Keep Your Receipts!

Karen Hough had to pay $100,849 in taxes because she “estimated” the business expenses. She relied on her testimony to prove the deductions, while the IRS required documentation. She did not have cancelled checks or receipts. The IRS could see she spent money, but because she could not prove the items purchased, the deductions were denied. There were no excuses.

I had someone ask me why they should keep their receipts when they charge all their business expenses on a credit card. The reason why you keep a legible receipt is that if you are in an audit, the IRS will NOT accept the line on a checking/credit card statement showing a store purchase. They need the original receipt or a readable copy . If you don’t have the receipt, the auditor can say that you purchased school supplies for your kids and not believe you purchased office supplies for your business. The deduction would be denied.