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Tax ez 5. Tax ez 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. Tax ez This chapter discusses the records you need to keep to prove these expenses. Tax ez If you keep timely and accurate records, you will have support to show the IRS if your tax return is ever examined. Tax ez You will also have proof of expenses that your employer may require if you are reimbursed under an accountable plan. Tax ez These plans are discussed in chapter 6 under Reimbursements . Tax ez How To Prove Expenses Table 5-1 is a summary of records you need to prove each expense discussed in this publication. Tax ez You must be able to prove the elements listed across the top portion of the chart. Tax ez You prove them by having the information and receipts (where needed) for the expenses listed in the first column. Tax ez You cannot deduct amounts that you approximate or estimate. Tax ez You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. Tax ez You must generally prepare a written record for it to be considered adequate. Tax ez This is because written evidence is more reliable than oral evidence alone. Tax ez However, if you prepare a record on a computer, it is considered an adequate record. Tax ez 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. Tax ez You should also keep documentary evidence that, together with your record, will support each element of an expense. Tax ez Documentary evidence. Tax ez You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. Tax ez Exception. Tax ez Documentary evidence is not needed if any of the following conditions apply. Tax ez 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. Tax ez ( Accountable plans and per diem allowances are discussed in chapter 6. Tax ez ) Your expense, other than lodging, is less than $75. Tax ez You have a transportation expense for which a receipt is not readily available. Tax ez Adequate evidence. Tax ez Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. Tax ez For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information. Tax ez The name and location of the hotel. Tax ez The dates you stayed there. Tax ez Separate amounts for charges such as lodging, meals, and telephone calls. Tax ez A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information. Tax ez The name and location of the restaurant. Tax ez The number of people served. Tax ez The date and amount of the expense. Tax ez If a charge is made for items other than food and beverages, the receipt must show that this is the case. Tax ez Canceled check. Tax ez A canceled check, together with a bill from the payee, ordinarily establishes the cost. Tax ez However, a canceled check by itself does not prove a business expense without other evidence to show that it was for a business purpose. Tax ez Duplicate information. Tax ez 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. Tax ez You do not have to record amounts your employer pays directly for any ticket or other travel item. Tax ez 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. Tax ez Timely-kept records. Tax ez 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. Tax ez A timely-kept record has more value than a statement prepared later when generally there is a lack of accurate recall. Tax ez You do not need to write down the elements of every expense on the day of the expense. Tax ez If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely-kept record. Tax ez If you give your employer, client, or customer an expense account statement, it can also be considered a timely-kept record. Tax ez This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record. Tax ez Proving business purpose. Tax ez You must generally provide a written statement of the business purpose of an expense. Tax ez However, the degree of proof varies according to the circumstances in each case. Tax ez If the business purpose of an expense is clear from the surrounding circumstances, then you do not need to give a written explanation. Tax ez Example. Tax ez 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. Tax ez 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. Tax ez You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence. Tax ez Confidential information. Tax ez 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. Tax ez 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. Tax ez 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. Tax ez 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. Tax ez Direct evidence can be written statements or the oral testimony of your guests or other witnesses setting forth detailed information about the element. Tax ez Documentary evidence can be receipts, paid bills, or similar evidence. Tax ez 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. Tax ez For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. Tax ez Invoices of deliveries establish when you used the car for business. Tax ez Table 5-1. Tax ez How To Prove Certain Business Expenses IF you have expenses for . Tax ez . Tax ez THEN you must keep records that show details of the following elements . Tax ez . Tax ez . Tax ez Amount Time Place or Description Business Purpose Business Relationship Travel Cost of each separate expense for travel, lodging, and meals. Tax ez Incidental expenses may be totaled in reasonable categories such as taxis, fees and tips, etc. Tax ez Dates you left and returned for each trip and number of days spent on business. Tax ez Destination or area of your travel (name of city, town, or other designation). Tax ez Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Tax ez Relationship: N/A Entertainment Cost of each separate expense. Tax ez Incidental expenses such as taxis, telephones, etc. Tax ez , may be totaled on a daily basis. Tax ez Date of entertainment. Tax ez (Also see Business Purpose. Tax ez ) Name and address or location of place of entertainment. Tax ez Type of entertainment if not otherwise apparent. Tax ez (Also see Business Purpose. Tax ez ) Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Tax ez For entertainment, the nature of the business discussion or activity. Tax ez 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. Tax ez Relationship: Occupations or other information (such as names, titles, or other designations) about the recipients that shows their business relationship to you. Tax ez For entertainment, you must also prove that you or your employee was present if the entertainment was a business meal. Tax ez Gifts Cost of the gift. Tax ez Date of the gift. Tax ez Description of the gift. Tax ez Transportation Cost of each separate expense. Tax