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REALTOR® Emeritus | | Creating and Monitoring Business Systems Tax Record Keeping | |
| Financial Management Is Your Company Profitable? Tax Record Keeping Escrow and Trust Record Keeping Personnel Management Compensation Policies Policies for Real Estate Operations More Resources | Whether it’s preparing your annual business tax return or defending yourself against a tax audit, good records are invaluable. Keep the following records for tax purposes. Gross receipts are the income you receive from your business. You should keep supporting documents that show the amounts and sources of your gross receipts. Keep: bank deposit slips, invoices, credit card charge slips. Expenses are the costs you incur (other than purchases) to carry on your business. Your supporting documents should show the amount paid and verify that it was for a business expense. Keep: canceled checks, invoices, and credit card charge slips. Assets are the property, such as machinery and furniture, that you own and use in your business. You must keep records to verify certain information about your business assets. You need records to compute the annual depreciation and the gain or loss when you sell the assets. Keep: purchase price with canceled check or credit card charge slip, when and how acquired, cost of improvements, selling price and expense of sale, and how you used the asset in business. TIP: Keep all records for at least three years. This is the limit for an IRS audit, although it can be extended. Proof of Expenses You Should Save · Canceled checks · Bank deposit slips · Receipts and bills · Accounting books · Trip sheets for business use of vehicles · Credit card charge slips · Invoices · Expense reports · Appointment calendars and diaries TIP: Travel, transportation, entertainment, and gift expenses must meet special requirements to be deductible as business costs. Also keep in mind that in most cases, only 50 percent of these expenses are deductible. TIP: Expenses can be fixed or variable. Fixed expenses, such as rent, employee salaries, and insurance, remain unchanged regardless of how many homes are sold. Variable costs, such as classified ads and commissions, will vary depending on how many homes are listed and shown. Proof of Asset Value You Should Save Keeping receipts isn’t just for expenses; you must be able to show proof of what assets cost.
Tips for Asset Deductions Assets you buy for your business, such as computer equipment, cell phones, office furniture, and buildings used for business purposes, can either be deducted as an expense in the year that you begin using the equipment (or place it in service) or depreciated. Depreciation allows you to deduct a portion of the value of an asset each year over the useful life of the asset. For relatively inexpensive items or items such as technology, which have a short useful life, deducting them as expenses may be more beneficial. Keep these restrictions in mind when calculating asset deductions under Section 179.
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