> Incidentally, I withstood an audit on my third year in business,
> lucky me.
> Turbo Tax and Quicken were life savers because every little dollar
> in or
> dollar out was duly noted and accounted for. The IRS auditor just
> loved my
> files, seriously.
One thing I will say about Turbo Tax and Quicken, which I have used
for years. In an audit, the IRS needs copies of ACTUAL RECEIPTS, not
line items in an accounting program, for documentation. The reports
from Quicken are a big help, but you MUST back them up with real
receipts. Statements from gas cards and credit cards are not
sufficient. I asked an agent about this once, and she told me that
many people put gum and cigarettes on their gas credit cards, and the
credit card statement only shows the total. This applies to most
everything, from supplies at Michaels, to the stuff you buy at the
convenience store when pumping gas. Keep it separate.
This I learned from an audit two years ago. Although I save receipts,
many older thermal receipts fade and become illegible, which renders
them useless for the IRS. They will disallow those expenses if you
don't have 'em. Missing receipts don't count, either.
The best way to save receipts is to put each type of tax line item
receipt in its own envelope or folder. Auto receipts broken down by
gasoline, oil & tires, maintenance, and so forth. Even though your
bookkeeping system may handle it differently, having your records
match the IRS methods of accounting definitely helps in an audit. Try
to keep expenses for different things separate. In other words, don't
buy mat board and masking tape on the same ticket as paint brushes and
supplies for the kiddies. It helps.
Jim Parker
parkerparker :: design | photography
http://www.parkerparker.info
@dakkid / twitter
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