Document Your Tax Deductions

If you are audited by the IRS, it is up to you to prove that you had a valid deduction. How do you do that? You need to keep invoices and bills that you pay. I attach the voucher part of my checks to the paid invoice which shows the date of the check and check number. If you don't have computer checks, write the check number and date on the invoice and keep them in a folder for the current year and at least the prior 3 years. Keep all of your business credit card statements that detail what you were charged. Write on the statement the names and relationships of anyone you paid a meal for. Keep all of your bank statements as the charges from debit cards can document business expenses. Pay the bank to provide check images each month if possible. It is worth the extra money. Going back and trying to get check images from banks several years old is very difficult and expensive and sometimes impossible. Also don't pay tax deductible bills with cash. Use checks.