17 Tips for Creating a Tax Records Filing System – Your Best Defense Against the Tax Boogieman

It’s that time of year that so many of us dread – tax season. With IRS audits on the rise, it is increasingly important for small businesses and individuals alike to report accurate information and file tax returns ON TIME. Having a system to keep records organized throughout the year ensures you have all of the information needed during tax return preparation. It also saves you the aggravation of having to dig through piles of receipts and other information just to prove that certain financial transactions took place during a particular year. And don’t forget that an Accountant, CPA or certified Tax Preparer can justifiably charge you more money if they have to actually organize your records prior to preparing your return.

Whether you are a sole-proprietor or the owner of a private corporation or LLC operating in the U.S., filing tax returns is something we all have in common. Do you find yourself scrambling every year to meet that March 15 business tax return filing deadline? If so, then maybe what you need is a tax records filing system that is easy to setup and maintain.

The following presentation provides a step-by-step tutorial using pictures (where applicable) to show you how to create a digital/electronic or paper-based tax records filing system.  If setup properly, this system ensures you will never experience file extensions, fines, tax liens or failed audits.

17 Tips:

  1. Create a system that works best for YOU! If you are a highly visual person, then having a paper based system might work better for you as opposed to a person who gets overwhelmed by the sight of too much paper.
  2. Ultimately the best system for tracking revenue for your business or household largely depends on the degree of visibility that you will need to serve as reminders for collecting and/or making payments.
  3. Handle papers in small, manageable pieces – the longer you wait to organize, the more time it will take to sort through information when it’s time to file the tax return.
  4. Remember that creating a tax record filing system and maintaining it requires CHANGE.
  5. Practice, practice, practice! Change involves replacing an unwanted habit with a new one.
  6. Leverage products you already have – there’s no need to go and buy a slew of new office supplies. The products featured in the presentation above can be found at any major office supply store (i.e. Office Depot, Staples).
  7. Use the following list of common business expense types as a first step in categorizing your receipts, paid bills/invoices and other tax records:
    • Seminars/Education
    • Memberships
    • Dues & Subscriptions
    • Office Supplies
    • Travel
    • Meals
    • Insurance
    • Postage
    • Website
    • Lease/Rent
    • Furniture & Equipment
    • Utilities
    • Vehicle Maintenance
    • Marketing & Advertising
    • Financial Statements
  8. Shred receipts or any financial information that contains account and/or identification numbers.
  9. Pace yourself, especially if you are creating your system for the first time. For example, if you need to separate and organize a year’s worth of receipts in order to prepare for a certain year’s tax return, work in 30 minute or one hour increments taking breaks in between.
  10. Consider enlisting the services of a Bookkeeper or Assistant for time management purposes and/or if you desire financial statement reconciliation on a frequent basis throughout the year.
  11. Consult your CPA, Accountant or Tax Preparer for specific questions regarding your bookkeeping practices. ALWAYS!
  12. Track your expenses using an accounting software program such as QuickBooks or FreshBooks. You can even use a MS Excel spreadsheet if your books are fairly simple.
  13. Store physical receipts in a place where they will be secure as the print on many of them will fade over time. Try to categorize receipts on a weekly basis.
  14. Store electronic or scanned copies of receipts in at least two different locations. One can include a computer network, hard drive, CD or DVD (only if it is backed up often) and the other can include a cloud solution such as DropBox or Google Drive.
  15. Review and reconcile your company’s financial statements monthly. This includes verifying that all check and debit card payments clear the bank. Understanding the financial health of your company is critical. Mistakes can often go unnoticed for long periods of time without frequent reconciliation.
  16. Log expense information by putting the date, payee, amount of bill/invoice, and type of expense (i.e. “office supplies” or “advertising) in the system that you choose for logging expenses.
  17. Document a business process for maintaining the new system once it is in place. Templates can be found at The Process Shop. This process should define how information is created, named, organized, stored and archived for system consistency.

At the end of the day, there’s no point in avoiding the IRS.  The legal ramifications simply aren’t worth it. Keep the Tax Boogieman at bay with a solid tax recordkeeping system and if you insist on using Ziploc bags and shoeboxes to store records, at least label them and make sure they are part of an actual system that allows you to easily archive and retrieve information when needed.  Visit the IRS’ website – it includes a combination of downloadable tax forms, video tutorials and guidelines. Specifically, see IRS Publication 583 “Starting a Business and Keeping Records” for specific guidelines to learn what information to keep and for how long.

Best wishes!

Stay tuned for next month’s topic on how to create a business process that includes your new tax records filing system.

Recommended Posts
Showing 32 comments
  • laptop repairs

    I am always looking online for articles that can aid me. Thank you!

