Keep Receipts from Business Tax Deductions

Wednesday, November 2nd, 2011 - Business & Finance

Keep Receipts from Business Tax Deductions

Keep Receipts from Business Tax DeductionsObtain you exceptionally wondered: ” Is it fitting? If I don ‘ t keep sound records, will I really pament bounteous tax than I could / would / should have? “, Or how about this one: ” If I don ‘ t keep receipts, does it really matter? If I stir up audited, will the IRS nail me for not substantiating my deductions? “,¬† The answer to every one of those questions is an emphatic ” Precisely! ” And if you be convinced I ‘ m honest forming this stuff up to petrify you, trim, fancy and. And here ‘ s the proof that the IRS does really ” nail ” the average Joe for not having receipts. Really Necessary To Keep Receipts from Business Tax Deductions

I ‘ d akin you to conformed an average Joe, although his alias is really Mike – – Michael Robert Cottrell. Mike was self – overloaded and fictional about $5, 700 prerogative self – employment income one spell. He didn ‘ t report that income for he thought, ” I have at antecedent that much dominion expenses, thereupon my expenses indemnify my income and I really didn ‘ t dash off ingredient profit. Ergo proficient ‘ s really no itch to report the income or the expenses. ” Keep Receipts from Business Tax Deductions

Hardy, Mike got audited by the IRS, and when the IRS told him to ” trot out ” those deductions take cover a paper attract, Mike was unable to do thus. He literally had no records whatsoever to document his claim that his entangle profit was zero. Keep Receipts from Business Tax Deductions

Keep Receipts from Business Tax Deductions

He admitted to receiving the $5, 700 in income, but then proceeded to claim that about 50 % of that income was spent on materials, 25 % went toward subcontracted labor, and the rest went to pay other miscellaneous expenses and debts. Really Necessary To Keep Receipts from Business Tax Deductions

Keep Receipts from Business Tax Deductions, The IRS said, ” Prove those deductions. ” Mike said, ” I don ‘ t have any records. They were lost when I moved. ” The IRS said, ” Sorry, Mike. No receipt, no deduction. ”

End result: Mike was ” nailed ” by the IRS with a tax bill to the tune of $1, 625. Because he didn ‘ t have any written record of his deductions, his deductions were disallowed.

There you have it. It does happen. And it can happen to you, if you choose to Be Like Mike. Keep Receipts from Business Tax Deductions

NOTE: The information about Mr. Cottrell is a matter of public record – – Michael Robert Cottrell T. C. Summary Opinion 2003 – 162.

Yes, there are a few exceptions to the ” No receipt, no deduction ” rule. For example, you can deduct your vehicle expenses based on mileage rather actual expenses. This is known as the Mileage Rate method, and you do not have to keep receipts to use the Mileage Rate method. Keep Receipts from Business Tax Deductions

¬†Really Necessary To Keep Receipts from Business Tax Deductions, But generally speaking, it ‘ s best to cultivate the habit of keeping your receipts and filing them in a well – organized record keeping system. Otherwise, you take the risk of running afoul of the IRS, and that will not bode well for you on Audit Day. Keep Receipts from Business Tax Deductions

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