Keep the Receipt or Lose the Deduction
Good record keeping can pay off.
Time after time, there are rulings from the IRS stating someone lost their deduction due to bad record keeping.
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.
Do you save all your receipts? Do you copy the thermal receipts because they will fade after 2-3 years?
To keep your record keeping life as simple as possible, have one business checking account. Run everything through this account. This way you can track income and expenses in one place. I pay $1 a month to have my business checks mailed back to me so I don’t have to print copies of checks online. I know most banks go back months or even a few years, but if you are audited, it can be 3 years later and who wants to print each check online? Plus, I work with many banks and some don’t go back 3 years.
I have had clients have to pay large bank fees to get copies of checks. No fun!
