Keeping Good Records Is Key to Deducting Business Expenses

Desk with paper, coffee and other documentation

Keeping good records can pay off big if you deduct travel, business or transportation expenses. They will help protect you from the IRS if your return is ever examined and provide the proof your employer may require if you are reimbursed for business expenses under an accountable plan. Use an account book, diary, statement of expense or similar record to keep the proof that you will need. It’s also a good idea to keep documentary evidence that, together with your records, will support your expenses. Receipts, canceled checks or bills are examples of some items that you should retain. Receipts are not needed in every case, such as travel and entertainment expenses less than $75 (with the exception of lodging.)

Your records should show the amount, time, date, and place or description and the business purpose for each expenditure. For example, when traveling always record the amount for each separate expense, the city in which it took place, and the business purpose for the trip. The business purpose is especially crucial for deducting meal and entertainment expenses. A substantial and bona fide business discussion must take place directly before, during, or after the entertainment. Generally, only 50 percent of meal and entertainment expenses are deductible.

Automobile usage for business purposes should also be kept in your log. Your log should include the number of miles driven for each use, as well as the information described above. Tolls and parking fees may be claimed in addition to the standard mileage rate that many taxpayers use.

Do you have the support you need to manage your small business bookkeeping? Contact us to schedule an appointment to speak with a local small business advisor.