There comes a time, at least once a year, when you need to convert all the piles of paper and things you’re trying to remember into something you need to give to your accountant.
If you’ve got a good system, you will go through this process at least once a month so that your bookkeeper can prepare accurate and timely financial statements for your business. If you’re flying by the seat of your pants, you may wait until it’s time to file your tax return to go through the process. (Yikes)
Some of the things you will likely need:
Mileage log. How much do you use your car for business purposes in relationship to non-business? Really, the only way to know is keep track of your miles. Luckily, we’re past the old notebook stuck in the glove box days, although that will definitely work. There are now apps you can download to your smart phone to help you track miles. Take a little time Googling options. Some of the popular ones are Mileage Expense Log, MileIQ and TripLog.
If you are a real estate professional, you’ll need a time log to track how many hours you spend on real estate activities and how many hours you spend on other trade or business activities. You can use online computers for that or continue to use the paper and pen method.
If you have a travel expense for under $75, you do not need to keep a receipt. These are considered de minimus, in other words, roughly translated to “too small to care.” The exception is lodging. You always need a receipt for lodging. Please note that this is applicable for travel expenses only. If you have an expense that is not travel, the de minimus rule is $25.
If you have an expense that is over the de minimus amount, you not only need to show that the expense was paid by you but that it was also needed for your business. For example, my son has a food truck, Baja Asian Invasion. If he goes to the store to buy products that he’ll sell in his food truck, he will have receipts. But he has to also somehow demonstrate that the food is going to the food truck and not for his household.
We’re already over 1/3 of the way through the year. If you don’t have your record keeping up to date yet, now is a great time to do it.