Four years ago, we lived every small business owner's nightmare. It was horrible. The process took months, we couldn't find any of our record keeping, and I was exhausted and drained from a move. We were definitely not set up for success.
We only had 30 days to dig up records from both my husband's construction business and my handmade business.
I learned a lot from this, including how to keep our records straight for tax season. If I can recommend any one thing from this experience, it's this:
Write every thing you purchase on them. Especially if you get any business materials from Hobby Lobby.
Are you a Hobby Lobby shopper? Do you know what I'm talking about? If not, go grab your latest Hobby Lobby receipt.
There are no product descriptions! They only give categories, like "crafts," or "sewing," or "home decor." Not very specific, huh?
Why does this matter? Well, when we were getting audited, the IRS actually threw out our entire stack of Hobby Lobby receipts because we could not prove that the items on the receipt were purchased for our business instead or our home.
Most other stores, like Dollar Tree, Target, and Wal-Mart, do a better job of including the product names on receipts. However, it's important to note that you need to be careful if the store does not obviously tie to your business.
For example, my husband works in construction, so his Lowe's receipts make sense. However, purchases from Wal-Mart were not always clear if they were for home or business.
If you happen to forget to separate you purchases and have items for home and business on the same receipt, don't worry! Just highlight or underline all of the items that you bought for your business.
Once you've labeled your receipts, it's time to organize them by date and category to optimize them for tax season success. Learn more about my process for this here.