How To Organize Business Receipts for Taxes 2023
How to Organize Receipts for Small Business
As a business owner, you have probably heard this statement over and over again:
KEEP YOUR RECEIPTS FOR TAXES!
Here are a few suggestions on how to KEEP THE IRS in mind when COLLECTING, STORING, AND PRESENTING those BUSINESS RECEIPTS.
WHICH RECEIPTS ARE DEDUCTIBLE FOR MY BUSINESS?
Owning, operating, and maintaining a business COSTS MONEY.
But, when you buy things for the BUSINESS, they must be legally deductible.
- EXPENSES must be an
ORDINARY AND NECESSARY EXPENSE for your specific industry to be
able to legally deduct it on your taxes.
- The WAY that you STORE,
ORGANIZE and PRESENT the receipts for business purchases as
the PROOF will also be a consideration by the IRS to allow the deduction
or not.
STORING and ORGANIZING RECEIPTS to MAKE YOUR CLAIM
If you keep the receipts that you collect in a BOX or in
your POCKET, and try to give the BOX or those wadded up and faded receipts to
the IRS to support your claim, THE IRS WILL NOT ACCEPT THEM AS PROOF OF TAX
DEDUCTIONS!
You will need to ORGANIZE and PRESENT
the receipts in a FORMAT that the IRS will accept.
Here are some suggestions:
- TAKE PICTURES to preserve the receipts while the ink is still on the paper. Make sure that the date and the type of expense are clearly shown.
- You can store the photographed copies to serve as the PROOF of the EXPENSE in lieu of the paper copies on JUMP DRIVE or an APP.
- UNFOLD and GROUP
the receipts by TYPE OF EXPENSE. Group all receipts for Office
supplies together, Fuel together, Insurance together, Repairs/maintenance
together, etc. and store them in a FIREPROOF BOX in
their groups -OR- by pictures that you took in a JUMP DRIVE or APP from the file
you made in your computer or phone to store them
- RECORD the
receipts by their GROUP together in a LEDGER -OR- an ACCOUNTING
software program so that each GROUP is TOTALED. By
doing this, you can provide totals that will actually be supported by the
receipts that the IRS can easily locate and associate as a legitimate
expense for you to claim.
PRESENTING RECEIPTS/EXPENSES TO THE IRS
As mentioned previously, if/when dealing with the IRS or
anyone else who wants to verify your claims for the purchases of your business,
DON'T PRESENT THE BOX of receipts as your PROOF.
- Use a LEDGER, SPREADSHEET,
SHEET OF NOTEBOOK PAPER to LIST OUT THE TYPE OF EXPENSE with
the TOTALS
- MAKE SURE THAT THE
TOTALS on the ledger MATCH UP to the TOTALED RECEIPTS for each item
claimed.
BE CAREFUL WHEN DEDUCTING MEALS FOR BUSINESS
Claiming meals as a business owner is NOT JUSTIFIED when you buy lunch while driving to a client's place of business or by writing "BUSINESS MEETING" on the meal receipt.
When collecting to claim an
ordinary meal like LUNCH or a BUSINESS MEETING, keep a couple of things in
mind:
- ORDINARY MEALS DURING TRAVEL-To be able to deduct a meal, you must travel OVERNIGHT AND AWAY FROM HOME for over 24 hours for your business to be able to claim the MEAL or PER DIEM deduction and YOU MUST PROVE that you were actually AWAY FROM HOME FOR BUSINESS.
- MEALS for BUSINESS
MEETINGS- When meeting with clients or employees and having a meal,
your receipt must include THE NAMES OF THE INDIVIDUALS ATTENDING THE
MEETING and THE BUSINESS PURPOSE of the meeting
to stand up to the IRS.
EQUIPMENT that COSTS over $100
When purchasing ELECTRONICS, CARS, TRUCKS, ACCESSORIES,
or anything else that WILL LAST OVER 1 YEAR or
IMPROVES A DEVICE and COSTS more than $100:
- GATHER and KEEP those RECEIPTS separately as ASSETS. Each of these must be individually added to your tax return as ASSETS TO YOUR BUSINESS and are required to follow the rules for depreciation.
- STORE and RECORD these
receipts as BUSINESS ASSETS in your ledger or accounting software.
If you don't have time to do this for you and your business,
FIND A GOOD BOOKKEEPER to do this for you so you can be AUDIT READY at all
times.
I have worked with business owners and truckers for over 30 years and would be happy to answer any questions you may have and help you organize your business for success.
Be prepared and organized and your business will thrive.
Bonnie Dorsey
www.Dorseytaxplace.com
972-672-8850
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