Why your credit card bill may not provide tax breaks

If you believe (or if you have received your tax notice before) that your credit card statement is sufficient proof of your business tax obligations, you may have trouble if your returns sometimes appear within the scope of the exam.

This is the latest news I received from the IRS National Telephone Forum about the record keeping requirements of small business owners and self-employed entrepreneurs.

Please don't start smashing your credit card bills; they are definitely better than nothing, and in some cases they may have enough evidence. One of the IRS warnings is that in many cases, you will also need to certify documents to prove your tax deductions.

And, yes, I realize that for some purchases, there may not be any other documents. Some suppliers you order online or by phone do not provide written order confirmation. In these cases, I suggest you make some notes about this purchase yourself and save them in your file.

Remember, the IRS stated that in order for your business to be tax deductible, it must be regular and necessary, and for commercial purposes. For example, a line on your credit card statement indicates that you spent $54.89 on Office Depot on October 15, 2008. This does not prove that you purchased office supplies. You can also buy computer games for your children.

This is why the US Internal Revenue Service advises you to keep the original store receipts, which will show the details of the various items on the credit card statement. They said that this is not a bad idea. It is necessary to indicate in the receipt the commercial purpose of these goods.

If you have scanned a receipt onto your computer, the IRS says there is no problem. But they added that they know how to easily handle electronic files. If they call you for an audit, they test the authenticity of the scanned document by providing an original copy of some receipts.

So you probably should save all this. If you are concerned that the original paper may be degraded and unreadable, make a copy immediately and then copy the original.

This recommendation may not save trees, but it can help you avoid unpleasant audits and higher tax bills.

Just said.

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