Keeping Good Records

We’ve all heard it: “There is nothing surer than death and taxes.” And since our Federal taxes are due this month, it certainly is not too early to talk about taxes. The principal purpose of this article is to urge readers of the News to prepare for taxes, while at the same time get themselves prepared in case they want to sell their laundry. Most business people don’t think about taxes until it’s time to pay them in April, or beyond if an extension is filed. But as we approach the new tax year, it’s really time to think about record keeping and tax reporting systems for this year and beyond.

Keeping records is a pain, and most coin laundry operators feel like they are too busy to do records as accurately as they might have to if they ran another business. Yet, there are two very good reasons why keeping a good and consistent set of records is vital to the future well being of your coin laundry operation, and personal peace of mind as a business person.

First, your laundry operation, in fact all laundry businesses, will one day be sold either by you as the owner or by your heirs and your estate. So, why not be ready now? Buyers need to know the facts of a laundry’s income and expenses. Accurate records will make a business more valuable to potential buyers and more of an asset to you as an owner, or to your current or future heirs.

Second, the IRS may select you and your coin laundry business for an audit. Yes, they are still auditing coin laundries, and to them the business’ records, or lack of them, are not only important, they are all they really have to go on. Notice the phrase or lack of them. When records are absent, the auditors feel free to interpret your income pretty much as they wish. That will give auditors too much of an opportunity to find something wrong, even if you didn’t do anything wrong. With no records, how can you prove you’ve done nothing wrong? We all know it is impossible to prove or disprove a negative.

Record keeping can be simple or complicated, there are no hard and fast rules on what they should look like. Only that they be consistently done the same way every time. Both IRS agents and buyers have a sense that some cash may slip by and fail to be deposited or reported. Buyers suspect that’s what goes on and the IRS knows it, and look for any kind of proof they can find.

Many coin laundry owners only keep a checkbook record. They pay everything by check and record what they deposited in the bank. Some others keep ledgers where they transfer each collection and each bill paid. Others do their records on personal computers. Computer print outs make the data that they report seem som

ehow more authentic. The important thing here is that they are authentic.

No matter how you choose to do your record keeping, remember that consistency is the watch word. If you have not been doing things on a regular and consistent basis, now is the time to change. Starting fresh doesn’t have to wait for the beginning of a new year. Start doing it now. If you have to go back a month or two and put things in by memory, that’s OK. Just as long as you do things the same way in the future.

Suppose someone has been consistently taking ten percent of a coin laundry’s gross income and have been salting it away outside of their books. They think that they will, by not reporting income, save on their tax bill. Further suppose that ten percent amounts to $1,000 per month, or about $12,000 a year. In that case they could be saving about $4,000 per year in taxes.

The cash they hide to avoid paying taxes on it takes the saleable price of their laundry down by $40,000 to $50,000. Will they own this coin laundry for ten more years? In that case, all they are doing is breaking even. Otherwise they are losing money by saving on taxes now. That is, the tax they save cuts down severely on what the sales price of the laundry will be when they put it up for sale based on their income records.

It might make someone feel that they’re getting away with something by under reporting, but they could be losing more money in the long run. Do the math and you’ll see it pays to report each and every dime because it makes any coin or card operated laundry more valuable whenever it is put on the market.

Some operator may think they can get around that snag by keeping a “real set of books” that can be shown to a buyer. Since the IRS is known to send out employees to look at laundries for sale, imagine the results when those “real books” appear.

It could mean jail time for you, but most likely it could mean very heavy fines and penalties. These could be carried back for a number of years, and the costs could be astronomical. Don’t take the chance.

Further, even if the IRS misses someone in the audit cycle, and an under reporter shows a second set of books to someone they think is a prospective buyer, they are running the risk of that person offering their name to the tax people to collect a reward.

By the way, the accurate set of consistent records you will be keeping are one of the best sales tools you could ever have when selling your laundry. All buyers really want to know is how much a laundry makes so they can properly judge the value. And, they want to know they can trust the information they are given. Your accurate and consistent record keeping can provide them that information.

Be accurate, honest and you’ll be even -happier than you are today. Both now and in future, report every penny of income and have the growing asset value of a more valuable, and profitable coin laundry business. With the right kind of records you will be able to back up the true worth and the honest asking price for your coin or card operated laundry.

In the meantime, you can happily welcome the IRS agents if they come to call. Happily that is, if you have kept good records.