How to Prove Expenses

If you deduct certain expenses on your tax return, you must be able to prove those expenses. You are required certain types of proves depending on the type and the amount of the deductions.  Following are some of the typical expenses and the details of how to prove those expenses.

Travel:

• Cost of each travel separately
• Lodging
• Meals
• Incidental Expenses (You could categorize for small amounts)
• Dates: Arrival & Departure Dates
• Place: Business address(s)
• Business Purpose: Reason for visit(s) such as Sales Development, Demo, Nature of the Discussion, Attendees.

Entertainment:

• Cost of each expense separately
• Date of the entertainment
• Name & the address of the place
• Business Purpose: What business purpose was achieved? Such as meetings, presentation etc.

Gifts:

• Cost of the gift
• Date of the gift
• Description of the gift

Transportation:

• Cost of each transportation separately
• Date of the expense
• Business destination
• Purpose of the visits

Record Keeping Requirements:

• Cancelled checks
• Expense Reports
• Diary
• Log
• In addition to the above, receipt is the most important documentary evidence

Incomplete Records:

If you don’t have the complete records to prove your expenses, than you may be required to prove your expenses through sufficient substantive evidence.

• Written /Oral Statement about the expenses
• Other Substantive Evidence such as: cancelled checks, credit card statement, Bills, and invoice etc.  

By Sal Ghulamali, CPA

He could be contacted at sg@taxcpa1.com

We are local CPA firm serving the Miramar, Pembroke Pines, and surrounding neighborhoods since 2001.

Visit our website: TAXCPA1.COM

This article is for the purpose of providing general information only. It does not provide tax/legal advice for any particular person, entity or situation. Each situation is different and you should consult a CPA/Attorney with complete and pertinent details.