ez 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. Tax ez Date of the expense. Tax ez For car expenses, the date of the use of the car. Tax ez Your business destination. Tax ez Purpose: Business purpose for the expense. Tax ez Relationship: N/A Sampling. Tax ez 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. Tax ez 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. Tax ez Example. Tax ez You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. Tax ez There is no other business use of the car, but you and your family use the car for personal purposes. Tax ez You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Tax ez Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Tax ez 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. Tax ez Exceptional circumstances. Tax ez 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. Tax ez This applies if all the following are true. Tax ez 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 . Tax ez You are unable to obtain evidence for an element that completely satisfies the two rules listed earlier under What If I Have Incomplete Records . Tax ez You have presented other evidence for the element that is the best proof possible under the circumstances. Tax ez Destroyed records. Tax ez If you cannot produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Tax ez Reasons beyond your control include fire, flood, and other casualties. Tax ez Table 5-2. Tax ez 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. Tax ez ) 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. Tax ez Separating expenses. Tax ez Each separate payment is generally considered a separate expense. Tax ez 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. Tax ez You must record them separately in your records. Tax ez Season or series tickets. Tax ez If you buy season or series tickets for business use, you must treat each ticket in the series as a separate item. Tax ez 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. Tax ez You must keep records to show whether you use each ticket as a gift or entertainment. Tax ez 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. Tax ez See Entertainment tickets in chapter 2. Tax ez Combining items. Tax ez You can make one daily entry in your record for reasonable categories of expenses. Tax ez Examples are taxi fares, telephone calls, or other incidental travel costs. Tax ez Meals should be in a separate category. Tax ez You can include tips for meal-related services with the costs of the meals. Tax ez Expenses of a similar nature occurring during the course of a single event are considered a single expense. Tax ez 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. Tax ez Car expenses. Tax ez 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. Tax ez Minimal personal use, such as a stop for lunch on the way between two business stops, is not an interruption of business use. Tax ez Example. Tax ez 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. Tax ez You can account for these using a single record of miles driven. Tax ez Gift expenses. Tax ez You do not always have to record the name of each recipient of a gift. Tax ez 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. Tax ez 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. Tax ez Allocating total cost. Tax ez 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. Tax ez To do so, you must establish the number of persons who participated in the event. Tax ez An allocation would be needed, for example, if you did not have a business relationship with all of your guests. Tax ez See Allocating between business and nonbusiness in chapter 2. Tax ez If your return is examined. Tax ez If your return is examined, you may have to provide additional information to the IRS. Tax ez 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. Tax ez THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM Table 5-3. Tax ez Weekly Traveling Expense and Entertainment Record From: To: Name: Expenses Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total 1. Tax ez Travel Expenses: Airlines Excess Baggage Bus – Train Cab and Limousine Tips Porter 2. Tax ez Meals and Lodging: Breakfast Lunch Dinner Hotel and Motel (Detail in Schedule B) 3. Tax ez Entertainment (Detail in Schedule C) 4. Tax ez Other Expenses: Postage Telephone & Telegraph Stationery & Printing Stenographer Sample Room Advertising Assistant(s) Trade Shows 5. Tax ez Car Expenses: (List all car expenses - the division between business and personal expenses may be made at the end of the year. Tax ez ) (Detail mileage in Schedule A. Tax ez ) Gas, oil, lube, wash Repairs, parts Tires, supplies Parking fees, tolls 6. Tax ez Other (Identify) Total Note: Attach receipted bills for (1) ALL lodging and (2) any other expenses of $75. Tax ez 00 or more. Tax ez 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. Tax ez 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. Tax ez A return filed early is considered filed on the due date. Tax ez For a more complete explanation of how long to keep records, see Publication 583, Starting a Business and Keeping Records. Tax ez You must keep records of the business use of your car for each year of the recovery period. Tax ez See More-than-50%-use test in chapter 4 under Depreciation Deduction. Tax ez Reimbursed for expenses. Tax ez 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. Tax ez However, you may have to prove your expenses if any of the following conditions apply. Tax ez You claim deductions for expenses that are more than reimbursements. Tax ez Your expenses are reimbursed under a nonaccountable plan. Tax ez Your employer does not use adequate accounting procedures to verify expense accounts. Tax ez You are related to your employer as defined under Per Diem and Car Allowances , in chapter 6. Tax ez Reimbursements , adequate accounting , and nonaccountable plans are discussed in chapter 6. Tax ez Examples of Records Table 5-2 and Table 5-3 are examples of worksheets which can be used for tracking business expenses. Tax ez Prev Up Next Home More Online Publications
Filing Season Statistics
The tables on this page present information from the population of all Forms 1040 processed by the IRS at two critical points in the annual filing season, mid-July and mid-November. The mid-November tables are presented here for the first time. Those data have been developed as part of a research program to provide authoritative data for use by researchers in cases in which a substantial interest in those data exists and information produced by researchers from incomplete data can lead to inaccuracies.
