WorldWide Drilling Resource

Drilling Into Money Not Boring by Mark E. Battersby Those Annoying Business-Saving Records While every drilling business is re- quired to keep “complete and accurate records”, the decision of what must be kept, what records to retain and for how long, is usually up to the owner. The Internal Revenue Service (IRS) suggests related records be retained until the “period of limitations” expires for that tax return. Typically, the IRS can come after a business for failing to report income for up to six years after filing if the amount is greater than 25% of the operation’s gross income. If a deduction was claimed for a bad debt or worthless security, the IRS recommends retaining supporting tax records for seven years. A business with employees should retain all employment tax records such as employer identification number, amounts and dates of wage payments, and tax deposits - as well as the names, address- es, social security numbers, dates of employment, and occupations of employ- ees, for a minimum of four years accord- ing to the IRS. If business property is involved, the IRS suggests retaining records until the period of limitations ends from the year the property was disposed of. These records will aid in calculating deprecia- tion, amortization, or depletion deduc- tions; and to determine any gain or loss on the property. The most common reason an IRS auditor denies a tax deduction is because the amount of the deduction cannot be substantiated. Thus, ideally every drilling business should have a canceled check and an invoice marked “paid” for all purchases. A canceled check without an invoice or other document showing the item purchased could be a problem. Fortunately, because many checks are not returned by the bank, the IRS will accept check images. The drilling business should have an invoice for payments made to inde- pendent contractors, as well as provid- ing a Form 1099-MISC, Miscellaneous Income. Without a Form 1099, the deduc- tion could be lost and the business fined. While there is no requirement to keep receipts for any expense of less than $75, all information about every expense: how much, to whom payment was made, and what type of expense it was, the date paid, etc. should be re- corded. Another good strategy: record all money coming in, whether taxable or not. At a minimum, note in the check register the source of each deposit. Remember however, records are not only about making the IRS happy. They also play an important role in managing every drilling business to profitability and success. Mark Mark E. Battersby may be contacted via e-mail at admin@ worldwidedrillingresource.com 62 JULY 2014 WorldWide Drilling Resource ® 65<,5:065 *:6),8 8,(: '63- 6+., (965 ",.09:,8 ' (: === 5+( ; *64 68 *(33 #*/,+;3, 6- <,5:9 $/;89+(? 63- ;:05. 74 6*2:(039 B&090: =0:/ >/0)0:689 74 8,90+,5:A9 055,8 74 80+(? 8,9,5:(:0659 86-,99065(3 ,<,3674,5: 6;89 (4 74 @ ,?9:65, 07,305, 861,*: @ 803305. %905. 06+,.8(+()3, 803305. 3;0+ @ 99;,9 -68 8033,89 '/03, 80<05. @ ,= # (5+ # ,<,3674,5:9 @ 80+., 861,*: 09*;99065 @ 633,*:05. !;(30:? *6;9:0* $,3,<0,=,8 (:( @ (5+ 4(5? 468,