Tips for keeping good records
After submitting your tax return, you may wonder what to do with all the documents required to file your tax return. You realize that you have to keep some paperwork on hand for a while, but you may not know which documents to keep and how long to store them. You can simplify your tax administration and prevent you from collecting unnecessary paperwork with these guidelines after submitting your taxes every year.
With so much of everyone’s financial life that exists online or in electronic form, it is much less likely that people keep all their relevant data in one place. That is not to say that the registration strategy that you adopt does not have to be electronic, but simply means that it must be organized and everything you need must be kept in one safe place.
If you keep paper records, invest in a water and fire resistant safe. Consider perhaps to keep multiple copies in different locations. If you decide to go digital, you must scan the records you have on the hard disk, but the most important thing is to keep the files safe and back up.
Your checkbook, personal budget software or online banking tools can help you remember the revenue and expenses that should be mentioned on your tax return, but the checkbook or software alone is not enough documentation to prove the deductibility of an expense. In addition to a receipt (canceled checks credit card receipts, etc.), you also need invoices, receipts, sales documents or other written documentation that exactly indicate what you have paid for.
Deductions that you must document include alimony, contributions to charitable organizations, mortgage interest, childcare expenses and property taxes. If you pay in cash, you will receive a dated and signed the receipt with the total amount and a detailed description of what has been purchased.
Top tips to help them keep good records:
- obtain valid tax invoices for all purchases that include GST
- keep accurate records of all sales and purchases
- store a copy of all records electronically, including a system backup in case of damage to hard copies
- keep records that contain enough information to calculate and support the amounts claimed on their BAS
- retain all tax invoices and other GST records for five years.
If you keep good records, it may reduce the time you spend fixing common reporting errors. You can then spend more time to run more effective businesses.