Q & A and Tips on Accounting, Taxes and Personal Finance.

Receipts – The Foundations of Proof

March 14, 2016 | By More

receiptsSome people keep and guard receipts as if they were pieces of precious memorabilia. Many other people leave them on the store counter, toss them away, or roll them up in a ball and shove them in a pocket on the way out the door intending to throw them away later.

If you’re a business owner, receipts are worth more than their weight in gold. They create specific proof of the important 4 W’s: Where, When, What, and sometimes Why.

Credit card and bank statements alone are not sufficient proof in the event of an audit. Credit card statements are important to show financial interest charges, but they lack the specific detail required for deductible items.

For example: A credit card charge on a business account at a big box store may show total charges of $4,000 and subsequent payment. Making the payment from your business account is not enough. Only the original receipt will provide enough details to satisfy the IRS.

In this same case, if you purchased items for multiple properties, uses, or projects, each of these details must be documented on the original receipt.

In the event you happened to buy something for personal home use when you were business shopping, that’s okay. However, you must remember to note ‘personal’ on the original receipt as well.

It would be better to buy your personal items separately. It’s much easier to track and justify business expenses when the items purchased are clearly used for business purposes exclusively with the 4 W’s noted on the original receipt.

Your modus operandi is sometimes a factor during an audit.

Once in a while, it will probably happen that you’re family shopping and you spot an item you must have for work. Go ahead and buy it, but again purchase it separately if possible. If not, remember to keep the personal receipt and document the business purpose immediately.

Keep it simple…Keep it separate…but KEEP THE RECEIPT!

Contributed by Sheila Askov
The Bookkeeping Company, LLC is located in Portland, Oregon. For more information or to contact Sheila Askov, visit http://www.tbcinfo.com

Article information should not be used exclusively to make legal, financial or tax decisions. Because laws and rules can change frequently, topics may not always be updated to reflect these changes or may not apply to your unique situation. It’s prudent to seek out the advice of a professional for your specific needs.

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Category: General Business

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