Receipts! What are they and why are they important in your health coaching business! Let’s dig into everything you need to know about your business receipts and documentation.
First of all, let me be really blunt, with the IRS, it’s your job to prove your point not theirs.
Sounds harsh?! Well, let’s move on and see what you can do to help yourself and your business.
The IRS requires you to keep all documentation to support what you filed on your personal and business tax return. If the IRS ever audits you ( and it’s bound to happen at some point) they will request documentation for any income or expenses that you claimed.
The IRS requires that the documentation you keep to prove your income and expenses show the following information:
Who you paid?
How much you paid them?
What you paid them to do or goods you receive? (in regards to your business)
Date you paid them?
How you keep this information is solely up to you, but in today's digital age, it’s probably a good idea to keep a digital copy of your receipts, especially for those receipts that can fade over time. Keeping a digital copy is so much more doable these days especially with your smart phone.
The $75.00 rule is a huge misconception – you have to keep documentation for all income and expenses, regardless of amount, except expenditures that are less than $75 for overnight travel and listed property.
You, the taxpayer, carry the burden of proof if ever audited, so my advice is to keep things simple and ignore this rule altogether (it most likely does not apply to you) and KEEP DOCUMENTATION FOR EVERYTHING.
These require even further detail on receipts to be allowable deductions.
Gift receipts – need to show who the gift was for and why.
Meals receipts – need to have the names of those who attended and what business was discussed during the meal.
Keeping a copy of these will also help too jog your memory on these transactions should you ever need to talk about these.
Bottomline: Documentation (paper for digital) is King in your business when it comes to being in compliance and proving your point to any charges that the IRS may have a question.