Tax season does not have to mean a frantic search through shoeboxes and email inboxes. The key is knowing what records to keep throughout the year so everything is organized when your CPA needs it.
Here is a breakdown of the records every Tennessee small business should keep on file.
Income Records
Keep documentation for every dollar your business earns. This includes invoices you send to clients, bank deposit slips, payment confirmations from platforms like PayPal or Stripe, and 1099 forms from clients who paid you $600 or more during the year.
If you accept cash payments, record each one with a date, amount, and client name. The IRS expects you to report all income, including cash.
Expense Records
Save receipts and documentation for every business expense. The IRS allows deductions for ordinary and necessary business expenses, but only if you have proof.
Common deductible expenses for bookkeeping and service businesses include office rent, software subscriptions (QuickBooks, Excel, etc.), professional development and certifications, business insurance, marketing and advertising costs, office supplies, and mileage driven for business purposes.
For mileage, keep a log with the date, destination, business purpose, and miles driven. The IRS mileage rate for 2026 applies to each qualifying mile.
Bank and Credit Card Statements
Keep monthly statements for every business bank account and credit card. These serve as backup documentation when the IRS questions a specific transaction. They also help your CPA verify that your reported income and expenses match what flowed through your accounts.
Payroll Records
If you have employees, keep all payroll records, including W-4 forms, quarterly payroll tax filings (Form 941), W-2 forms, and records of wages paid, taxes withheld, and employer contributions.
Tennessee does not have a state income tax on wages, but you still need to track federal payroll obligations and Tennessee unemployment insurance (SUTA) payments.
How Long to Keep Records
The IRS recommends keeping tax records for at least three years from the date you filed the return. If you underreported income by more than 25%, the window extends to six years. For records related to property or assets, keep them until the statute of limitations expires for the year you dispose of the asset.
A safe rule: keep everything for at least seven years.
Organize as You Go
Set up a simple folder system, either digital or physical, with categories matching the records listed above. Update it monthly rather than waiting until January to sort through a year of paperwork.
If you would rather hand off the record-keeping entirely, Browns Bookkeeping LLC keeps your financial documents organized year-round so tax time takes days, not weeks. Reach out for a free consultation to learn more.