No receipt, no deduction, ideal? Frequently speaking, certainly. The mantra of little business bookkeeping has been relentlessly burdensome for many years: “No Receipt, No Deduction.”
My possess tax purchasers are rapid to remind me of this standard recordkeeping rule. More than the years I have listened to this many instances: “But I don’t have any receipts. I guess I can not choose the deduction, ideal?”
What is my reaction to the “No Receipt, No Deduction” lament? “Not so quick! Where ever you will find a tax rule, you will find an exception to the rule.”
In sure conditions, having deductions without the need of a receipt is really sanctioned by the IRS. Below are a few legal exceptions to the “No Receipt, No Deduction” rule.
EXCEPTION #one: Automobile Price You are authorized to deduct your car or truck charges to the extent that you utilized your car or truck for business. If you drove your automobile 100% for business, then 100% of your car or truck charges are deductible.
And you have two solutions for determining all those car or truck charges: one) The Actual Price Process 2) The Mileage Process
Our focus listed here is on Option #2 — since with the Mileage Process your car or truck cost is just the selection of business miles instances the formal IRS mileage fee.
For 2009, this fee is fifty five cents for every mile. In 2009, if you drove your car or truck ten,000 miles for business, you can report a deduction of $5,500 — without the need of getting to maintain any receipts for gasoline, oil changes, repairs and maintenance, insurance coverage, and many others.
You do have to document your business mileage by using a composed log of some type, but this is normally substantially simpler than preserving all all those receipts for precise car or truck charges.
EXCEPTION #2: Meals Whilst Traveling When touring out-of-city on an right away business excursion, you can deduct the precise cost of your meals (by retaining the receipt), or you can depend on the small known “Per Diem Process” (which demands no receipt).
The Per Diem Process offers you a day by day meal allowance for each and every working day of the excursion, relying on what component of the nation you stop by. For example, the for every diem meal fee for Birmingham, AL is $forty four for San Francisco, it is $64 (as of 9/30/08).
To locate the for every diem amounts for every condition, go to: http://www.irs.gov/publications/p1542/ar02.html
EXCEPTION #three: The $75 Dollar Rule This is yet another straightforward way to stay away from the inconvenience of preserving receipts — this a single consists of your business meal and enjoyment charges. Feel it or not, the IRS does not need a receipt when your business meal or enjoyment cost is fewer than $75 for every cost.
Audio far too good to be correct? Perfectly, there is a “catch”, of system: you continue to ought to sustain a history of the next five specifics linked to the deductible event:
one) WHO did you eat with or entertain? i.e. the names of the individuals and the character of their business partnership to you
2) WHEN did the enjoyment manifest? i.e. the day
three) Exactly where did the enjoyment manifest? i.e. the title of the cafe or other location
4) WHY did you satisfy? i.e. a description of the business objective of the meal or event
5) HOW Substantially did you commit? i.e. the dollar amount
You need to history these five specifics in a log. Your day by day appointment ebook or working day-timer is the fantastic put to jot this down in fewer than a moment. Possessing fulfilled the IRS substantiation necessities, you can then throw absent the receipt. In the event of an audit, you can be lined.
Two last comments: Exception #2 applies to right away vacation conditions, no matter of whether or not you eat your meals alone or with business associates. Exception #three applies to meals and enjoyment charges incurred when you are with somebody with whom you have an current or possible business partnership, no matter of whether or not you are in city or in right away vacation status.