By topic: Receipts

Why IRS Audit Technique Guides Are Helpful Business Resources

IRS Audit Technique Guides provide valuable insight as to how the IRS conducts audits. The guides also provide helpful guidance in developing financial best practices for your business.

Helicopter View of Meals and Entertainment (2021-2022)

COVID-19 is going away, perhaps by early summer. It’s time to start thinking business meals and partying with your employees. The chart in this article gives you a helicopter view of the latest business meal and entertainment rules.

Disaster Strikes: Next Trouble, an IRS Audit

Disasters can happen at any time. As far as your business records go, you’ll be most equipped for a disaster if you’ve backed up and stored your most critical data online. To the extent you fail to do this, you’ll have to get copies of vital records from the IRS and other government agencies, your bank, clients, customers, and others. You’ll have to re-create other data as best you can.

Five Things to Know About Employing Your Spouse

If you own your own business, hiring your spouse to work as your employee can be a great tax savings strategy. But the tax savings may be a mirage if you don’t pay your spouse the right way. And the arrangement is subject to attack by the IRS. Here are five things to know before you hire your spouse that will maximize your savings and minimize the audit risk.

The Insurmountable Sin in an IRS Audit: A True and Sad Story

Do you have a mileage log that will survive an IRS audit? If so, good for you! If not, get ready to give up all (not some, but all) of your vehicle tax deductions for not just one year but three years, as you will see in this true story.

TCJA: Don’t Lose Out When Corp. Vehicle Is in Your Personal Name

Do you operate your business as a corporation but use a vehicle that you own in your personal name for the corporate business? If so, be aware that the TCJA changed the rules of the road for tax years 2018-2025. To avoid losing your rightful deductions, you need to have the corporation reimburse you for business use, as we describe here.

Seven Things to Know Before You Take Out an EIDL

Your businesses can borrow up to $150,000 from the Small Business Administration (SBA) with a low-interest Economic Injury Disaster Loan (EIDL). But you and/or your business will be subject to some strict SBA requirements for SBA permission before making changes to your business or distributing its assets. You’ll also have to keep extensive records, and you may have to pledge all your business assts (other than real estate) as collateral.

What Is the Unpardonable Sin in an IRS Audit?

If you or your corporation is unlucky enough to face an IRS audit, there is one record that stands out as critical to your audit health. If you are missing this one record, the IRS examiner knows that he or she should quickly expand to other areas of your tax return.

Best Choice: De Minimis or 179 Expensing—or Bonus Depreciation?

The Tax Cuts and Jobs Act (TCJA) tax reform gives you bonus depreciation as a method for deducting 100 percent of the cost of certain business assets. You also have the de minimis safe harbor for certain assets costing $2,500 or less ($5,000 or less with the applicable financial statement). And finally, the TCJA tax reform enhanced the Section 179 deduction. Which is the best choice for you?

Does the Per Diem Expense Option Stick It to Business Owners?

If you’re a business owner, should you take advantage of per diems when you travel? The short answer is yes and no—and perhaps surprisingly, keeping track of your actual expenses is often a better plan anyway. Here’s why.

Per Diems Post-Tax Reform: What the TCJA Has and Hasn’t Changed

If you have employees who travel for your business, would the IRS travel per diem method simplify your record keeping and reduce your risk of audit disallowance?

TCJA Creates New Reasons for Accountable Plan Expense Reimbursements

Failure to use an accountable plan for your employee expense reimbursements (including yourself if you operate as a corporation) turns those improperly reimbursed expenses into taxable wages. In other words, by failing to comply with the accountable plan rules, you turn the tax-free reimbursement into taxable W-2 wages. That’s about as ugly as it can get.

Q&A: Can the IRS Require Odometer Readings with the Mileage Rate?

What proof of mileage do I need if I’m using the IRS standard mileage method? Can the IRS require me to provide odometer readings as proof?

Taxpayer Saved 15 Hours of Paperwork, Lost $35,000 to the IRS

How much per hour do you collect in tax savings when you keep the right tax records? We don’t know for sure, but it’s a lot of money. We estimate that with the right records, the taxpayer in this court case would have earned about $2,333 an hour. And the thing is, the records this taxpayer needed in this case are very easy to keep.

IRS Says TCJA Allows Client and Prospect Business Meal Deductions

You are not going to do this very often, but thank the IRS for showing you the path to your client and prospect business meal tax deductions. Remember, the Tax Cuts and Jobs Act eliminated tax-deductible entertainment, so the IRS’s new client and prospect business meal rules are important.

