HOUSTON BUSINESS REVIEW

THE CPA CORNER: KEEPING GOOD RECORDS
By C. Kevin Moore

Kevin Moore is a Principal of C. Kevin Moore & Associates and has two decades of experience as a Certified Public Accountant. Each week he provides the information you need to grow and protect your business.

Everyone who pays taxes is required to keep accurate, permanent books and records so they can determine the various types of income, expenses, gains, losses, and other items that affect their income tax liability for the year. You should retain basic records showing the source of all income you receive, including W-2 forms, 1099 and 1098 forms, and year-end comprehensive statements from financial institutions.

For any deductible item, you should retain documents proving the expense itself (a receipt, bill, or invoice) and proving that you paid it (a canceled check, credit card slip, or bank statement itemizing your checks). If you are claiming employee business expenses, the recordkeeping rules for each type of expense are the same as those that apply to business owners, as discussed in more detail below.

If you receive or pay alimony, you should keep a copy of the separation agreement or divorce decree.

If you are claiming the child care credit, you must keep records of the name, address, and Social Security number or employer identification number of all caregivers.

If you are claiming deductions for charitable contributions, you may need to get a receipt from the organization to which you made the donation, or an appraisal of the item.

If you have gambling winnings, you should be keeping a diary of your winnings and losses that includes the date, type of activity, and location of the establishment, the names of other people who were present, and the amount you won or lost.

Special recordkeeping rules apply to the following:

• business-related records
• automobile expense records
• capital asset records

All of these records must be kept as long as they may be relevant for any tax purpose, or for a minimum of four years.