Record Keeping Guide
The following outline provides general guidelines for business record keeping and allowable expenses. Consult your tax professional for information relative to your specific needs.
1. Establish a separate business checking account.
2. Use a separate credit card for business & personal expenses. The business should be on cash basis accounting system, unless it is carrying inventory. If a credit card is being used, expenses are booked at the time you make the charge and not when it is paid.
3. Revenue is recognized when it is received for cash basis businesses.
4. Advertising expenses: business cards, ads, and printing costs for flyers or brochures.
5. Bank service charges (if the account is solely for the business).
6. Business meals and entertainment (limited to 50%, it is necessary to keep records of who you meet with and the business purpose). For the sole proprietor, business meals while traveling away from home are also only 50% deductible.
7. Dues and publications (trade journals).
8. Equipment and furniture: Need an item description and date put into service (usually purchase date). Purchase price and percentage of business usage (for example: home computers are often used for both personal and business use).
9. Insurance for the business or to cover business equipment (possibly a separate rider to your home owners policy). Life, disability, and health insurance are not deductible for the self employed individuals.
10. Interest on business loans (100% deductible if 100% business use; be sure to deposit proceeds in business checking account). Interest on credit cards used for both personal and business use must be allocated.
11. Office or operating supplies (cleaning supplies).
12. Office-in-the-Home: The area must be used exclusively and regularly as the principle place of business for your trade or business or as a place where you meet or deal with customers in your business. In order to take this expense, you must show a profit.
13. Postage & freight.
14. Repairs & maintenance.
15. Retirement plans – SEP/Keoghs.
16. Seminars (professional education or certification classes), conferences, hotel, airline transportation.
17. Subcontractors or Casual labor.
18. Telephones – Long distance telephone calls only, unless you have a separate business line. Mobile phones if used partially or soley for business. Pay phones & pagers.
19. Tolls & Parking
21. Vehicle Expenses: Standard mileage rate is $.54/mile (unlimited) for 2016.
Actual expenses are the business percentages of the actual expenses incurred (ie: gas, repairs, insurance, etc).
Written records of mileage must be kept. The beginning and ending odometer readings should be recorded. A business mileage log should be kept recording business miles and business destinations regardless of which method is used to calculate vehicle expenses (standard or actual).