All companies need to record business activities to avoid an IRS tax notice or penalties, and to track progress. But, do seasonal companies have the same rules for small business recordkeeping as year-round companies?
What records do seasonal businesses need to keep?
Seasonal businesses must keep the same records that year-round businesses keep. You need to track accounting, file government forms, and pay taxes.
Seasonal businesses must keep company records for the same time lengths as year-round businesses. The length of time you maintain each document depends on the type of business record.
Here are some business documents you should keep and how long you should keep them.
Business income tax returns and supporting documents
You need to keep your tax-related small business bookkeeping forms after you file information and taxes. The IRS sets rules for the time periods you should maintain the records.
In general, keep business income tax returns for three years from the date you filed the original return. Or, keep the tax return for two years after the date you paid the tax. Choose whichever date that comes later. If you claim a loss from worthless securities or a bad debt deduction, keep the tax return for seven years.
The IRS can review your business’s income reports for up to six years after you file taxes. This time is called the period of limitations.
You need to maintain tax return records until the period of limitations runs out. The period of limitations is the time the IRS allows you to file an amended tax return. The period of limitations also includes the time the IRS can assess you for extra tax liabilities.
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Accounting records
You compile many different accounting records for your seasonal business. Often, your records start with tracking each business transaction in your small business general ledger. From the ledger, you create financial statements. The statements could include profit and loss statements, balance sheets, and cash flow statements.
Keep the general ledgers and financial statements you create for your business. Also, maintain check registers, bank and credit card statements, and journal entries.
Maintain records of your business assets for as long as you own them. These documents might include property deeds, equipment leases, and vehicle titles. The records help with your amortization and depreciation expense calculation.
You should keep your main accounting records permanently. These records help you through legal issues and tax problems. You can also look at the records over time to track progress and troubleshoot problems.
How long to keep accounting records:
| Three Years | Seven Years | Indefinitely |
|---|---|---|
| Bank Deposit Slips | AP and AR Ledgers | Balance Sheets |
| Budgets | Bank Statements | General Ledgers |
| Invoices | Expense Reports | P&L Statements |
| Cash and Charge Slips | Petty Cash Records | Cash Book |
| Purchase Orders | Fixed Asset Records | |
| Income Tax Returns | Check Register |
Client and project information
Record of your clients and projects might include business agreements and contracts. These records help your seasonal business transition to the busy season smoothly. You can network and reconnect with past clients. And, you can reference previous projects to complete similar projects.
Client and project records can help you if you are sued by a client. The records show proof of how you conducted business. The documents also help you correctly spell name and track contact information.
Small business recordkeeping systems
Your seasonal company has several options for small business recordkeeping. Consider the time want to spend on recordkeeping, the amount you will pay, and your skill level. Investigate each accounting option before making a decision.
The least expensive way to keep your seasonal business records is to do your accounting by hand. In a notebook or spreadsheet, you record each transaction. Then, you compile statements from the lines in your ledger.
Doing your small business recordkeeping by hand is cheaper than other accounting methods, but it requires more time commitment and finance skills. During the busy season, you may not have time to do accounting by hand. Before you decide to record your books manually, consider the time you must dedicate.
Another option you have for recordkeeping is to hire an accountant. When you outsource accounting, you have an expert handling your finances. But, an accountant’s services can be expensive. Make sure the price is worth the time you save before handing your books over to a professional.
You can use cloud accounting software for small business to store your financial information online. You can access it from anywhere with an Internet connection.
You enter the transactions into the system. The software computes totals and compiles statements for you. The process is simple, and you can get a software program for a low monthly subscription.
Do you need to streamline your small business recordkeeping? Patriot’s online small business accounting software is easy and affordable. Get started today with free setup and support.
This article is updated from its original publication date of May 20, 2016.
This is not intended as legal advice; for more information, please click here.
