Archive for July, 2011
IRS Tax Limitations are up to Interpretation
Posted by Kim Perkins on July 26th, 2011
The IRS is quite specific in terms of how long records must be kept. IRS Publication states, “You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code.” Your records are your responsibility. Loss or disposal of your records may be detrimental to your position should the IRS enact an audit or a judgement against you.
However, there is a time limit which favors both the IRS and the taxpayer: the Period of Limitations.
If You:
1) Owe no additional tax and (2), (3), and (4) below do not apply to you the limit is three years.
2) Do not report income that you should and the income is more than 25% of your gross reported income shown on your return the limit is six years.
3) File a fraudulent return there is no limit.
4) Do not file a return, there is no limit.
5) File a claim for a refund or a credit after you have filed a return the limit is either 2 years from when you paid the tax or three years from when you filed the return, whichever is greater.
6) File a claim for a loss from worthless securities, the limit is seven years.
The Period of Limitations is subject to filing dates and interpretations of the Internal Revenue Code.
Need help with culling out old paperwork, give us a call.
Record Management 101
Posted by Kim Perkins on July 20th, 2011
Paperwork, files, receipts, contracts, correspondence- without a proper records management strategy business owners are likely to find themselves losing the battle against documentation. One of the most important tasks that Small Business Owners face, is how to manage the records of their business.
Not everyone shares a passion for financial organization. We might recycle important letters, forget to back up computers or hold on to our tax documents in a bin labeled ‘in case of audit’. To run a successful business, however, records management is a matter to be taken seriously. If you can’t do it, or you don’t want to do it, hire someone who is able and willing to do the task.
Why does a business need to keep records? Well, according to the IRS: “If you are carrying on a business or engaged in a commercial activity you are required to keep adequate records. Such records must provide enough details to determine your tax obligations and entitlements.” In many cases original documentation must be maintained to support your records.
If the thought of making the IRS unhappy isn’t enough to motivate you to start a records management system, perhaps a better reason is business continuity. Business continuity means that your business is able to continue operating without stopping. You do not benefit when your business comes to a stop. Without proper records a business would have a hard time reaching its customers, suppliers, employees or backers. And a business can be interrupted in many ways – natural disaster, illness/death, fire – the list is endless. But these risks can be mitigated through good records management.
Here is a list of simple steps you can take to develop a records management system that works for your business:
Learn which documents hold long-term value to your company. Pricing contracts, certifications, licenses, etc.
Learn how long certain records must be held.
If you can’t organize it – Get someone who can!!!
Back it up. Back up systems are low-priced and current technology allows for “cloud computing”.
Keep the paper only when it is necessary. Purchase a scanner and e-file your records. Banks, as a general rule, keep your records on e-file and accessible for 7 years.
It can be argued that your business, what you do best, is only a strong as its financial framework. Invest your time in creating a financial foundation which will sustain your business, increase your efficiency and reduce your anxiety.
Call me if you have questions.
