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Use Receipts, Not Statements

Author: Brad Howland
First Posted: Oct. 22, 2007

Credit card or bank statements are generally not adequate documentation of your expenses. You will do better in an income tax audit if you back up your expenses with receipts.

Many self-employed taxpayers mistakenly assume that they don't need to keep receipts, since they purchase everything with a credit card and save their statements. There are some items that you probably do need to use statements to document (i.e. the interest expense on a business credit card, or items purchased in a foreign currency), but everything else should be backed up with receipts.

Imagine the work an auditor must do to verify expenses from your credit card statements:

In the event of an income tax audit, you want it to be as easy as possible for the auditor to verify your expenses! Receipts, totalled up with a printing calculator, are the best way to document your expenses. All the auditor needs to do is thumb through the receipts and compare them to the printed tape. Anything that makes the auditor's job easier will be more likely to produce a successful outcome for you.

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