Running a CNC machine shop means wearing a lot of hats. You find the work, see that the work gets done, bill and collect payments, hire, train and develop your team, deal with problem employees and government regulations, and, of course, keep a careful eye on your finances.
Then comes tax season and you pull together the information you or your tax preparer need to file your returns. It’s at this time when many of us look at these financial documents and wonder how long we need to hang to this stuff.
These days much of what you need is on your computer, in the “Cloud” or safely maintained online by the banks you deal with. The good news is that we have fewer boxes of paper to store. The bad news is that if, for any reason, you can no longer access these data the IRS can be quite unforgiving.
So if your bank and credit card statements, canceled checks and other records are now kept online you’ll want to be sure they’re available if and when you need them. First, you should check to see how long the bank or other institution keeps these records. Second, you may want to keep a back up just in case. In many instances, you can simply save these documents as PDFs when you reconcile your statements each month and keep them on your computer or on an external storage device. Then if the “bank-that’s-too-big-to-fail” fails to properly maintain its records, you won’t suffer the consequences. Naturally you’ll also backup all income, balance sheets and other financial statements in case your computer fails or the “cloud” goes dark.
How long do you need to keep these records? Unless your tax advisor tells you differently, you should keep tax-related records for a minimum of three tax years. That’s the time period within which the IRS typically audits returns. However if the IRS has reason to believe that there are problems with your record-keeping practices that have been going on for some time, they can investigate as far back as six years.
Which are the most important financial records to hold onto? Check with your tax advisor or CPA who will most likely recommend keeping the following:
- Documents pertaining to income including invoices, credit card records and bank deposits.
- All proof of purchases for raw materials and other costs-of-goods-sold.
- Invoices or credit card receipts, credit card statements and canceled checks for all deductible expenses (office supplies, postage, travel, utilities, rent, etc.). If claiming automobile expenses for business travel, be sure to maintain and keep contemporaneous mileage logs including the business reason for the trip.
- Keep all receipts for any deductible charitable contributions.
- Tax related documents including payroll records, employee W2 forms, W9 forms, 1099 forms and, of course, proof of state and federal tax deposits, unemployment taxes, worker’s comp payments and any other taxes you pay.
While we don’t have tax experts at your Torrance Haas Factory Outlet, we do offer good advice on great CNC machines and accessories that will make your bottom line smile. To learn more call (310) 381-0750, email: jphillips@haasfactoryoutlet.com, or visit www.haasfactoryoutlet.com.