26 Mar Maintaining a Paper Trail for Your Business Expenses
Filing a business return requires you to track every expense in order to get the maximum benefit on your return. And while keeping a spreadsheet or tracking those expenses in QuickBooks is highly recommended, this data must be accompanied by an accurate paper trail if you want to ensure it stands up to an IRS audit. For every expense you claim for your business, you must have a document to accompany it. Not sure what documents to include? Here are a few suggestions of what items to save from your Provo CPA.
For every expense that you attribute to your business, you need to keep a proof of the expense for your tax records. If you receive a physical receipt or printed invoice, you can scan the paper and keep an electronic record. You can even simply snap a photo of the receipt on your phone.
We strongly recommend keeping a digital file folder of your business expense receipts for easy management of your paper trail. This also makes it simple when filing your taxes, as you can provide your accountant with access to your folder, as well as to your QuickBooks or spreadsheet of total expenses. This allows us to easily total and verify your business expenses when filing.
If you’re deducting your actual vehicle expenses, you need to maintain a paper trail as described above. But most business owners choose to claim the standard, per-mile deduction, as this usually yields a higher return. When claiming this deduction, however, you can’t simply make an estimate of your mileage driven. You must maintain a detailed driving record of every mile driven for business reasons. Those records must include the following details:
- Date of the trip
- Beginning odometer
- Ending odometer
- Total miles
- Reason for trip (e.g., meeting with client, attending a conference, etc.)
To see an example of a mileage record, click here: https://www.irs.gov/pub/irs-pdf/p463.pdf#page=27. If you wish to claim the standard mileage deduction for your business vehicle expenses, please ensure that you bring a copy of your mileage record to your meeting with your accountant in Provo, or provide us with online access to your information.
By maintaining a detailed spreadsheet of expenses, and accompanying that information with an accurate paper trail, you can greatly simplify your business tax return and protect yourself should you be audited by the IRS. Be sure to maintain these records throughout the year, and provide both your spreadsheet and your paper trail to your Provo CPA when preparing your business return.