The first set of tables, those processed by mid-July, primarily reflect income earned in the year preceding the Filing Year and reported to the IRS by the April 15th filing deadline, although they also include some late-filed returns for prior Tax-Years. Importantly, these data exclude taxpayers who requested a 6-month filing extension by filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. The data represent approximately 95 percent of all returns that will be processed by the IRS in the calendar year. Because filers requesting an extension generally have more complex finances, on average the data reflect just over 85% of the total AGI and less than 80 percent of the total tax liability that will be reported for all returns filed during the year. The final column in each table indicates the share of income from the sale of capital assets represented in the income presented. By comparing the data presented in these tables over time, these data can be used to develop early estimates of changes in the economy or to update forecasts of economic activity that were developed using older data.
Data in the mid-November tables update the earlier tables and reflect nearly all returns that will be received and processed by the IRS in a calendar year, including timely-filed returns that had been granted a 6-month extension. Again, the information presented primarily represent income earned in the prior year, but will include some late-filed returns for earlier Tax-Years.
Mid-July filing season statistics by AGI
These tables present information from the population of all Forms 1040 processed by the IRS on or before week 30 of the calendar year. Returns filed primarily reflect income earned in the year preceding the Filing Year, but exclude taxpayers who requested a 6-month filing extension by filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.
2010 2011 2012 2013
Mid-November filing season statistics by AGI
These tables present information from the population of all Forms 1040 processed by the IRS on or before week 47 of the calendar year. Returns filed primarily reflect income earned in the year preceding the Filing Year.
2010 2011 2012 2013
Additional filing season statistics
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Page Last Reviewed or Updated: 10-Jan-2014
The Tax Ez
Tax ez Index A Archer MSAs, Archer MSAs, Employment taxes. Tax ez Assistance (see Tax help) C Contributions to FSA, Contributions to an FSA HRA, Contributions to an HRA HSA, Contributions to an HSA MSA, Contributions to an MSA D Death of HSA holder, Death of HSA Holder MSA holder, Death of the Archer MSA Holder Distributions from FSA, Distributions From an FSA HRA, Distributions From an HRA HSA, Distributions From an HSA MSA, Distributions From an MSA E Employer participation FSA, Employer Participation HRA, Employer Participation HSA, Employer Participation MSA, Employer Participation F Flexible Spending Arrangements Grace Period, Health FSA – grace period. Tax ez Flexible spending arrangements, Flexible Spending Arrangements (FSAs), Employer Participation Balance in, Balance in an FSA Contributions to, Contributions to an FSA Distributions from, Distributions From an FSA Qualifying for, Qualifying for an FSA When to contribute, When To Contribute Form 5329, Excess contributions. Tax ez , Excess contributions. Tax ez 5498–SA, Form 8889. Tax ez , Reporting Contributions on Your Return 8853, Additional tax. Tax ez , Filing Form 8853 8889, Form 8889. Tax ez , Additional tax. Tax ez , Filing Form 8889 Free tax services, Free help with your tax return. Tax ez H Health plans, high deductible, High deductible health plan (HDHP). Tax ez , High deductible health plan (HDHP). Tax ez Health reimbursement arrangements, Health Reimbursement Arrangements (HRAs), Employer Participation Balance in, Balance in an HRA Contributions to, Contributions to an HRA Distributions from, Distributions From an HRA Qualifying for, Qualifying for an HRA Health savings accounts, Health Savings Accounts (HSAs), Employment taxes. Tax ez Balance in, Balance in an HSA Contributions to, Contributions to an HSA Deemed distributions, Deemed distributions from HSAs. Tax ez Distributions from, Distributions From an HSA Last-month rule, Last-month rule. Tax ez Partnerships, Reporting Contributions on Your Return Qualifying for, Qualifying for an HSA Rollovers, Rollovers S corporations, Reporting Contributions on Your Return When to contribute, When To Contribute Help (see Tax help) High deductible health plan, High deductible health plan (HDHP). Tax ez , High deductible health plan (HDHP). Tax ez M Medical expenses, qualified, Qualified medical expenses. Tax ez , Qualified medical expenses. Tax ez , Qualified medical expenses. Tax ez , Qualified medical expenses. Tax ez Medical savings accounts, Medical Savings Accounts (MSAs), Medicare Advantage MSAs Balance in, Balance in an Archer MSA Contributions to, Contributions to an MSA Deemed distributions, Deemed distributions from Archer MSAs. Tax ez Distributions from, Distributions From an MSA Medicare Advantage MSAs, Medicare Advantage MSAs Qualifying for, Qualifying for an Archer MSA When to contribute, When To Contribute Medicare Advantage MSAs, Medicare Advantage MSAs P Preventive care, High deductible health plan (HDHP). Tax ez Publications (see Tax help) Q Qualified HSA funding distribution, Qualified HSA funding distribution. Tax ez T Tax help, How To Get Tax Help Testing period Last-month rule, Testing period. Tax ez Qualified HSA funding distribution, Funding distribution – testing period. Tax ez TTY/TDD information, How To Get Tax Help Prev Up Home More Online Publications