As if small business owners didn’t have enough on their plates, they're also one of the most likely groups to be investigated by the IRS after they file their taxes.
If this happens to your small business, like it does to many thousands of others every year, the IRS is going to want to see the evidence for your tax deductions. The best evidence: receipts🧾.
Now, in a perfect world, you will have all your receipts digitized and itemized, ready to go in an instant. With Fincent’s shoebox in the cloud for your bills, receipts and invoices, it’s actually easy to make that happen... for next tax season, at least.
But back to this year’s filing and return. The worst has happened. You’ve filed, the IRS is auditing your return... and you have no idea where those receipts are.
First of all, don’t panic. Here’s what to do.
💰The expense amount
📍Details about when and where it was incurred
📔The purpose or context of the expense
🧑🤝🧑When more than one person is involved, such as at a meal, the IRS may ask for details regarding the number of people that were present, the reason for the meeting, and the expense.
There are a number of ways you can recreate records in a manner that will be acceptable to the IRS.
🏦 Bank and credit card statements. They might work as a substitute if you don’t have a receipt.
💇With your vendors and suppliers. They might have records they can share with you
🗓️Your calendars and planners, which might show information about travel, clients and services provided.
📱Cell phone records, photos and social media, which could all contain evidence.
🛰️Google Maps and similar tools, which might help you reconstruct mileage and other travel expenses.
It’s a good idea to get going with this as soon as you learn you’re going to be audited because it takes time to gather all the evidence.
Once you’ve compiled as much evidence as you can, supply it, along with as much information and explanation as possible to the IRS. If the IRS disagrees with you, they may charge a penalty, but if you can demonstrate you’ve done your best to comply, you’ll have a good case for appeal.
Professional bookkeeping services like Fincent can reduce the stress of maintaining records. Book a call to learn more about how we can help you!