Two questions frequently asked by Network Marketers are “what sort of business records do I need to keep for the IRS?” , and “What is type of record-keeping strategy if I use in my organization?”
Running a business without paying attention to record-keeping is a recipe for failure. You might be thinking “that cares-I despise bookkeeping and taxation information, and when my company happens in enough cash, it will not matter anyhow… I will just pay somebody else to clean my record-keeping afterwards!”
()Not too fast, my friend! There is A process essential for preparing your own tax returns. And you will not pay in earnings, but also boost the probability of a IRS audit, should youn’t prepare your tax returns together with caution. When an auditor finds mistakes on your novels or records, it wiping away your life savings and may disallow deductions, and impose fines and penalties forcing you out.
()The great thing is that the IRS does not prescribe one specific method of storing records that have to be utilized. No two companies are alike, so in regards to record-keeping, there is not a single style. Any system is fine as long as it paints a picture of expenses and your earnings.
You may keep your records either manually, or with a computer.
The manual system works fine for smaller home businesses and cost only $10 to $20 a year for a ledger book and some manila file folders. I suggest a Weekly Bookkeeping booklet, where you could record your earnings and expenses update the year at the conclusion of each week, by expense category. This way you always have an current statement of revenue and Expenses, or “Profit and Loss” report, at your fingertips. Along with the record book, maintain an adding machine a check register, a mileage log,and an accordion file close by for filing receipts. Organize your receipts by category; mobile phone, Advertising, Travel and Entertainment, and so forth.
A computerized record-keeping system works on exactly the exact principles as the manual system, but the computer automates the procedure. It is possible to use spreadsheets use columns to categorize your expenses, and to record bonus checks and your income.
An even quicker way to categorize your expenses is to use a software program such as Quicken or QuickBooks. These programs work with each income and expense transaction, as a checkbook register. A Profit and Loss report can be printed in a snap-assuming you do have some accounting knowledge. But beware. A software program isn’t a substitute for a fundamental comprehension of credits and debits. Frequently the year-end reports whom I see produced from accounting computer software programs is best summarized by the statement “Garbage in-Garbage Out”.
If you’re comfortable at the computer and have basic bookkeeping expertise, good for you! Nevertheless, you don’t require computer software to keep records that are accurate. At minimum, categorize your receipts (auto, office supplies, advertising, etc) in manila folders or an accordion file, and total them up by category at tax time. Staple the adding machine tape or stack of receipts. Either system is okay provided that it paints a picture of expenses and your earnings.
Network Marketing business owners should find a copy of IRS Publication 583, “Starting a Business and Keeping Records”, for additional information on IRS record-keeping requirements.
Jim Flauaus, President / CEO of Anchor Accounting & Tax, is a Network Marketing / MLM tax specialist. He and Home Business owners and Network Marketers connect and around the world via phone, email, and fax to help them prepare and plan their income tax returns.