Now to discuss everyone’s favorite five letter nightmare, an audit!
We all know that some people (*giggle*) are into “that sort of thing,” but if you aren’t one of those people you might want some advice on what you need for an audit.
The first thing you’ll need is obviously your receipts, silly! Each receipt should clearly state the company, the date, the amount, and what it’s for (service or *ahem* item). If it’s for a donation to charity, it should also include a statement saying no ownership will be retained and you’re not receiving a benefit for the donation.
Next thing you’ll need is your proof of payment. You wouldn’t want the IRS to think you got away with something, would you? These are cancelled checks, bank statements, or credit card receipts. I think they’ll have to accept that, won’t they?
Another thing that you’ll need, to prove that you aren’t doing anything untoward is keep your business records for financial activity. You can’t just be willy-nilly about these things!
Mileage logs are one of the things that lots of businesses should keep better track of. If it’s not written down, with lots of notes about the purpose of the trip, how is the auditor going to trust you? Better get on top of writing that down! Or at least use an app!
If you’re one of those people that moves around a lot (not that there’s anything wrong with that!) you should also keep records so that you can prove your residency for the year! Records that demonstrate your actually real presence somewhere can be super important, especially to prove to Jessica Fletcher that you couldn’t be the one that killed the latest murder victim!
The last thing is that if you work for the Man, you know, the bad one, and he denies reimbursement of a business expense, you may need to show proof of non-reimbursement! That might be an expense report with a big stamp on it that says “DENIED” or “UH-UH, AIN’T GONNA HAPPEN!” or at least a letter that your boss writes for you. This is especially important to musicians, barbers and stylists, construction workers, and anyone that uses their own tools to do their job. *AIR GUITAR* Whoo!
So, that’s:
- Receipts
- Proof of Payment
- Business records
- Mileage logs
- Residency proof
- Proof of non-reimbursement
However, there’s one last important point that you need to keep in mind! What is it, you ask? It’s Contemporaneousness! Er . . . contemporancess . . . conmemportance . . . being contemporaneous! That is to say, all of the documentation should be dated to match what it describes!
IRS agents and state agencies may just dismiss documentation that isn’t dated around the time of the financial activity, especially receipts that are provided much later! That means that you should try to make sure that you get your paperwork done when the transaction occurs, or as soon as possible afterward!
Now, no one can tell you for sure if you will or won’t face an audit in your lifetime, right? But if worst comes to worst and the IRS comes knocking on your door, then you’ll know what papers they ask for!
Good luck!
Tags: weirdly funny