Posts Tagged ‘bank statements’
Record Keeping – It is Important
Proof of a deduction or business expense takes two legs. Under IRS §162, Trade or business expenses, a taxpayer must prove that the expense:
- was ordinary and necessary for carrying on a trade or business; and
- was actually paid.
It is not enough to have bank statements showing checks written to office supply stores and the U.S. Post Office, but not a detailed record of items purchased and how they relate to your business. Conversely, you must have invoices showing the amount due and how these items related to the business and also proof that the invoices actually were paid.
If your record keeping is scant, you risk being denied the deduction because you cannot prove both key elements for each deduction.
Some expenses, such as travel, meals, entertainment and auto expenses, require more proof under §274, Disallowance of certain entertainment, etc., expenses. The IRS and courts have no flexibility on these items and deny deductions unless all the substantiation required by the regulations is provided. [Fleming v. Commissioner, T.C. Memo. 2010-60]
If you have questions regarding deductions and record keeping, consult your accounting professional and CPA.
Record Retention Guide: What You Need to Keep
What records do you need to keep and for how long? This matrix shows you.