Avoid Penalties—Give Notice of 2019 HRA Medical Plan on Oct. 2

You have three good reasons to get your qualified small-business health reimbursement account (QSEHRA) in place on or before October 2. First, this avoids penalties. Second, your employees will have the time they need to select health insurance. Third, you will have your plan in place on January 1.

Q&A: IRS Auditor Doesn’t Know the 90-Day Mileage Log Rule

You cannot expect IRS auditors and agents to know the tax code and regulations. If you can produce the code or regulations that authorize your deductions, you are miles ahead in your audit.

Tax Reform Update on Strategy for Business Meals with Clients and Prospects

Should you deduct your client and business meals in spite of the Tax Cuts and Jobs Act? This article explains why that is what you should do and gives you reasons for doing it.

Proving Travel Expenses after Tax Reform

Whether you operate your business as a corporation or as a proprietorship, you need to record your tax-deductible travel expenses in an IRS-approved manner. This means you need to know technically what a receipt is—and when you do or do not need one. By the way, the credit card statement is not a receipt.

Entertainment Tax Deductions Look Fishy

It’s true—you don’t need a receipt for an entertainment expense that is less than $75. But you may need to prove that you had the cash available to pay for your entertainment that cost less than $75.

Q&A: Find Some Tax Sanity by Using the Gambling Per Session Rule

Tax law does not like you if you are a casual gambler. If you are a casual gambler, you report your winnings above the line, where those winnings can increase your taxes, cause loss of deductions because of phaseouts, and increase your Medicare premiums. Your losses are itemized deductions that appear below the line, where you benefit only if you itemize. There’s no choice about where you report your winnings and losses, but there’s a way you can use the per-session rule to mitigate the damage this reporting causes.

Q&A: Tax Deductions for Nine Months of Out-of-Town Travel

How does the tax code define a temporary assignment that qualifies you for tax deductions during a full period of stay, such as nine full months? In this article, you learn how federal per diem rates interact with some actual expenses and what you need in place to achieve deductions for a temporary out-of-town work assignment.

Q&A: S Corporation Reimbursement of My Home-Office Expenses

If you operate your business as an S corporation and you take advantage of the benefits you receive by having an office in your home, you probably want an easy and audit-proof way to make the reimbursement request. You find that in this article.

The Gambler’s Tax Guide—How to Protect Your Winnings from the IRS

If you win big at the casino, the government is going to ask for its share of the proceeds. Gambling income is taxable, and casinos must, by law, report big wins to the IRS. But the law provides you a way to offset your gambling income and thereby reduce your taxes. You just have to know the rules, including whether you are a professional or amateur gambler, and keep the right records.

Tax Audit Tips for Travel, Entertainment, and Education

If you don’t have tax records as you are reading this sentence, think of this: how would your tax records hold up in an IRS audit? Oops, we forgot. You don’t have them. See what generally happens when you create those records after you get the IRS audit notice.

Should You Accept Bitcoins as Payment in Your Business?

More businesses are accepting bitcoins as payment. To the IRS, bitcoin is not the same as cash. You should know the tax implications of accepting bitcoins in your business and the major pros and cons of doing so.

New in Business? Avoid These Two Tragic Vehicle Deduction Errors

If you are new in business, your vehicle deductions can prove problematic because you likely do not know what tax records you need. And without the right records, you arrive at your tax preparer’s office hoping for a miracle that’s not going to happen.

Avoid Lost Deductions When Corp. Vehicle Is in Your Personal Name

Do you operate your business as a corporation but own the vehicle you use for the corporate business in your personal name? If so, to avoid losing your rightful deductions, you need to have the corporation reimburse you for business use. The corporation can use one of two methods for the reimbursement.

2016 Last-Minute Year-End General Business Deductions

This article takes your daily activity and identifies five easy year-end tax-planning strategies. Here are two examples from the article: prepaying your expenses under the IRS safe harbor and simply not billing customers and patients until 2016. These two strategies are certainly easy, as are the other three strategies in this article.

Tax Audit Tips for Entertainment and Vehicle Deductions

Special documentation rules apply to entertainment and vehicles. One rule requires you to document your vehicle mileage within one week. Another rule says you don’t need receipts if the vehicle or entertainment expenditure is less than $75. This no-receipt rule can be hazardous to your deductions. It also does not relieve you from using the right documentation to prove the expenses.

Age 70 1/2 or Older? Make Your IRA Donate Directly to Charity

When you turn age 70 1/2, the IRS wants a piece of those IRA accounts that you built up all those years. You’re required to make mandatory withdrawals each year just so the IRS can tax you on those amounts. But what if you can limit, perhaps even eliminate, these required withdrawals? Not only that, what if you could benefit a local charity in the process as well? Find out how donating to charity directly from your IRA accounts can make a huge impact on your bottom line.

