There are millions of small businesses around the nation, and each of them makes transactions every day that will impact their bottom line. Those transactions will also have an impact when it comes to paying taxes. Whether you have a small business or a large one, it’s in your best interest to keep an accurate log book, especially if the event arises that you have to deal with the Internal Revenue Service (IRS).
Nobody wants to be audited, but each year businesses do find that they are going to be. The best way to breeze through an audit and come out smiling is by having maintained an accurate log book. Keeping a log book is going to help you keep all of your information in order and make it easy to provide what the IRS needs.
One thing that is important to note is that the burden of proof is going to be on the business. Therefore, if you are ever audited it will be your responsibility to be able to provide the log book and supporting documentation that they need. In other words, you can’t simply say that you can’t find it, didn’t keep it, or that you didn’t know you were supposed to have one. The burden to maintain such business records as a log book lies with the business and only the business.
What every business should be doing is keeping an accurate log book that tracks everything, including receipts, sales, purchases, expenses, travel, assets, etc. You should also keep a file of all the supporting documents that go along with this, such as the physical receipts or invoices from the transaction. The more documentation you can save, the better off you will be if you find your business being audited.
The IRS reports that you will need to keep the log book and supporting information for the last four years. Maintaining a log book will help keep your business out of trouble, because you will easily be able to prove expenses, including where and when money was spent and what it was spent on. Having a log book for your business is one major step you can take to make the audit process get a little bit more smoothly!