I know… record keeping doesn’t sound very exciting. But the truth is – something as simple as a mileage log translates directly into saved money and time.
Good records save you money because they make deductions possible. (Read: Pay less taxes.) They save you time because they keep Uncle Sam off your back. Not having them puts you in Uncle Sam’s pocket (and maybe even in jail).
Follow these record keeping rules:
Rule 1. Keep all tax records for a minimum of 3 years and long-term records (real estate closings, stock transactions, IRA or retirement plan purchases) for a minimum of 10 years.
Rule 2. Receipts must be dated and include the business name. (Not yours – the name of the business issuing the receipt… even if it’s just a corporate ID #.) To qualify as a “receipt” for tax purposes, logs must be dated and kept continuously.
Rule 3. Sort receipts by date. Having all of each month’s receipts in one envelope is better than having, for example, all your gas receipts for the year in one envelope.
A good way to handle business-travel expenses for tax purposes is to keep a simple mileage log in your car and use the log to store all your travel-related receipts. At today’s standard rate of $0.55 per mile, 10,000 business miles would give you a $5,500 standard mileage deduction. On the last day of every month, take the receipts from your mileage log and put them in an envelope. Write “travel receipts” with the month and year on the envelope. Then stash it in a shoebox or desk drawer.
Simple steps like these can save you thousands.[Ed. Note: Internet Money Club member Tim Clay is an Enrolled Agent (a federally authorized tax practitioner) and a certified QuickBooks Advisor with 25 years of experience. Visit www.AskTaxGuys.com to learn more and sign up for Tim’s free tax-tips newsletter.]