Tuesday, December 9, 2014

4 Common Expense-Tracking Pitfalls – And How to Avoid Them This Tax Season

William Olsen for AccountingWeb  writes: When it comes to gathering business records for claiming business deductions, the idea of sorting through expense receipts and “mining” for deductions makes procrastinators out of all of us.
But proper deduction tracking during the year is not as difficult as you might think. Avoiding these four common pitfalls will help you prepare better and have less tax-time stress.
1. Having an incomplete mileage log: One of the common misconceptions of mileage tracking is that you have to write down your beginning and ending odometer every time you get in and out of your car to complete a business mileage log. The truth is an ending odometer at the end of December, which becomes the beginning odometer for the start of the new tax year, is all you need. That way, you know the total miles you drove during the year. With that, your business mileage log only needs the following three things for each entry:
  • Date
  • Miles driven
  • Description of the business purpose
2. Saving receipts: To save the receipt or not to save the receipt, that is the question.  The official rule is that a receipt is not needed unless the expense is more than $75, or it is for lodging. But that doesn’t really cover everything. There are two other circumstances when a detailed receipt is still recommended regardless of the dollar value:
  • When you pay for deductible items with cash
  • When the expense is not obvious
For example, if you purchase office supplies at a drug store, a detailed receipt would be needed to substantiate that the items purchased were not personal. On the other hand, a receipt for a credit card purchase of “Discount Business Cards Only” for $36 would not be necessary to prove the deduction.[snip] the article continues @ AccoutningWeb, click here to continue reading.....
3. Forgetting to record business purpose: 
4. Not “wrapping up” each week:  


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