Record Keeping 101: What Small Business Owners Should Track for Taxes

Good recordkeeping isn’t just about being organized—it’s about protecting yourself if the IRS ever comes knocking. Whether you’re an employee, a contractor, or a small business owner, the way you track your financial records can make or break your ability to defend your tax return.

Why Record Keeping Matters

• Accuracy: Ensures you file correct returns and claim all deductions you’re entitled to.

• Defense: If the IRS audits you, records are your shield.

• Efficiency: Saves time and money when filing or reconstructing old returns.

What to Keep

1. Income Records

   • W-2s, 1099s, bank deposit slips, invoices, sales receipts.

2. Expense Documentation

   • Receipts, mileage logs, bills, canceled checks, and credit card statements.

3. Supporting Forms

   • 1098s for mortgage interest, tuition, or student loan payments.

   • 5498s for IRA contributions.

4. Business Records

   • Bookkeeping ledgers, payroll records, contracts.

How Long to Keep Records

• 3 years: Minimum for most taxpayers.

• 6 years: If income was substantially underreported.

• Indefinitely: If no return was filed or fraud is suspected.

Best Practices

• Separate personal and business accounts.

• Use digital tools to scan and store receipts.

• Back up records in at least two places (physical and digital).

Good records are the foundation of compliance and peace of mind. With the right system, tax time becomes routine—not a crisis.

If you’re struggling to organize your records, we can help you set up a simple system that keeps you protected year after year.