A self-employed business that services the entertainment industry was denied several of the deductions claimed on its Schedule C because of lack of proof. When the matter was taken to court, the ruling was made in favor of the IRS.
Why was the business unable to claim these deductions for work expenses? The business owner himself admitted that he did not have thorough records for these purchases, although they were qualifying expenses. He could only supply PayPal receipts for his advertising, depreciation, legal and professional expenses, and “other expenses.” He did not have records of supporting invoices or receipts.
Although he could prove how much he paid, who he paid, and when he paid it, he could not provide records about what was purchased and why it was a legitimate business expense. As a result, he did not receive the deductions and was charged a fine for illegitimately claiming tax deductions.
What does this mean for your business?
Are you keeping thorough and accurate records of your business expenses for your deductions? It is not just the responsibility of big businesses to keep accurate records for tax time; it is important for your small business as well. Don’t be caught off guard with fines you are not expecting.
We’re accounting experts. We’ll make sure that you have all the correct records you need to claim your tax deductions. We’ll also help you get your books in order so that you can accurately assess your business’s finances and make the best decisions for your business. Contact us today and let us help you get peace of mind.