How to Keep Good Tax Records

Posted by Accounting Diary

Did you know that you can avoid panic during Tax preparation time when you Keep Good Records through out the year? In this article, I want to look at why Good record keeping is important in your Business and also show you how to Keep Good Tax Records.

Good record keeping is very important for future Tax reference. When your records are properly maintained, you will always be able to file the correct information when you prepare your Tax return.

In addition, your local tax authority such as IRS in America or ZRA may at a later stage select your return for further examinations or in case of disputes with your Tax authority, you will need your documents to prove that the amounts claimed in your return were based on facts.

In most cases, your tax authority will not require you to keep your records in a specific way but generally, these are the most important files you must maintain.

Sales Invoices

Open a file of all your sales invoices. If you use a cash register in your business, then at the end of the day, total up your sales and calculate your total daily sales and the tax due. You will find this information on the audit roll (copy till slip). Attach the audit role to your daily sales report and place on file.

Credit notes and refunds

Open another file for credit notes or cash refunds. For every refund you make, keep clear records on your file. Alternatively, design a form where your customers collecting any refund can sign clearly indicating their name, signature and contact as proof of getting the money. This will show that you are not just creating fictitious credit notes and refunds to reduce your sales.

Purchases

Open file for all your purchases and another file for all your payments supported with proof of payment including any other records and cancelled documents that support any tax deductions made in your return.

Though these records can be managed very well using accounting software, it is not enough to merely post all you documents into the accounting system and neglect the records. While all your posted business information can still be retrieved from your system at any time, the tax authorities would be interested in the source documents which support your figures.

Good record keeping can not only save your business from tax problems with revenue service, but it saves you time and effort when organising and completing your return. If you hire a professional to prepare your return, and your records are very straight, the professional can be done in no

About the Author:

Fixed Asset Consultant at Prosperity Agencies Limited with over 10 years practical experience in physical verification, bar-coding of assets and fixed asset software implementation


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