For the love of tax-deductions, please keep your receipts! Write notes on them if you need to. The IRS will NOT accept bank or credit card statements as substantiation for expenses if you are audited. You have to show the business purpose of the expense. If you take a client out for coffee, write the person’s name and what you talked about on the top of the receipt.
Now, the good news is that all of this can be saved digitally. You don’t have to keep those flimsy register receipts that fade in a couple months. That’s why we love technology! Ask us about your options. There are lots of mobile apps (including QBO) where you can snap a picture and upload it to QBO, so you can always get back to it if you need to. But some of the things that you are probably not thinking about should also be saved – like Amazon orders. The IRS is getting a bigger budget thanks to the Inflation Reduction Act and more audits are incoming. Every month I see more court cases in my newsletter that are ruled “for the IRS” because the business owner didn’t have any substantiation.
While I’m on the subject, you need to do the same for mileage! If the business does not own the vehicle, then you need to be tracking your mileage. You can’t deduct gas or maintenance. And again, this means they need to know where you went and the business purpose of the trip. I use TripLog personally. It has a usb plugin for the car and gps, so it automatically saves all your trips and then I go in weekly (or monthly if i’m being realistic) and swipe all the business trips. Then I write in the notes section – Chamber business card exchange or whatever reason I was out and about. You can run a report monthly or at the end of the year so you can put those mileage expenses in as a deduction for the business. And yes, you can reimburse yourself for that mileage at the IRS rate. Currently it is 62.5 cents/mile for the last 6 months of the year. Fortunately, TripLog also does that calculation for me.
Stay safe out there peeps!