Publication 225 |
2000 Tax Year |
Why Keep Records?
Everyone in business, including farmers, must keep records. Good
records will help you do the following.
Monitor the progress of your farming business.
You need good records to monitor the progress of your farming
business. Records can show whether your business is improving, which
items are selling, or what changes you need to make. Good records can
increase the likelihood of business success.
Prepare your financial statements.
You need good records to prepare accurate financial statements.
These include income (profit and loss) statements and balance sheets.
These statements can help you in dealing with your bank or creditors.
Identify source of receipts.
You will receive money or property from many sources. Your records
can identify the source of your receipts. You need this information to
separate farm from nonfarm receipts and taxable from nontaxable
income.
Keep track of deductible expenses.
You may forget expenses when you prepare your tax return unless you
record them when they occur.
Prepare your tax returns.
You need good records to prepare your tax return. These records
must support the income, expenses, and credits you report. Generally,
these are the same records you use to monitor your farming business
and prepare your financial statements.
Support items reported on tax returns.
You must keep your business records available at all times for
inspection by the IRS. If the IRS examines any of your tax returns,
you may be asked to explain the items reported. A complete set of
records will speed up the examination.
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