Saturday, March 8, 2008

Record-Keeping for Tax Deductions

A recent article details record-keeping requirements for certain tax deductions:

Certain red-flag deductions require that "adequate records" be kept, which includes two components: a daybook, ledger, trip sheet or journal in which each expense is noted "at or near the time" it was incurred, and corroborating receipts for all lodging and items costing more than $75. Your daybook may be tallied on a weekly basis and still fall within what the IRS considers timely.

According to IRS Section 274, your business log or daybook entry for a claimed expenditure must include the following to satisfy claimed expenditure requirements:

•For T&E: date, time, place, amount and business purpose of the expenditure. In the case of business entertainment, you also need to note your business relationship to those who accompanied you.

•For business gifts: date, time, amount, description, business purpose and your business relationship to the recipient of the gift.
•Listed property: date, time, amount and business purpose of the purchase.

Documentary substantiation for these expenses (receipts, statements, etc.) are considered adequate if they contain the date, place, amount and character of the expenditure.