    • Equilibria

      My pleasure!

  • music education

    Good post however I was wanting to know if you could write a litte more on this topic? I’d be very grateful if you could elaborate a little bit further. Cheers!

    • Equilibria

      Hi there. What additional information are you interested in seeing? I’m definitely open to new ideas.

  • water dispenser suppliers

    I have learn several good stuff here. Definitely worth bookmarking for revisiting. I wonder how much attempt you place to make any such magnificent informative site.

  • Equilibria

    Thank you for your kind words. I hope to continue to provide more useful content. Just need to find the time to do so!

  • Equilibria

    Thank you Jeffrey! The wp theme is: Twenty Eleven 1.3

  • monkey information

    Hey There. I found your blog the use of msn. That is an extremely neatly written article. I’ll make sure to bookmark it and return to learn more of your helpful info. Thank you for the post. I will certainly return.

  • Felicita Maria

    After reading your blog post I browsed your website a bit and noticed you aren’t ranking nearly as well in Google as you could be. I possess a handful of blogs myself and I think you should take a look here: http://dominateseowithwordpress.com You’ll find it’s a very nice tool that can bring you a lot more visitors. Keep up the quality posts

  • archos 101

    Just wish to say your article is as surprising. The clearness to your submit is simply cool and i could think you’re knowledgeable in this subject. Well with your permission allow me to seize your RSS feed to stay updated with forthcoming post. Thank you one million and please continue the enjoyable work.

    • Equilibria

      Thank you Archos 101! Feel free to suggest topics that you’d like to see info on pertaining to small business operations.

  • Karole Korzep

    I appreciate an amazing publish, can examine your personal others topics. thank you your thinking with this, I experienced somewhat strike by this short article. Merit again! You earn a terrific aspect. Has excellent facts here. I think that in case more individuals thought of it like this, they’d possess a better moment in time obtain the hang ofing the situation.

  • Equilibria

    I checked out your website at http://www.malakaisparks.com Very impressive!

  • Edite
  • Ivan

    Kudos for this post. This is a pretty riveting post. I will drop by again soon.

  • Celina

    write more often please.http://www.ouvirmusicagratis.net

    • Equilibria

      I hope to write more often. This is new for me and it’s forcing me to step out of my comfort zone! Thank you for the encouragement.

  • Amélia

    great site, i like it. greetings.http://www.ouvirmusicagratis.net

  • Fred

    Outstanding article. This is a truly entertaining post. I look forward to see more such soon.

  • body cream

    I have to say that for the last few of hours i have been hooked by the impressive articles on this site. Keep up the good work.

  • Aimée

    write more often please.

  • Darrel Lener

    This is the right blog for anyone who wants to find out about this topic. You realize so much its almost hard to argue with you (not that I actually would want…HaHa). You definitely put a new spin on a topic thats been written about for years. Great stuff, just great!

  • Lupe Dolman

    We are usually for you to blogging and site-building and i actually appreciate your articles. The content has really mountains my personal attention. I will book mark your web site whilst checking out for first time data.

  • Equilibria

    Hmm…try Internet Explorer or Firefox

  • boutique hotel broome

    Discovered your article incredibly appealing certainly. I actually experienced reading through it and also you make rather some excellent factors. I’ll bookmark this web page for your future! Relly great report.

  • Reply

    Uncovered your short article extremely remarkable in truth. I definitely appreciated studying it and you simply make really some great factors. I will bookmark this website for your upcoming! Relly great short article.

    • Equilibria

      Thank you! Let’s keep the dialogue going, okay?

  • Cyrus Parmalee

    A well written and useful post, thanks very much

  • 먹튀사이트

    Thanks for one’s marvelous posting! I certainly enjoyed
    reading it, you can be a great author. I will be sure to
    bookmark your blog and will eventually come back very
    soon. I want to encourage you to definitely continue your great posts, have a nice weekend!

pingbacks / trackbacks
  • Keeping It Altogether – How a Business Process Can Help You File Tax Returns on Time | Equilibria's Blog

    […] Reference any additional human resources, tools, processes or systems that influence the process. This includes the Bookkeeper, Accountant, CPA or Tax Advisor you may work with. It can also include the specific software (i.e. QuickBooks, Peachtree Accounting) that is used to store financial records and your tax records filing system. […]

  • […] account information) into the correct file in the file drawer underneath all the slots. See the tips for filing tax records and how to organize paper files for more details on how to setup an accounting filing […]

  • […] account information) into the correct file in the file drawer underneath all the slots. See the tips for filing tax records and how to organize paper files for more details on how to setup an accounting filing […]

Leave a Comment