The IRS doesn’t take your word for it. If you claim deductions, you need documentation to back them up. Poor recordkeeping is one of the biggest reasons businesses face audit adjustments and penalties.
WHAT YOU MUST KEEP
- Income Records – Bank statements, invoices, sales receipts, payment records, and 1099s from clients. Keep these for at least 7 years.
- Expense Records – Receipts, invoices, credit card statements, and cancelled checks for all business expenses. Don’t throw away receipts.
- Mileage Logs – A contemporaneous log showing date, destination, business purpose, and miles driven. Mileage apps help automate this.
- Home Office Records – Square footage documentation, utility bills, mortgage/rent statements, insurance, and repair invoices.
- Equipment & Asset Records – Purchase receipts, depreciation schedules, and disposal documentation for business assets.
- Payroll Records – W-2s, 1099s, payroll tax filings, and employee time records if you have employees.
- Travel & Meal Records – Receipts, credit card statements, and notes about the business purpose. The IRS wants to know who you met with and why.
- Loan & Debt Records – Documentation of business loans, interest payments, and terms.
- Digital vs. Paper – Scan important documents and back them up digitally. Keep originals for 7 years. Cloud storage is your friend.
- The bottom line: Treat recordkeeping like it’s part of your business (because it is). Good documentation protects you in an audit and makes tax preparation faster and cheaper. When in doubt, keep it.
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