Get Your Tax Refund
File your Federal Taxes for
Free with TurboTax Federal FREE Edition
FREE to Prepare + FREE to Print + FREE to E-file
- Get your maximum refund*
- 100% accurate calculations guaranteed*
TurboTax Federal Free Edition - File Taxes Online
Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!
Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
Free 1040Amended ReturnStudent Filing Taxes 2013Tax Act 20102011 Form 10401040ez FormWww.irs.gov1040xAmmended Tax Returns1040x Mailing AddressHow To Fill Out 1040x Line By LineTax Planning Us 1040aAmendment TaxesUnemployment Tax ReturnHow Do I Do My 2010 TaxesFederal1040x AmendmentHow To File A Amended Tax ReturnCan I File My 2010 TaxesTax Cut Hr BlockVita Tax 2014H&r Block Advantage Free FileHow To Do An Amendment On My Tax ReturnFile 2011 Tax ReturnH&r Block Free Tax FilingNj 1040ezFile Amended Return OnlineTax Act 2012 ReturnForm 1040x 2013Free Tax Filing Online 2011Taxes UnemployedFile My Taxes For 2012How To File 1040x FormState Tax Return 20132011 Form 10401040nr Ez OnlineIrs Free FileTaxcut OnlineFree State Taxes FileIrs Tax Return Forms 2012Amend A Tax ReturnTax Forms 2010Free E File State Taxes Only
Free 1040Free 1040 5. Free 1040 Recordkeeping Table of Contents How To Prove ExpensesWhat Are Adequate Records? What If I Have Incomplete Records? Separating and Combining Expenses How Long To Keep Records and Receipts Examples of Records If you deduct travel, entertainment, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expense. Free 1040 This chapter discusses the records you need to keep to prove these expenses. Free 1040 If you keep timely and accurate records, you will have support to show the IRS if your tax return is ever examined. Free 1040 You will also have proof of expenses that your employer may require if you are reimbursed under an accountable plan. Free 1040 These plans are discussed in chapter 6 under Reimbursements . Free 1040 How To Prove Expenses Table 5-1 is a summary of records you need to prove each expense discussed in this publication. Free 1040 You must be able to prove the elements listed across the top portion of the chart. Free 1040 You prove them by having the information and receipts (where needed) for the expenses listed in the first column. Free 1040 You cannot deduct amounts that you approximate or estimate. Free 1040 You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. Free 1040 You must generally prepare a written record for it to be considered adequate. Free 1040 This is because written evidence is more reliable than oral evidence alone. Free 1040 However, if you prepare a record on a computer, it is considered an adequate record. Free 1040 What Are Adequate Records? You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. Free 1040 You should also keep documentary evidence that, together with your record, will support each element of an expense. Free 1040 Documentary evidence. Free 1040 You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. Free 1040 Exception. Free 1040 Documentary evidence is not needed if any of the following conditions apply. Free 1040 You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging. Free 1040 ( Accountable plans and per diem allowances are discussed in chapter 6. Free 1040 ) Your expense, other than lodging, is less than $75. Free 1040 You have a transportation expense for which a receipt is not readily available. Free 1040 Adequate evidence. Free 1040 Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. Free 1040 For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information. Free 1040 The name and location of the hotel. Free 1040 The dates you stayed there. Free 1040 Separate amounts for charges such as lodging, meals, and telephone calls. Free 1040 A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information. Free 1040 The name and location of the restaurant. Free 1040 The number of people served. Free 1040 The date and amount of the expense. Free 1040 If a charge is made for items other than food and beverages, the receipt must show that this is the case. Free 1040 Canceled check. Free 1040 A canceled check, together with a bill from the payee, ordinarily establishes the cost. Free 1040 However, a canceled check by itself does not prove a business expense without other evidence to show that it was for a business purpose. Free 1040 Duplicate information. Free 1040 You do not have to record information in your account book or other record that duplicates information shown on a receipt as long as your records and receipts complement each other in an orderly manner. Free 1040 You do not have to record amounts your employer pays directly for any ticket or other travel item. Free 1040 However, if you charge these items to your employer, through a credit card or otherwise, you must keep a record of the amounts you spend. Free 1040 Timely-kept records. Free 1040 You should record the elements of an expense or of a business use at or near the time of the expense or use and support it with sufficient documentary evidence. Free 1040 A timely-kept record has more value than a statement prepared later when generally there is a lack of accurate recall. Free 1040 You do not need to write down the elements of every expense on the day of the expense. Free 1040 If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely-kept record. Free 1040 If you give your employer, client, or customer an expense account statement, it can also be considered a timely-kept record. Free 1040 This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record. Free 1040 Proving business purpose. Free 1040 You must generally provide a written statement of the business purpose of an expense. Free 1040 However, the degree of proof varies according to the circumstances in each case. Free 1040 If the business purpose of an expense is clear from the surrounding circumstances, then you do not need to give a written explanation. Free 1040 Example. Free 1040 If you are a sales representative who calls on customers on an established sales route, you do not have to give a written explanation of the business purpose for traveling that route. Free 1040 You can satisfy the requirements by recording the length of the delivery route once, the date of each trip at or near the time of the trips, and