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I have a small hair braiding business (cash only) MD is requesting I provide detailed documentation of my business income reported on my 1040, what should I provide them?

I made $11,500 last year braiding hair, (cash only) business Maryland is asking that I provide them with details of my business income before they release my refund. What can I provide them in order to prove my business income? Additionally, I have been braiding hear since 2014 and reporting it on my tax returns, but I've never setup an EIN number or registered my business with Maryland.  what documentation are they seeking from me in order to prove my business income?


3 Replies

I have a small hair braiding business (cash only) MD is requesting I provide detailed documentation of my business income reported on my 1040, what should I provide them?

Do you give any kind of receipts ?   Or deposit the income in a business bank account ?
AmandaR1
New Member

I have a small hair braiding business (cash only) MD is requesting I provide detailed documentation of my business income reported on my 1040, what should I provide them?

That's ok that you don't have an EIN or formal business. What they want is proof of your business income. Your sales of $11,500 is a very even number and often that's a sign that you are estimating, which may be why they are requesting this. It's perfectly fine if that is the actual number and that's why you want to have your records.

Taxes are never based on estimates, only actual numbers, so everyone who works for themselves is supposed to keep records of every sale and every expense (accounting records), on a regular basis. 

What I recommend is getting out whatever calendar you used most and then starting a notebook to record your sales and support your $11,500. This is called re-creating your records. You can pull up emails, texts, your bank accounts, any receipts you have, anywhere and anything that can help you remember. 

Go month-by-month and day-by-day and re-create your income records. For every sale you can remember, write out a line for it. For each line, be sure to include:

  • The date 
  • The customer name 
  • The type of service you provided (it's ok if it's just one 'hair braiding') and the amount you charged
  • How they paid - cash

I would also recommend putting this in a digital format before you submit it to the state (like a spreadsheet), but it might be easiest to get started in a notebook. 

I have a small hair braiding business (cash only) MD is requesting I provide detailed documentation of my business income reported on my 1040, what should I provide them?

Going forward ... get a cheap receipt book at a place like office depot that have duplicate copies and give one to the customer and keep yours in the book (do not remove them) so you have a paper trail of the income you make.
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