Keeping receipts?

[stanw]

Is it necessary to keep receipts used to show business expenses when the same charges can be shown on a credit card statement? I am referring mainly to charging gas and food.

Thanks.

[mwcpa]

stan

not only do you need to keep the credit card statement you need to keep the underlying receipt and proof of payment.

just because the amex or visa/mastercard bills says XYZ gas company does not mean you bought gas.... "Mobil Mart" sells cigarettes, snacks and others items.... just because you ate at ABC restaurant does not mean it was for business purposes.

think of it this way... if you had an employee what would you expect from them to reimburse them for a cost they said they incurred....

Meals and gas are two areas that special care need to taken...

for gas you need to maintain a log of miles, clearly showing business and personal use

for meals, you need to be able to show, think like a journalist (novel concept these days in tabloid press)... who, what, when, where... you need to be able to show those things and there better be a business purpose...

from the IRS on the topic
www.irs.gov/businesses/small/article/0,,id=109807,00.html
www.irs.gov/newsroom/article/0,,id=169072,00.html
www.irs.gov/newsroom/article/0,,id=167363,00.html

[stanw]

Thanks for your great response.

How long do you need to keep these receipts for to support these expenses if you are ever audited?

Thanks!

[mwcpa]

minimum of 3 years from the date you filed the tax return or April 15, which ever is later...

examples

if you filed your 2009 return on 4/15/10, the records for 2009 need to be available through 4/15/13
if you filed your 2009 return on 3/14/10, the records for 2009 need to be available through 4/15/13
if you filed your 2009 return on 5/20/10, the records for 2009 need to be available through 5/20/13

I would suggest that you keep records for at least 4, maybe 5 years....

Also, for some records, like a capital improvement, that support needs to be kept for the life of asset plus a minimum of three years after you reported the disposition.

[stanw]

Is there any reason to keep old credit card statements then?

Thanks.

[mwcpa]

you should maintain the "statement," the actual charge receipt and any other supporting details (like an original invoice) related to any and all credit card transactions that you desire to claim a tax deduction for. Often there are items on a credit card statement that are not supported by any other documentation (example.... for a business use only credit card the annual "fee" for the card, interest charges, certain discounts, etc)

From IRS.gov
"The responsibility to prove entries, deductions, and statements made on your tax returns is known as the burden of proof. You must be able to prove (substantiate) certain elements of expenses to deduct them. Generally, taxpayers meet their burden of proof by having the information and receipts (where needed) for the expenses. You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. Additional evidence is required for travel, entertainment, gifts, and auto expenses"

you are required to maintain a complete set of books and records....
www.irs.gov/businesses/small/article/0,,id=98551,00.html
www.irs.gov/publications/p583/index.html