How to Keep Track of Business Expenses
With a little planning and organization, keeping up with business expenses is an easy task. With tax season right around the corner, having complete and accurate records will pay you for time invested, and you can feel good that you are updated and ready for the IRS without last minute scramble and worry.
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Instructions
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Keeping Up With Business Expenses
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Go to an office supply store and purchase a business expense log book (with a section for receipts and a mileage section). Buy a 12 section accordian file folder. Doing this in December will insure being ready to begin on January 1 of the new year. Keep the log book in your car. When you travel, you can file each month of paper receipts in the accordian file. (The 12 sections are for the months of the year). Keep the file in a spot in or near your workdesk, either in your office or at home. If you plan to use a software program for expense record keeping, choose from the many that are available, purchase and install in your computer.
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As expenses are incurred each day, fill in the amounts in the book. Use the mileage chart and fill in beginning mileage. When the day ends, be sure to fill in the ending mileage and calculate how many miles driven, then write it in the space given. Store receipts collected in the section for receipts. If your company requires you to turn in receipts weekly, take the book into the office to do that. If you fill in a form and fax it, all of your expenses are listed in the book for the week, just transfer to the sheet. If you turn receipts in monthly, store receipts in the accordian file for the month. File the fax sheet in the accordian file for the month it was used. Take all receipts into the office (if you go in) or fax in as required then store in the file. If you are using a software program for this purpose, take a few moments and enter all information into the program.
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Total all expenses and mileage at the end of each month. Continue this process for the 12 months. If using software, continue to fill in information into the program. At the end of the year, a printout of totals can be easily accessed and printed. If you are self-employed and no expenses are reimbursed by your company, you will have a complete month by month printout of all expenses and mileage for the entire year. All of the receipts will be neatly placed in the file according to the month they were incurred.
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Check IRS allowances for mileage (and other deductions) with your tax preparer. Compare these to what your company pays you. Example: if the IRS allows .51.5 per mile, and your company pays .29.5 per mile, you can claim the difference of .22 per mile X number of miles used on your taxes. All miles are totaled in your book. If you use software, the printout will give the year's total of miles used.
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Tips & Warnings
Using a log book is acceptable to the IRS in case of an audit.
Always get a receipt for expenditures if you are writing off expenses on tax returns. A credit card receipt may not work. If you receive a receipt that is mostly white and no explanation of where it came from, write the vendor's name, date and note the reason for it.
It takes dilligence and consistency for this to work. If you miss a day or two, don't worry. Just be sure to update all expenses and mileage by the end of the week.
