Q. I'm trying to help my dad with his partnership tax return, and I see on the last page they want the Balance Sheet information. How do I get this from his checkbook and why do I need it? AG, Georgia
A. Unless you have an understanding of accounting, trying to create a Balance Sheet from a check book is a pretty tough job! Your need a double entry bookkeeping system. With that, it would be a snap. Depending on the circumstances, you may not need to enter the information on the tax return. Generally, if Gross Receipts are under $250,000 and Total Assets are under $250,000, you can opt out of putting that information on the return by using a check box.
Tax Tip: If your business is an entity other than a sole proprietorship, more complex books and records are required. Other than income tax concerns, there is one outstanding reason to keep a double entry bookkeeping system: designed over 300 years ago to avoid mistakes, it still serves this most important function.