Everybody knows that tax deductions aren’t allowed without proof in the form of documentation so have you found all your receipts to support your 2017 tax filing? What about your mileage log? Have you managed that somewhere manually or do you just plan to add a ‘guesstimate’ uplift on your 2016 deduction because seems like a reasonable (and so much easier) approach?
You know, I’m sure it’s tempting to just think you’ll get away with things that are missing as the statistics show it’s possibly a long shot that you’ll get audited but you’re simply playing Russian Roulette unnecessarily.
The IRS expects all businesses to maintain “timely kept records” with the expenses recorded at or near the time the expense was made AND also include some form of commentary of the business purpose. The fact that some of the details are on your bank or credit card statement is not sufficient. Sounds easy but, in reality, how many of us carry around a wallet full of receipts and when the wallet is bulging too much, just transfer those receipts into a drawer or a shoebox to deal with them later?
Alongside this, your deduction for the business use of your vehicle can slash your tax bill by thousands of dollars but if you’re not tracking your mileage then you can say goodbye to that as the IRS can disallow ALL these expenses if you can’t prove it. Worse still, let’s say you claim that the usage was 100% and can’t show, through your tracking, that you never dropped the kids to school on your way to work or popped into the local grocery store on you way home to pick us those last few ingredients needed for dinner that evening?
You know, App developers are pushing the envelope on a daily basis and, from a business perspective, there’s over 600 apps that currently integrate into leading cloud accounting solutions. And the IRS knows about them so their big question they want answered is why, with all the technology out there today, businesses aren’t keeping all their receipts and tracking their mileage.
Almost everyone in American (well, 95% according to Pew Research Center) has a cell phone and 77% have smart phones, with an average user downloading 8.8 apps per month.
I guess I’m not an average user as I’ve had my current phone for just over a year now and I’ve only got 56 Apps (go on, check yours as well!) but, staying on topic, there’s 2 Apps that deal with the problem to hand – Hubdoc for all your business receipts and MileIq for accurate mileage tracking.
With Hubdoc you can simply take a picture of the receipt at point of sale and store it in your own digital vault for future reference. If you have a business account with Hubdoc, you can collect all your invoices from the majority of major organizations in a range of different formats then pass these automatically into either Xero or QBO so you have the receipt attached to the actual line item within your accounts.
MileIq, as long as you always have your smartphone with you, automatically tracks all your journeys (as long as you are moving at more than 5 miles per hour). On a periodic basis, they’ll email you and ask you to categorize these trips into personal and business on your dashboard and you never need to work about tracking your miles again!
In terms of cost, Hubdoc is currently only $20/mo. and MileIq runs at $4.99/mo. with an annual plan, although I can give you a 20% off code to use if you decide to sign up so drop me a note if you're interested.
So, give yourself a break from 2018 onwards and have these details to hand so you’re chasing your tax advisor rather than tearing your hair out to get everything together in time for them to get your returns filed!
It makes sense...!!!