Proper record keeping important for small business tax time and in case of audits

Tax time can be stressful for those with day trading companies, and even more so if record-keeping isn't a strong suit. In order to properly file, and especially in the case of an Internal Revenue Service audit, creating, organizing and holding onto the right documents and financial data is key.

Should a business owner be faced with an audit - which is uncommon for the smallest of businesses, although certain triggers may bring more scrutiny from the IRS - a penalty may be assessed for neglecting to keep records. This doesn't mean comprehensive bookkeeping, but the failure to produce evidence of income and expenses can certainly result in a fine.

One of the most important steps, and one often overlooked, is keeping business and personal expenses separate. Even for day traders without a formal home office or equipment solely for business use, any deductions against items or services that could be considered personal as well should be documented. Simply marking the division between office and home use on an internet utility bill is an acceptable means of documentation.

No matter what means of record keeping are utilized, it's best to keep files organized. This will make tax time easier, and in the event of an audit, will speed up the process. Many IRS auditors are accountants, and will appreciate a well-maintained set of records rather than an out-of-order pile of dog-eared receipts.

As bill payment and money transferal become increasingly automated, losing track of copies of statements may become easier. Small business owners should either download and backup electronic receipts and statements or print a hard copy to physically file.