Excite Tax's answer for Utah owners: yes. IRS Publication 583 asks for records that clearly show income and expenses, not a program; a spreadsheet works if reconciled monthly.
Excite Tax's answer: for a small, simple business, yes. The IRS lets you use any recordkeeping system that clearly shows income and expenses, and the books must show gross income, deductions and credits; nothing in that says software. What Excel does not do is check itself, so the spreadsheet is only as good as the monthly reconciliation behind it. When it stops being enough is below.
Excite Tax's short version: one workbook per business per year, one row per transaction from the business bank and card statements, a category on every row that matches a line of the tax return, and a monthly check that the spreadsheet agrees with the statement. The IRS example keeps each frequent expense in its own column and small ones under a general column. The steps are below.
Yes, and it needs no signup: Excite Tax's income and expense ledger is laid out on this page, column by column, with a filled-in month to copy. Each column is there for a reason the IRS gives, such as records detailed enough to identify the source document and sales tax kept out of income.
Excite Tax's rule of thumb: a spreadsheet suits a cash-basis business with one bank account, no employees and no inventory. Once there is payroll, inventory, unpaid customer invoices, or a second person entering data, the checks and balances of double-entry earn their cost. The comparison is below.
It does not balance, lock or trace. Double-entry books are self-balancing, so an error shows up as debits that do not equal credits; a spreadsheet will total a typo without complaint. The IRS also expects a computerized system to have controls against records being changed or deleted, which in Excel means a saved, closed copy of each month. See where spreadsheet books go wrong.
The law requires records, not a product. Every person liable for tax must keep the records the IRS prescribes, and what the IRS prescribes for most businesses is any recordkeeping system suited to the business that clearly shows income and expenses. The books must show gross income, deductions and credits. Publication 583 still describes journals and ledgers bought at an office supply store, so a spreadsheet is well inside what the rule allows.
The vocabulary carries over directly. A journal records each transaction from its supporting documents; a ledger holds the totals, organized into accounts. In a workbook, the ledger tab below is the journal, and the monthly summary tab built from it is the ledger. Most spreadsheet books are single-entry, which the IRS describes as based on the profit or loss statement and simple and practical for a new small business.
Keeping books on a computer brings one more set of rules. Under Publication 583, a computerized system's records must reconcile with the books and the return and identify the underlying source documents, and the owner keeps a description of the system, including its controls and chart of accounts. Excite Tax reads those rules as reaching a spreadsheet too, and the setup below is built to meet them.
This is the whole template: copy the column headings into row one of a blank sheet in Excel or any spreadsheet program. Nothing is gated and no email is asked for. Each column earns its place from a rule in Publication 583 or from what the return needs at year-end.
The Ledger tab: one row per transaction
| Column | What goes in it | Why it is there |
|---|---|---|
| Date | The date the money moved, as the statement shows it | Rows sort by it, and the reconciliation matches on it |
| Payee or source | Who was paid, or who paid you | Identify the source of recorded receipts |
| Reference | Check number, invoice number or the receipt's file name | Enough detail to identify the underlying source document |
| Account | Which bank account or card it went through | One reconciliation per account, filtered on this column |
| Category | A name from the Categories tab, picked from a drop-down list | Totals by category become the lines of the return; see the IRS annual summary |
| Money in | Deposits, including any sales tax collected | Ties to the statement's deposits |
| Money out | Payments, including owner draws | Ties to the statement's withdrawals |
| Sales tax collected | The tax portion of a taxable sale | Taken out of receipts; not income |
| Receipt on file | Yes or no, or a link to the scan | Proof of what was bought, not just that money left |
| Reconciled | The month in which this row was matched to a statement | Anything blank after month-end is an open question |
The Monthly summary tab is a pivot table or a SUMIFS grid: categories down the side, months across the top. The Reconciliation tab holds, for each account and month, the statement's closing balance, the uncleared items and the book balance. The Receipts tab is an index of the scans, since electronic records must be indexed and retrievable in legible form.
Here is April for a hypothetical Orem seller of handmade goods, cash basis, one business checking account. Every amount below is invented for the example; the right-hand column names the rule that decides how the row is booked.
