Confused on How to Keep Your Books for a Laundromat?
By: Laundromat 123
Some owners have professionals do their taxes, just like some owners have professionals do all their equipment repairs. There are also a small percentage of owners who believe they know better. I have experience in being audited by the IRS and other government agencies. I was also a consultant and worked with the IRS when they were considering an extensive national program to audit Laundromats (I believe based on the false notion of extensive "skimming" potential) so I believe there is merit in my contribution. To avoid problems, try to keep things simple. Owners often devote too much thought and time to Laundromat bookkeeping. Here's one way to keep records and avoid problems if you are ever audited.
Open a single bank account into which you deposit all your collections and nothing else. This is your INCOME for tax purposes. Now write out checks (or use a Laundromat only payment option) for all your expenses. This is your EXPENSES. These two areas will be explored by IRS audit agents prior to an audit, so make sure the year end totals match exactly the numbers you enter on your tax returns. Don't mix in any other money. You do not need to keep collection sheets or even use them. Explain that ALL MONEY COLLECTED is deposited into your Laundromat account. It confuses IRS auditors if you mix in other money or make the claim that you kept out cash for refunds, payments to contract workers or just mixed in other deposits. Junior auditors are normally assigned Laundromat audits. If you want to review the actual IRS agent audit manuals go to my educational website at Laundromat123.com for the manuals used in audits by the IRS. Keep in mind that a simple few pages showing the above items based on your bank statements and then carried over to a Microsoft Excel sheet is adequate for Laundromat bookkeeping.
Depreciation is calculated on another line on your tax return, with straight line depreciation of equipment allowed over 5 years. Fixtures, lease value are depreciated over their actual remaining life. It's the reason experienced owners try to put as much of their allocation towards equipment. Your tax return also has a place for the deductions for automobile expenses and other expenses you want to claim. Always made a payment to another account from your Laundromat account to document these expenses.
Another often overlooked deduction is the money you spent searching and researching for your Laundromat. Mileage, seminars, food, paid consultations, demographic studies, CLA membership and many other items are all legitimate deductions. Start keeping records and receipts of these items right now.
If you are ever audited, keep things simple and smile as you explain that you are not a professional bookkeeper but only a Laundromat owner and this is how you keep your income and expenses. Try to schedule any requested meetings to be held at the offices of the assigned auditor. If additional items are requested, you’ll have the time to find the proper records. Those who have elected to install a payment system that keeps track of vended usage need to be careful that any permanent records match exactly the claimed income. The more items you bring in for review, the more time and attention your audit will take and the more likely the IRS will find an error or mistake in your calculations. Keep it simple.