the total miles you drove the car during the tax year. Free 1040 You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence. Free 1040 Confidential information. Free 1040 You do not need to put confidential information relating to an element of a deductible expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. Free 1040 However, you do have to record the information elsewhere at or near the time of the expense and have it available to fully prove that element of the expense. Free 1040 What If I Have Incomplete Records? If you do not have complete records to prove an element of an expense, then you must prove the element with: Your own written or oral statement containing specific information about the element, and Other supporting evidence that is sufficient to establish the element. Free 1040 If the element is the description of a gift, or the cost, time, place, or date of an expense, the supporting evidence must be either direct evidence or documentary evidence. Free 1040 Direct evidence can be written statements or the oral testimony of your guests or other witnesses setting forth detailed information about the element. Free 1040 Documentary evidence can be receipts, paid bills, or similar evidence. Free 1040 If the element is either the business relationship of your guests or the business purpose of the amount spent, the supporting evidence can be circumstantial rather than direct. Free 1040 For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. Free 1040 Invoices of deliveries establish when you used the car for business. Free 1040 Table 5-1. Free 1040 How To Prove Certain Business Expenses IF you have expenses for . Free 1040 . Free 1040 THEN you must keep records that show details of the following elements . Free 1040 . Free 1040 . Free 1040 Amount Time Place or Description Business Purpose Business Relationship Travel Cost of each separate expense for travel, lodging, and meals. Free 1040 Incidental expenses may be totaled in reasonable categories such as taxis, fees and tips, etc. Free 1040 Dates you left and returned for each trip and number of days spent on business. Free 1040 Destination or area of your travel (name of city, town, or other designation). Free 1040 Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Free 1040 Relationship: N/A Entertainment Cost of each separate expense. Free 1040 Incidental expenses such as taxis, telephones, etc. Free 1040 , may be totaled on a daily basis. Free 1040 Date of entertainment. Free 1040 (Also see Business Purpose. Free 1040 ) Name and address or location of place of entertainment. Free 1040 Type of entertainment if not otherwise apparent. Free 1040 (Also see Business Purpose. Free 1040 ) Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Free 1040 For entertainment, the nature of the business discussion or activity. Free 1040 If the entertainment was directly before or after a business discussion: the date, place, nature, and duration of the business discussion, and the identities of the persons who took part in both the business discussion and the entertainment activity. Free 1040 Relationship: Occupations or other information (such as names, titles, or other designations) about the recipients that shows their business relationship to you. Free 1040 For entertainment, you must also prove that you or your employee was present if the entertainment was a business meal. Free 1040 Gifts Cost of the gift. Free 1040 Date of the gift. Free 1040 Description of the gift. Free 1040 Transportation Cost of each separate expense. Free 1040 For car expenses, the cost of the car and any improvements, the date you started using it for business, the mileage for each business use, and the total miles for the year. Free 1040 Date of the expense. Free 1040 For car expenses, the date of the use of the car. Free 1040 Your business destination. Free 1040 Purpose: Business purpose for the expense. Free 1040 Relationship: N/A Sampling. Free 1040 You can keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year. Free 1040 You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year. Free 1040 Example. Free 1040 You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. Free 1040 There is no other business use of the car, but you and your family use the car for personal purposes. Free 1040 You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Free 1040 Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Free 1040 Your weekly records are representative of the use of the car each month and are sufficient evidence to support the percentage of business use for the year. Free 1040 Exceptional circumstances. Free 1040 You can satisfy the substantiation requirements with other evidence if, because of the nature of the situation in which an expense is made, you cannot get a receipt. Free 1040 This applies if all the following are true. Free 1040 You were unable to obtain evidence for an element of the expense or use that completely satisfies the requirements explained earlier under What Are Adequate Records . Free 1040 You are unable to obtain evidence for an element that completely satisfies the two rules listed earlier under What If I Have Incomplete Records . Free 1040 You have presented other evidence for the element that is the best proof possible under the circumstances. Free 1040 Destroyed records. Free 1040 If you cannot produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Free 1040 Reasons beyond your control include fire, flood, and other casualties. Free 1040 Table 5-2. Free 1040 Daily Business Mileage and Expense Log Name: Odometer Readings Expenses Date Destination (City, Town, or Area) Business Purpose Start Stop Miles this trip Type (Gas, oil, tolls, etc. Free 1040 ) Amount Weekly Total Total Year-to-Date Separating and Combining Expenses This section explains when expenses must be kept separate and when expenses can be combined. Free 1040 Separating expenses. Free 1040 Each separate payment is generally considered a separate expense. Free 1040 For example, if you entertain a customer or client at dinner and then go to the theater, the dinner expense and the cost of the theater tickets are two separate expenses. Free 1040 You must record them separately in your records. Free 1040 Season or series tickets. Free 1040 If you buy season or