The Importance of Keeping Accurate Records for Tax Purposes

The Importance of Keeping Accurate Records for Tax Purposes

The Importance of Keeping Accurate Records for Tax Purposes

The Importance of Keeping Accurate Records for Tax Purposes

The National Archives and Records Administration (NARA) always reminds everyone to keep accurate tax records. Complete financial records can help make tax season easier. Correct files can help give a good picture of how your finances are. Knowing the importance of keeping factual records can motivate you to keep an eye on your financial records more. Here are the details. 


It Can Help in Preparing Financial Statements


Error-free financial statements need good records. You must get your balance sheets and income statements ready. The documents can help you manage your finances and your business. They can also help you deal with creditors or your bank. Your balance sheets show your equity, assets, and liabilities on a specific date. An income statement shows your expenses and income for a given period. 


It Can Help Prepare Tax Returns


Filing your tax returns will need good records. The documents must support your credits, income, and expenses. These same records can help you keep an eye on your business. They are also helpful in preparing your financial statements. If you always stay on top of your records, you do not need to keep extra copies when you file your tax returns.


It Can Oversee Your Deductible Expenses


You can deduct valid business spending. This can lower your business taxes. A specific expense is deductible if it is necessary and ordinary in keeping your business running. You can keep track of your company’s expenses by listing them down as they happen. It is easy to forget the expenses for your tax returns if you do not document them right away. 


It Can Justify the Items on Your Tax Returns


Business owners like you must always be ready for an audit. When that day comes, you will not be stressed trying to remember every profit or spending. Keeping your business records on hand for the IRS to inspect is important. You may need to explain some of the items that you reported. This short interview will not take long if your records have the answers. Your personal financial records must be ready as well. 


It Can Pinpoint the Source of the Receipts


As your business or work thrives, you will acquire properties or money from different sources. Your records will make it easy to identify the receipt sources. These documents are important in separating your personal receipts from your business receipts. They can also separate nontaxable income from taxable income. These documents can help when the IRS audits your business. 


It Gives Insight Into Your Company’s Progress


Good records can tell you how your business is doing. They can point to where your company is doing well and where it does not. Your records can inform you what possible changes you must make or what items are selling. Your up-to-date business records can help you improve your company’s chance of becoming successful. 

Accurate financial records can make your tax filing experience more pleasant. At Coomber Consulting, LLC, we ensure you and your employees have a secure financial future. You can drop by our office in Carlsbad, California, for an in-person consultation. Please call us at 760-205-3810 to set an appointment or inquire about our Employee Retention Tax Credit or ERTC program.

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