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What Records and Paperwork do I Need to Keep on File?

What Records and Paperwork do I Need to Keep on File?

When starting your own small or solo law firm, it’s important to know what kind of records and documents you need to collect and save for tax purposes. Keeping essential paperwork from the start of your business isn’t only critical for filing taxes, it’s also the best way to understand the financial health of your law firm. Here’s a list of important supporting documents that the IRS recommends all small businesses keep:

Gross Receipts

Your gross receipts are the records that show your income and its source. Examples of gross receipts are:

  • Deposit information (cash and credit sales)
  • Receipt books
  • Invoices
  • Forms 1099-MISC

Expenses

Any documents that show the costs you incur to keep your law firm running should also be saved. Examples of expense documents include:

  • Canceled checks or other documents reflecting proof of payment/electronic funds transferred
  • Cash register tape receipts
  • Account statements
  • Credit card receipts and statements
  • Invoices

Travel, Transportation, Entertainment, and Gift Expenses

In order to deduct travel or entertainment expenses, be sure to keep those records, documents, or receipts to be able to prove that these costs were directly associated with your business.

Assets

If you’ve purchased things like property, electronics, or office furniture for your law firm, saving those documents can help you verify that those are indeed business assets. Those documents should include the following information:

  • When and how you acquired the assets
  • Purchase price
  • Cost of any improvements
  • Section 179 deduction taken
  • Deductions taken for depreciation
  • Deductions taken for casualty losses, such as losses resulting from fires or storms
  • How you used the asset
  • When and how you disposed of the asset
  • Selling price
  • Expenses of sale

These documents typically show this information:

  • Purchase and sales invoices
  • Real estate closing statements
  • Canceled checks or other documents that identify payee, amount, and proof of payment/electronic funds transferred

Employment Taxes

The IRS recommends keeping all records of employment for at least four years.

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