Sole proprietor Business gets paid in cash, Is 100% accuracy important ? Does IRS require copies of invoices and receipts? ?
I am Sole proprietor for a Lawn care/junk removal business registered in Maryland, formed the business in 2019.
Majority of customers pay using cash, sometimes Cashapp. I just track the money best as I can ,boyfriend does the lawn work, he pays helpers using cash.Invoices are used only on larger jobs. We have receipts for lawn equipment purchased last year, purchased with cash. Some items were purchased used from neighbors without any receipts. Are homemade receipts accepted?I use a spreadsheet to keep track of the cash, I know the cash flow reported is not 100% accurate all the time.What forms do I need to file? How do I report expenses and income?Does the IRS need copies of invoices and receipts as proof? Or, Is just a spreadsheet enough? Expenses exceeded income, what should I expect when that happens.I work a 9-5 too, w-2 employee.
- 4 weeks ago
The IRS accepts receipts, canceled checks and bill copies to verify expenses. To be sufficient, the documentation should detail the amount, place, date and character of the expense.In our digital era, both paper and electronic documents need to be considered in your record preservation plans. Here are some basic record retention rules to think about for your business...read more at-https://rplg.co/52226840
- StephenWeinsteinLv 71 month ago
Accuracy is important.
You are required to keep the proof, in case the IRS asks for it.
You are not supposed to send it to them until they ask for it. If you send it when they have not asked for it, then you must keep another copy yourself, because you still need to be ready to give them a copy when they ask for it, even if you already gave them a copy when they didn't ask for it.
- Anonymous1 month ago
No, the IRS does not require copies unless you get hit with an audit and the truth is, a LOT of small companies do a cash business on the side. I was married to one of those and the IRS did nothing, even when he hadn't even filed any taxes for 20 years.
The fact is, generally the IRS goes after people who own a lot of assets and cheat big time, not the small timers. You could however, be randomly selected for an audit-they do that every year too.
Just be careful to minimize the cash you actually deposit-it can be matched against your business and you would have to justify it. Don't deposit it and keep it absolutely, completely out of your real business. Keep very accurate records but NOT on the cash and where it goes or have a separate set of books. It's not a terribly honest thing to do but that's the real truth about "under the table" transactions.
- A HunchLv 71 month ago
Start-up costs are included over a 5 year period
Yes, your documentation needs to be perfect. This is how you create accurate taxes. Most the time, this is for your records only. But if you are audited, you have to provide your information.
If you purchase an item from a neighbor- keep documentation of the item, date, and amount.
If you purchase from craigslist/letgo/FB marketplace- keep a copy of the original ad, the date purchased, and the actual amount you paid.
You provide a Schedule C to the IRSThe business is either yours or your boyfriends. It's not both. If it's yours, you need to pay your boyfriend for the work he does. If it's his, you should be paid too but no one will know you are doing the books instead of him.
You need to learn all about this. More than someone on Y!A can tell you.
Do you have a business license and all the other requirements to operate in your state/city?
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- EvaLv 71 month ago
You need receipts/invoices for every transaction. I hope the cash payments to "helpers" are being run legally through payroll and you have workers compensation insurance. Homemade receipts are accepted, but they must contain the seller's name and address. You report the income and expenses on Schedule C of your tax return. Since it appears you don't know the basics of how to run a business, you should make an appointment with an accountant soon to make sure you're doing everything you're supposed to be doing. Having illegal employees, treating employees like independent contractors, and/or not having workers compensation insurance can cost you a fortune.