Recordkeeping is one of the most cumbersome tasks associated with running a business. It is something that many people put off. Having your financial information at your fingertips is important for making business decisions and keeping your accounting up-to-date.That being said, recordkeeping is required and necessary to complete your income taxes. If your business gets audited, good recordkeeping habits could prevent you from having to pay the IRS a large sum of money. You may need to provide records to keep all of your expenses. Records can consist of receipts, bank statements, credit card statements and more. Failure to provide proper evidence could cause your deductions to be disallowed. As a small business owner, your time is valuable and limited. You should strive to get your bookkeeping done as productively as possible. This could consist of using software to do much of the heavy lifting for you. For example, QuickBooks reduces the amount of work you have to do by eliminating redundant tasks. When you print a check in QuickBooks, the expense is already posted in the proper category. It’s vital that you keep yourself form doing duplicate work. You should also avoid commingling funds with any account that you make non-business purchases with. This is true regardless of whether your business is incorporated. In the event you get audited and the IRS agent notices that many personal items are bought through your business account, the agent will be more likely to disallow an expense. Meals and entertainment are generally 50% deductible. However, it must be absolutely clear that they were business expenses. It is always a best practice to separate personal and business transactions. If you use your vehicle for business use, you do not have to keep track of each expense. Instead, you can track your mileage. You will be able to take a deduction based on the number of miles you drove throughout the tax year. In addition, records are needed each time you buy or sell an asset. You need to prove what you paid for an asset in addition to what you sold it for. Assets that are capital expenditures require depreciation. That is, the amount of the tax deduction would span over the useful life of that particular asset. One of the questions I get asked most frequently by clients is hou long is it necessary to maintain records. At a minimum, you should keep records that are within the statute of limitations of the IRS. This is generally the later of three years after you file or two years after you pay any taxes due. You should keep copies of your income taxes even longer. The statute of limitations assumes that you filed those returns and paid any taxes that were due. If the IRS has no record of a return that was filed, then there is no statute of limitations. Having said that, it’s best to err on the side of caution when maintaining your financial records.