Tuesday, December 29, 2015

Keep good records for a cash-intensive business

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips Do your business transactions involve a lot of cash? Because cash transactions are, or can be, anonymous, the IRS takes a special interest in "cash intensive" businesses. One indication of this interest is the "Cash Intensive Businesses Audit Techniques Guide" developed by the IRS. The goal of the guide is to assist IRS examiners in identifying specific issues, business practices, and examination techniques for businesses that primarily deal in cash. What does that mean for your business? A cash business is generally not required under tax law to use a specific type of bookkeeping method. Still, the added scrutiny means you'll want to be particularly careful about maintaining books and records that accurately reflect your income and expenses. Here are three suggestions to get you started. • Maintain original source documents. Sales invoices and cash register tapes are records that support the amount of income received. Tie these totals to your bank deposits. Remember to track income from electronic transactions, including digital currency, as well as non-cash activity such as bartering. • Support non-income cash inflows. Document loans you make to the business with written promissory notes. Keep records of amounts you receive in the form of refunds, rebates, and insurance policy payouts. • Practice good internal control. Internal controls are the processes you put in place to maintain the integrity of your accounting information. For example, having more than one person involved in receiving and recording income can help minimize the risk of errors or inadvertent misreporting. Please call us for more recommendations and guidance on establishing and maintaining a bookkeeping system that can help you support the income and deductions you report on your tax return. As always please call us if you have any questions. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker Ten Forty plus Quality Tax Preparation & Financial Services www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.

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