I love the KISS principle. I think it is good not only for business owners but can be used for individual taxpayers as well. Not a lot of people like keeping paper. But when it comes their accounting and taxes, people tend to keep more than necessary out of fear of the IRS (and rightly so).
There are simple techniques to reduce the paperwork you need to keep:
- Bank and investment accounts. Most people really only need one account of each – checking, savings and investment (not including retirement accounts). There are always exceptions, though, which is a client’s preference or purpose for that account. But keeping them to the absolute minimum reduces the monthly statements you need to keep. And even if you’re paperless, it’s hard to track multiple accounts over time. The time needed to manage multiple accounts is time taken away that you could doing better things.
- Charitable donations. I have some clients, mostly retirees, who like to make small donations to multiple charities every year. That’s a lot of checks and little bits of paper you need to keep. I suggest making one or two large donations in a year instead.
- Debit and credit cards. I usually recommend to business owners to use only one credit card for all of their business needs and only for business. A separate credit card should be used for personal use. That way, you don’t mix the business with the personal. The IRS will only care about your business credit card charges (as it relates to your business). And your CPA will only need to look at one statement for your credit card charges instead of sorting through multiple statements with the need to separate your business credit card charges from your personal ones.