Good records for a business

01One account for the business, one for you

The IRS's own first instruction to a new business is to open a separate checking account and put every business receipt through it.

When one account does both jobs, someone has to read it line by line and decide which side each entry belongs on. That work happens before the return can start.

A credit card used only for the business does the same job.

02What matching the bank means

• Each month's closing balance in the books equals the closing balance on the statement.
• The same holds at year end for every account: checking, savings, credit cards, loans.
• A number in the books with no statement behind it is a guess. Finding the record behind it is part of keeping the books, and it has to happen before the return can use that number.

03The year-end set

• A profit and loss, and a balance sheet, as of the last day of the year.
• Year-end statements for every account, and for each loan its balance and the interest paid.
• The year's payroll summary, and copies of the W-2s that went out.
• Anything bought that lasts more than a year: what it was, the date, the cost. Vehicles, equipment, building work.
• A count of what is on the shelves at year end, if you carry stock.
• What the owners put in or took out, and any loan taken or repaid.

That is the usual set, not the whole of it. Your business may need more, and if you are not sure whether something belongs, ask us before the year closes rather than after.

04Miles, home office, meals

• Miles. Written and kept as you drive: date, distance, and the reason for the trip.
• The car method is a one-time choice. Standard mileage has to be picked in the first year the car is used for the business. A leased car stays on that method for the whole lease, renewals included.
• Home office. The square footage of the room and of the house, plus the year's bills for the house — utilities and insurance to start with. What counts here shifts, so send more than you think we need and ask us if you are unsure.
• Meals. A receipt does not carry who was there or why. Write it on the receipt at the time.

05People you paid

• Ask for a W-9 before the first payment, not in January.
• $2,000 or more to someone who is not an employee usually means a 1099-NEC. It is due both to them and to the IRS by January 31. That threshold was $600 until recently and it rises with inflation from 2027, so ask rather than assume it.
• Schedule C asks on the form itself whether you made payments that required a 1099. It is a question the return has to answer either way.

06If it is a partnership or a corporation

• The return is due March 15 for a calendar year, and the owners' K-1s are due on that date too. If March 15 is a weekend or a holiday it moves to the next working day.
• So the company's books decide when its owners can file, not just when the company can.
• Past a certain size the return carries a balance sheet, which means year-end balances have to be right rather than close.
• If you own more than 2% of an S corporation and it pays for your health insurance, that amount belongs in your W-2 wages. Fixing it after the W-2 has gone out means reissuing forms.

07Letters from a tax office

Send the whole letter, both sides, with the envelope. Some of them run on a 30-day clock from the date printed at the top.

08What a business keeps for longer

How long to keep things is on the other page. One rule sits on top of it here: payroll records run four years, longer than most of the rest.

Behind on the books? That is a different job from the return, and it comes first.

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This is general information, not advice about a particular business.