Ledger, April (example)
| Date | Payee or source | Category | Money in | Money out | Sales tax collected | Why it is booked this way |
|---|---|---|---|---|---|---|
| April 2 | Market booth sales, deposited | Sales | $1,080.00 | $80.00 | The tax is taken out of receipts, not counted as income | |
| April 5 | Online shop payout | Sales | $640.00 | Recorded when it posts, with its source | ||
| April 8 | Craft supply wholesaler | Materials | $412.35 | A frequent, large expense gets its own column | ||
| April 15 | Spring market booth fee | Booth fees | $150.00 | Small, infrequent costs could share a general column instead | ||
| April 20 | Grocery store (personal) | Owner draw | $96.40 | Recorded, but not deducted | ||
| April 30 | Bank service charge | Bank fees | $10.00 | Found on the statement at reconciliation and added to the books |
April's summary: money in is $1,720.00, and the $80.00 of sales tax comes out of receipts, because it is not income, leaving $1,640.00 of sales. Expenses are $412.35 + $150.00 + $10.00 = $572.35, so the month's profit is $1,067.65 (the figures that roll up to Schedule C). The $96.40 grocery run stays in the ledger as a draw and out of expenses. The Payee column names every source because line 1 of Schedule C must include the amounts on any Forms 1099-NEC received, and matching each form to the ledger is then a filter away.
The question is not which tool the IRS prefers; it accepts any system that clearly shows income and expenses. It is which tool catches your mistakes before the return does. Publication 583 frames the same trade-off: single-entry is the simplest to maintain but may not suit everyone, and double-entry has built-in checks and balances.
Excite Tax's comparison, criteria only (no product ranking)
| Spreadsheet ledger | Accounting software | |
|---|---|---|
| Cost and setup | Free with a program you likely own; setup is an afternoon | A subscription; setup includes connecting accounts and a chart of accounts |
| Entry | Typed or pasted from statements | Usually imported from bank and card feeds, then categorized |
| Checks on itself | None; a wrong formula totals quietly | Double-entry: debits must equal credits |
| Balance sheet | Not without a second set of tabs | Produced from the same entries |
| Unpaid invoices and bills | Tracked by hand, if at all | Receivables and payables built in |
| Change history | Only the closed monthly copies you save | Typically an audit log of who changed what |
| Handing it to a preparer | One file; easy to read, easy to break | Reports and a shared login |
Excite Tax's signals that a spreadsheet has been outgrown:
For the criteria to compare between packages, see choosing bookkeeping software; for the mechanics of each system, see single vs double-entry bookkeeping.
If the file has already drifted, fixing messy books covers the repair and common bookkeeping mistakes covers the rest of the list.
An examiner asks two things of any ledger: does it agree with the return, and can each line be traced to a document. Publication 583 asks the same of a computerized system: its records must reconcile with the books and the return and identify the source documents. Keep the closed monthly copies, the Receipts index and a one-page note that describes the tabs, the categories and how a month is closed; that note is the plain-language version of the system description the IRS expects.
Keep the workbook as long as the return it supports: 3 years in general, 4 for employment tax records and 7 for a bad-debt loss. The full schedule is in what records the IRS requires. One caution from the IRS itself: its own sample books illustrate one business and are not a recommendation, and neither is this template. Adapt it to the business.
A Utah seller's sales-tax column does a second job: it is the running total for the state return. Utah sales tax is filed on Form TC-62S or TC-62M through Taxpayer Access Point, and a business with $50,000 or less of annual sales-tax liability files quarterly. Each return is due the last day of the month after the filing period, so the April-to-June column must be settled by the end of July. If the column's quarterly total does not match what was filed, the spreadsheet or the return is wrong. Excite Tax's advice is to find which one before the next quarter starts, not at year-end.
The spreadsheet formats Excite Tax works from are pending confirmation and will appear here, with a reviewed date, once confirmed.
Not to the IRS, which accepts any system that clearly shows income and expenses. What matters is that the file is backed up, the closed months are kept, and the records can be retrieved and reproduced in legible form.
Yes. Start the software at the end of the last month that reconciled, enter the opening balances from that month, and keep the closed spreadsheet copies as the record for the months before. Changing tools does not change the accounting method; changing a method generally needs IRS approval.
Yes: the Monthly summary tab is one. A single-entry system is built on the profit or loss statement, so income less expenses by category is exactly what it shows. See the profit and loss statement.
Hand the books over when keeping them costs more hours than the business can spare, or when they stop agreeing with the bank.
Excite Tax keeps these books; the return they feed is reviewed and signed by a licensed CPA at TBD CPA LLC.
Ranked and explained on the sources page.