Act Fast: Install New Audit-Proof $2,500 Expensing ($5,000 with AFS)

Danger with Business Credit Card

You can make your tax life easier with a business credit card—but only if you use that business credit card correctly for tax purposes. For example, charging an expense to a credit card does not make it tax deductible. You need more proof. And you could create a type of double jeopardy if you operate your business as a corporation.

Got Junk? Donate It! Pay Less in Taxes

Pay less in taxes this year by donating clothing and household items. When you know what to do and how to do it, the noncash deductions available here can help you pocket some hefty after-tax cash that costs you nothing but a little time and effort.

Don’t Let Expense Report Blunders Trigger Unnecessary Taxes, Punishing You and Your Employees

If you reimburse your employees for business expenses, or if you operate your business as an S or a C corporation, it’s crucial that you know and follow the IRS accountable plan rules—this will save money not only for you but also for your employees. We’ll give you two easy-to-use tools that will help you seamlessly incorporate these rules into your business routine.

Ignore the Tax Code’s Rules on Receipts

There is one part of tax law that you should ignore. It will get you into trouble. If you read the literal language of the tax code, you might get the impression that receipts are not always necessary. Don’t fall into this trap. Make it a general habit to keep your receipts and you will make your tax life much, much easier.

Don’t Get Fooled by the Deductions Affidavit Myth

Lost records are not a death warrant when it comes to audits. But if your tax advisor tells you that you can replace your missing records with an affidavit, you need to change tax advisors. This type of affidavit is a bad idea. It will not help you. Find out what you should do instead.

Beware, Be Alert, and Be Selfish with Charitable Contributions

Making tax-deductible charitable contributions has become more difficult with each passing year. Two culprits make things messier than in years past. First, lawmakers have enacted more rules that you need to follow. Second, the Internet offers you opportunities to make donations that don’t qualify for tax deductions. That’s the bad news, but there is plenty of good news when you do this right.

U.S. Government Models Gambling Tax Law after Vegas Casinos

Are you a recreational gambler? If so, you likely know that you are required to keep income tax records that prove your gambling winnings and losses. If you don’t have the records, your winnings are taxable and your losses nondeductible. Holy smokes! That’s terrible. Don’t let that happen. See why you need the records. Learn what the IRS and the courts say your records must show. Spend a little time with this article so that you can avoid overpaying your taxes on your gambling activity.

Don’t Let Your Tax-Deductible Receipts Fade and Disappear

Learn how today’s restaurant and other receipts printed on thermal paper can create big trouble for your tax deductions. Over time, the images on thermal paper can totally disappear. And of those that have not yet totally disappeared, you have many that you can’t read. This means you need to create a plan that includes scanning or photocopying thermal receipts.

New IRS Optional Method for Home-Office Tax Deduction: A Good Deal?

The IRS created a new optional method that you can use to calculate the tax deduction for an office in your home. Obviously, this brings up a question: Does the IRS like you, or does the IRS hate you? The IRS reveals itself in this new optional method.

Know Two Major Rules for Tax-Deductible Business Entertainment

Your business entertainment tax deductions fall into one of two business categories for deduction. The first category requires that the entertainment take place in a business setting. The second category triggers a piggyback entertainment deduction for the non-business setting, such as golf or scuba diving. Once you know the two rules, you have clarity in knowing how to claim your tax deductions for business entertainment.

How to Prove Expenses for Tax-Deductible Business Travel

Whether you operate your business as a corporation or as a proprietorship, you need to record your tax-deductible travel expenses in an IRS-approved manner. This means you need to know technically what a receipt is and when you do and do not need one. By the way, the credit card statement is not a receipt. This report explains how to keep your tax records, gives you an easy record-keeping resource to use, and helps you build audit-proof records that prove your travel expenses.

5 Year-End Tax Tips for Business Receipts and Expenses

Are you looking for more business tax deductions this year? It’s not too late. Learn five last-minute tax-planning strategies that you can implement now so you lower your taxes this year.

Digitize Tax Receipts to Protect Yourself and Make Credit Card Statements and Checkbooks Complete

Protect yourself and your receipts by digitizing them. You will like the results. Digitized receipts make the IRS smile and, of course, that makes you smile too. Without digitization, some of your receipts will disappear.

