If you’re looking to make sound financial decisions, especially as a business owner, you should keep a record of business transactions or credit card statements. Receipts are proofs of documenting every expense incurred for facilitating daily operations. If you don’t have a properly filed receipt of your business expenses, your chances of decreasing your tax obligations may go down.
Here’s how you can organize receipts and simplify your taxes:
Keep physical copies
While this isn’t strictly necessary, many of us prefer digital receipt management. However, IRS only accepts it when it adheres to the labyrinthine legalese of Revenue Proclamation 97-22, which needs an indexing system to prevent deletion or alteration of information.
Never assume you’ll remember the details
You’ll need to provide the particulars when claiming client dinners as business expenses – what’s the business aim of the dinner? Who was present? Which firms did they represent? Writing it down on the receipt is the simplest way to handle this.
The burden of proof is on you
Whenever you get audited, you’ll have to prove every deducted expense occurred and how you paid for it. While you can simply do this by matching digital or physical receipts to your bank statements, it’ll help if you maintain a log of expense details (such as who attended the business dinner) along the way.
Purge the $75 rule from your mind
Many people talk about this convenient loophole. However, ignoring it altogether will be your best bet. It’s stated that receipts for deductible expenses lesser than $75 aren’t essential. Unfortunately, this is only applicable to listed property expenses, overnight travel, and entertainment.
In addition, you’ll still need proof to establish who paid for them and how was this done. So, keeping receipts is important.
Don’t file your recycling
Not every receipt is tax-deductible – and if you avoid the work of separating the deductible receipts upfront, you’re only building clutter that makes it difficult to work with your receipts when the tax time arrives.
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