Business Bookkeeping
Records That Will Keep the IRS Happy
Illustration by Ken Clubb
It’s well and good to fear the IRS, but it’s not difficult to make them happy if you keep the right kind of business records. Surprisingly, you may use any type of bookkeeping system you wish, so long as you avoid “comingling of funds.” That means you need a separate checking account for your business. You must not deposit crafts income into your regular checking account or write business-related checks from that account. If you choose to ignore this IRS ruling, you run the risk of losing all the tax deductions previously taken on your Schedule C tax form, and you’ll have to pay additional taxes as a direct result.
Note that you do not need an expensive business checking account, but merely a separate account through which you can run all business income and expenditures. If you open a second personal account for your small business, just put your name on it–ONLY your personal name, not your husband’s name or the name of your business. This will be sufficient for IRS record keeping purposes and keep your bank costs low. These checks will cost less if they are ordered from a service such as Checks in The Mail.
Many home businesses use single-entry bookkeeping systems that keep paperwork, figure work, and headaches to a minimum while still providing all the information needed to properly manage a business and prepare accurate tax returns. Very small businesses may find that all they need is a standard record-keeping book such as the Dome Simplified Monthly, which can be found in any office supply store. There are also a wide variety of easy-to-use accounting packages that will make your bookkeeping fun. (Many crafters have told me they love QuickBooks.)
P.S. Did you know that “bookkeeping” is the only word in the English language that has three double letters in a row?
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