Want to save a bundle in taxes? Keep your tax papers in order. That means no shoebox filing cabinet.
Too many small businesses throw everything in a shoebox or similar storage system and hand it to me at tax time. I charge more for this practice and you pay more in taxes as things probably get lost during the year or went unrecorded. No matter how small the business, you should record your income and expenses no less than once per week. If you have a number of transactions a day, you need to record every day.
QuickBooks is the easiest way to manage your companies financials; Excel works nice for very small businesses.
By keeping your books in order, you will miss fewer deductions. In the case of an IRS audit, the IRS finds income by reviewing bank deposits, but will be reluctant to grant any deduction without receipt or recording of expense at the time of transaction. If you keep good books, you have an advantage in an audit. If a receipt is lost, but recorded it in your financials, the IRS will almost always grant the deduction if it is reasonable. If the IRS plays hardball, appeals also will consider granting the deduction.
So, help your friendly tax preparer, save on taxes, and get a small amount of audit protection. What do you say? Do we have a deal?