All Americans dread the words tax audit.

A letter from the IRS, especially one ordering a tax audit, will unsettle even the calmest person. But, for a small business owner who does all of their own record keeping, it’s not only scary, it could spell disaster.

If you receive an audit letter from the IRS, call your tax accountant and schedule an appointment right away; Representing clients in tax audits is part of a tax professional’s job. It will be your job to locate and provide all the documents necessary to win that audit. If you have kept audit-proof records, that will be easy.

Because most small business owners have no accounting training, few realize how easy it is to keep audit-proof records. Some end up making record keeping a complicated computer task, and many just ignore the whole thing until it’s time to pay taxes.

Keeping business records doesn’t have to be complicated or time consuming. There are only two things you need to do to make getting through a tax audit easy. The first is to adopt a record keeping system that is super simple; the second is learning exactly what the IRS expects of a small business owner at tax time.

Record keeping for a one or two person business is mostly done to satisfy the IRS, so why not keep records that pass audits? Follow these ten simple rules throughout the tax year and you’ll not only be ready for a tax audit, but you’ll also simplify your record-keeping tasks.

Rule #1 – Document Income. Absolutely all business income, including all cash and tips, must be deposited in a separate checking account used for business funds only. Do this and all you need at tax time is 12 bank statements to add up your income.

Rule #2: Keep a documentary record. Every penny spent or collected by your business needs a paper record. If a receipt is not provided, you can make your own; be sure to include all the necessary details. Working from expense receipts simplifies the record keeping process for a small business owner.

Rule #3 – Record Barter Exchanges. Every barter trade requires a paper record that assigns value to your time or the product you traded. The value of a barter exchange is the same amount you would collect if it had been a cash sale.

Rule #4: Track all expenses. Sorting your expense receipts is easy when you use the Business Expense Alphabet. From advertising to Ziploc bags, if you use it in your business, there’s a place on your tax return to deduct that expense.

Rule #5 – Equipment depreciation. Any equipment purchased that has an expected useful life of more than 2 years must be depreciated or expensed at tax time. It is important to keep a list of all business equipment purchased, the date purchased and the price paid, along with your tax records.

Rule #6 – Record your Miles. Unless your car is used only for business, keep a small notebook in your car to keep track of business miles. If you do not keep a mileage log and you are asked to provide one for a tax audit, you will fail the audit.

Rule #7 – Track inventory. The IRS considers all items you manufacture or purchase for resale to be inventory; inventory costs cannot be deducted until that inventory is sold. Inventory spending is easy once you learn how to calculate cost value per item.

Rule #8 – Find out. No matter how good your tax professional is, if they don’t provide all the necessary information and figures, your tax return will be wrong.

Rule #9: Plan ahead. Tax laws change every year. During your annual tax visit, ask if there are any new changes that affect you, what tax laws are being worked on, how they will affect your business, and what you can do now to reduce future taxes.

Rule #10 – Keep everything. Without receipts you will fail a tax audit. Pack or bag all of your tax receipts each year and keep them for a minimum of six years. If you receive an audit letter from the IRS, simply bring the box or bag containing the audited year’s receipts with you when you meet with your tax professional.

I can’t tell you not to worry about a tax audit, we all do. But, if you’ve followed these ten rules, the receipts and audit should be in the bag!