Top 7 Bookkeeping Tips To Keep The IRS Off Your Back

The IRS can seize everything you own.

Bank accounts, property, businesses, your home.

Seriously, they have the power.

But you’re a savvy business owner and you’re going to keep the IRS off your back with these bookkeeping tips.

The IRS requires you to keep all receipts over $75, but I’m going to suggest you keep them all, better safe than sorry.

Not only do you need to keep your receipts but you need to consider how well your receipts will hold up over time.

Receipt ink can fade pretty quickly and the IRS isn’t going to accept that as an excuse. Neither will a fire, flood, tornado or any other natural disaster be considered a valid excuse.

I highly recommend storing your receipts digitally and in the cloud.

You can do this by attaching receipts to your transactions in your bookkeeping software, storing them in a place like Google Drive, or using a receipt software like Shoeboxed.

No matter what make sure you have proof of your expenses that the IRS will accept.

$20,000 in wardrobe expenses for an on-air newscaster as a deduction? 

Not so fast.

Crazy unreasonable deductions like this are essentially you raising your hand and saying “ooo, ooo, pick me, pick me!”

Be careful and reasonable when claiming things like the home office deduction, mileage, and other deductions that can be easily manipulated.

By all means, take every single deduction you are rightly entitled to, just don’t open yourself up to an audit by going overboard.

Make sure you work with a tax professional to get this right.

Bookkeeping is weirdly one of my favorite subjects, but I know that it completely drains other people.

No matter what you have to keep accurate records for your business, but that doesn’t necessarily mean that you have to be the one who keeps them.

If bookkeeping is one of those things that falls farther and farther down your to-do list and is mentally and emotionally draining to you then consider hiring a bookkeeper to take care of it for you.

That way you're still meeting the IRS’s requirement of keeping accurate records but you don’t have to spend your precious time on a task that you dread.

You can learn more about hiring a bookkeeper here.

The IRS is super particular about when you can take the mileage deduction and exactly what you need to track.

If you want to be able to back up your mileage deduction you’ve got to have an accurate log.

Consider using an app like MileIQ, it tracks your mileage and provides IRS approved reports for backup.

You can learn more about what you need to track here.

It’s important that you file both your business and personal taxes on time.

The IRS is a big fan of fees and interest rates and won’t be afraid to hit you with both if you’re late.

I recommend working with a tax professional to make sure your taxes are done right and done on time.

If you’ve ever received a paycheck from an employer you know that they are required to withhold a certain amount of taxes from each check.

Your employer sends this money to the government at regular intervals.

When you’re self-employed you have to make these periodic payments on your own.

The IRS doesn’t want to wait a full year to collect their money, we all know they’ve already spent it.

The IRS can fine you if you haven’t paid enough in during the year.

Avoid a huge tax bill, with an added penalty, by sending in your estimated quarterly payments. You can find the forms here.

Last but not least, make sure you’re setting money aside to be able to pay your tax bill each year.

The last thing you want to happen is to end up with a huge bill you can’t cover.

The IRS loves penalties and interest and no one wants to give them any more money than they have to.

Make sure you’re setting aside money each time you pay yourself, and put it in a separate bank account so you’re not tempted to spend it.

There you have it!

Follow these 7 tips and you’re likely to keep the IRS off your back.