series tickets for business use, you must treat each ticket in the series as a separate item. Free 1040 To determine the cost of individual tickets, divide the total cost (but not more than face value) by the number of games or performances in the series. Free 1040 You must keep records to show whether you use each ticket as a gift or entertainment. Free 1040 Also, you must be able to prove the cost of nonluxury box seat tickets if you rent a skybox or other private luxury box for more than one event. Free 1040 See Entertainment tickets in chapter 2. Free 1040 Combining items. Free 1040 You can make one daily entry in your record for reasonable categories of expenses. Free 1040 Examples are taxi fares, telephone calls, or other incidental travel costs. Free 1040 Meals should be in a separate category. Free 1040 You can include tips for meal-related services with the costs of the meals. Free 1040 Expenses of a similar nature occurring during the course of a single event are considered a single expense. Free 1040 For example, if during entertainment at a cocktail lounge, you pay separately for each serving of refreshments, the total expense for the refreshments is treated as a single expense. Free 1040 Car expenses. Free 1040 You can account for several uses of your car that can be considered part of a single use, such as a round trip or uninterrupted business use, with a single record. Free 1040 Minimal personal use, such as a stop for lunch on the way between two business stops, is not an interruption of business use. Free 1040 Example. Free 1040 You make deliveries at several different locations on a route that begins and ends at your employer's business premises and that includes a stop at the business premises between two deliveries. Free 1040 You can account for these using a single record of miles driven. Free 1040 Gift expenses. Free 1040 You do not always have to record the name of each recipient of a gift. Free 1040 A general listing will be enough if it is evident that you are not trying to avoid the $25 annual limit on the amount you can deduct for gifts to any one person. Free 1040 For example, if you buy a large number of tickets to local high school basketball games and give one or two tickets to each of many customers, it is usually enough to record a general description of the recipients. Free 1040 Allocating total cost. Free 1040 If you can prove the total cost of travel or entertainment but you cannot prove how much it cost for each person who participated in the event, you may have to allocate the total cost among you and your guests on a pro rata basis. Free 1040 To do so, you must establish the number of persons who participated in the event. Free 1040 An allocation would be needed, for example, if you did not have a business relationship with all of your guests. Free 1040 See Allocating between business and nonbusiness in chapter 2. Free 1040 If your return is examined. Free 1040 If your return is examined, you may have to provide additional information to the IRS. Free 1040 This information could be needed to clarify or to establish the accuracy or reliability of information contained in your records, statements, testimony, or documentary evidence before a deduction is allowed. Free 1040 THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM Table 5-3. Free 1040 Weekly Traveling Expense and Entertainment Record From: To: Name: Expenses Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total 1. Free 1040 Travel Expenses: Airlines Excess Baggage Bus – Train Cab and Limousine Tips Porter 2. Free 1040 Meals and Lodging: Breakfast Lunch Dinner Hotel and Motel (Detail in Schedule B) 3. Free 1040 Entertainment (Detail in Schedule C) 4. Free 1040 Other Expenses: Postage Telephone & Telegraph Stationery & Printing Stenographer Sample Room Advertising Assistant(s) Trade Shows 5. Free 1040 Car Expenses: (List all car expenses - the division between business and personal expenses may be made at the end of the year. Free 1040 ) (Detail mileage in Schedule A. Free 1040 ) Gas, oil, lube, wash Repairs, parts Tires, supplies Parking fees, tolls 6. Free 1040 Other (Identify) Total Note: Attach receipted bills for (1) ALL lodging and (2) any other expenses of $75. Free 1040 00 or more. Free 1040 Schedule A – Car Mileage: End Start Total Business Mileage Schedule B – Lodging Hotel or Motel Name City Schedule C – Entertainment Date Item Place Amount Business Purpose Business Relationship WEEKLY REIMBURSEMENTS: Travel and transportation expenses Other reimbursements TOTAL How Long To Keep Records and Receipts You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Free 1040 Generally, this means you must keep records that support your deduction (or an item of income) for 3 years from the date you file the income tax return on which the deduction is claimed. Free 1040 A return filed early is considered filed on the due date. Free 1040 For a more complete explanation of how long to keep records, see Publication 583, Starting a Business and Keeping Records. Free 1040 You must keep records of the business use of your car for each year of the recovery period. Free 1040 See More-than-50%-use test in chapter 4 under Depreciation Deduction. Free 1040 Reimbursed for expenses. Free 1040 Employees who give their records and documentation to their employers and are reimbursed for their expenses generally do not have to keep copies of this information. Free 1040 However, you may have to prove your expenses if any of the following conditions apply. Free 1040 You claim deductions for expenses that are more than reimbursements. Free 1040 Your expenses are reimbursed under a nonaccountable plan. Free 1040 Your employer does not use adequate accounting procedures to verify expense accounts. Free 1040 You are related to your employer as defined under Per Diem and Car Allowances , in chapter 6. Free 1040 Reimbursements , adequate accounting , and nonaccountable plans are discussed in chapter 6. Free 1040 Examples of Records Table 5-2 and Table 5-3 are examples of worksheets which can be used for tracking business expenses. Free 1040 Prev Up Next Home More Online Publications
Through various programs, the Department of Agriculture's Rural Development works to improve the economy and quality of life of rural America.