Simple habits that keep your books organized and audit-ready year-round, not just at tax time.
Use a dedicated business bank account and card for every business transaction, even as a sole proprietor. Mixing personal and business spending is the single most common reason small-business records become difficult to reconstruct later.
This can be bookkeeping software, a spreadsheet, or even a dedicated notebook — the best system is the one you'll actually keep up with. Update it weekly rather than trying to reconstruct a year of activity at once.
A total in a spreadsheet is a starting point, not proof. Keep receipts, invoices, and bank/card statements that back up what you're claiming. Digital photos or scans of paper receipts are generally sufficient — the goal is that each number in your books can be traced back to something.
Once a month, compare your books to your actual bank and card statements. This catches errors and missing transactions while they're easy to fix, instead of discovering a full year of discrepancies at once.
If you expect to owe self-employment or business tax, keep a running record of any quarterly estimated payments you make, including the date, amount, and confirmation number. This prevents both missed payments and duplicate ones.
As a general practice, most tax-related business records are kept for at least three years after filing, and longer for records related to property, equipment, or any year where income was significantly underreported. When in doubt, keep it — storage is cheaper than reconstruction.