Create Both Tax-Free Income for Mom and Dad and Business Travel Deductions for You

Stay with your mom and dad on a business trip, and create tax deductions by paying them for business lodging. You have a choice: deduct the cost of staying at the big hotel downtown or deduct the cost of staying with your parents. Either way, the choice of location does not change the fact that you are on a tax-deductible business trip.

Is the New IRS Mileage Rate a Rip-Off or Does It Improve Your Deductions?

The IRS mileage rate can produce misleading results. Often the new person in business wrongfully thinks that the IRS standard mileage rate overcomes the need for a mileage log. This article contains a magic calculator and gives you the ins and outs of what you need to know to ensure that you are picking the best after-tax cash result for your business vehicle.

Tax Audit Tips for Travel, Entertainment, and Education

How do you lose deductions to the IRS in an audit? Worse, how do you compound that loss of deductions by taking your case to court? In this article, see how one proprietor managed to do both.

Entertainment Tax Deductions Look Fishy

It’s true, you don’t need a receipt for an entertainment expense that costs less than $75. But you may need to prove that you had the cash available for the entertainment.

Business Gift Basket Tax Deduction

The business gift basket runs into the $25 limit on business gifts. If you want to deduct more than $25, you need to know the rules in this article that produce bigger deductions.

How the No-Receipt-Under-$75 Tax Rule Works

The no-receipt-under-$75 tax rule applies only to certain travel, entertainment and listed property.

Proving Federal Tax Deductions with Credit Cards

Credit cards are valuable time-saving assets when used correctly by the business taxpayer. Incorrect use damages both your wallet and your time management.

Tracking Personal and Business Checking Accounts

Computers and programs like Quicken make it easier to track business and personal activities. Even so, there are rules of the road that you should follow to ensure the best results.

Tips to Audit-Proof Your Records

The law gives you no choice but to keep the proper tax records on a timely basis. This is pretty easy when you know what to do. One easy rule to follow is to never commingle your activities in your bank accounts. Both the rule that requires a mileage log and the rule that requires a time log are more difficult, but absolutely essential to proving your deductions.

Do You Have What It Takes to Deduct Your Holiday Parties

Holiday parties trigger a variety of tax rules. Some parties, or parts of parties, are 100 percent deductible. Make sure that your chart of accounts has a place for 100 percent entertainment and a place for 50 percent entertainment deductions.

When You Benefit with Travel Per Diem (or Not)

Just as it has standard mileage rates, the IRS has standard per diem rates for daily travel costs. There are situations where you might benefit from the mileage rates and the travel per diems. This article explains how the per diem rules work for you as a self-employed taxpayer, and gives you the ability to make an informed decision on whether or not to use the per diem rates.

Deductible Business Expenses: Wins Computer, Loses Mileage Write-Off

In court, David Choe succeeded proving that his laptop was business use, but a bad mileage log took away all his automobile deductions. Ouch! Learn how to avoid this egregious error.

NY Taxi Loses Cab Deductions

Learn from this taxi driver’s mistakes: keep good records. His court case shows you why.

No Meal Receipts Equals No Deduction

This taxpayer lost $5,503 in meal expenses because she could not produce receipts or other records to prove the meal deductions.

 

Travel Deduction for Educational Seminars

When you combine business and personal travel, tax law contains specific rules on what you can and cannot count as a business day. These rules determine if your transportation, lodging, and meal costs are deductible in full, partially deductible, or not deductible at all.

New Law Attacks and Changes Many Charitable Deductions

Public Law 109-280 makes tax deductions for donations to charity far more difficult. Here is one example of the changes: dropping $5 in the collection basket at Church on Sunday is no longer deductible. Now you need a cancelled check or a receipt to claim that deduction.

Assignment of Personal Commissions to His Corporation Crushes Insurance Agent

Assigning your personal commissions to your corporation does not work. In this court case, this insurance agent had unfiled tax returns and unpaid taxes for the years he assigned his 1099 income to his corporation.

Woe to the Taxpayer with Bad Records

Bad records can cost you just about every tax deduction. You can testify as to your deductions, but without the records that turns out worthless. When it comes to your taxes, paper talks.

Proving Basis in the Home

The couple in this court case did not keep the right records to prove the improvements they made to their home. This failure to keep the records probably saved them some personal time, but it cost them taxes on $101,907 of capital gains. What do you suppose the hourly cost of this failure—considering that the time spent to keep these records has to be very few hours? You really do need the right tax records and it takes very little time when you know what to keep.

$75 Rule on Vehicles

Under tax law, your vehicle is considered “listed property.” The IRS has a regulation that applies the $75 receipt rule to listed property.