JV Accounting

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Please feel free to read our client newsletters. They are provided to keep you up to date on the latest tax and accounting news.


2011 Updates

As tax professionals we are always attending seminars and classes to keep us up to date on all of the new tax laws and changes. Please read this very informative article to keep yourself up to date as well.

Contents

Substantiation Requirements

When you are a self-employed individual or have employee business expenses it is very important that you keep certain documents to support your expenses.  Some examples of qualified and required documentation (per IRS regulations) are; a) mileage/expense log and b) purchase receipts.  Some examples of types of expenses that are more often audited than not are; a) travel, which includes meals and lodging b) entertainment and recreation activities c) local transportation and d) gifts.  The information that must be documented via purchase receipts and/or logs are; a) the amount of the expense b) the time and place the expense was incurred c) what the business purpose was d) for gifts - a description of the item given and the business relationship to the taxpayer and e) for entertainment - the business relationship to the taxpayer. 


NOTE: One item that has been an acceptable form of substantiation for travel expenses that is no longer, are credit card statements.  The IRS now requires that the original or copies of receipts be kept, seeing as credit card statements usually show one charge from a hotel, which could include non-deductible items such as gift shop purchases, room service, movies etc.


Even though there may not be any question as to whether or not an expense is deductible, the expense may be disallowed by the IRS for lack of documentation that properly substantiates the expense.  For this reason we will be strictly enforcing our policy that if you do not provide a mileage log to substantiate your personal v. business miles, WE WILL NOT BE TAKING A DEDUCTION FOR AUTOMOBILE EXPENSES. 


Meals & Entertainment Defined:  Any expenses that are incurred for meals and/or entertainment are only business deductions if they are a) directly related to the active conduct of business or b) associated with the active conduct of business and directly precede or follow substantial business discussions.  For example if you take a customer to dinner, you must discuss business before, during or directly after the meal in order for the expense to be deductible.  In addition, business discussions must be the primary purpose of meeting for the meal.  The same rules apply to entertainment expenses, however an expenditure for the use of an entertainment facility is non-deductible (i.e. yachts, hotel suites, hunting lodges and vacation homes)  Just as a reminder, meals and entertainment expenses are deducted at 50% of the total cost. 


 


 


 


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