Jacksonville CPA | More Than Just An Invoice

Hello, today, welcome everyone to this morning’s podcast. So, uh, this is brandon, president of Mineva. If you are looking for a Jacksonville CPA, then quit looking in coal mineva. We’ll help you with all your tax accounting, business planning needs today. I want to talk about the importance of proper documentation and record keeping when it comes to substantiating expenses taken on a tax return. So I had the pleasure of meeting with an irs auditor and a client today and unfortunately this client was a newer client to our firm and they have not properly implemented the documentation, uh, the correct documentation systems to make sure they can support the deductions taken on their tax return. So, uh, not all Jacksonville CPA, we’ll talk about this, but I’m, this is very important and I think everyone should be talking about it. So the irs wants to see that you are making an effort when it comes to keeping your records in such a manner as to prove the items taken on your tax return.

How I get a lot of questions about this, what should I be doing? How should I keep it monthly to keep it folders by month, folders by vendor? You know, what, what should I do? So the answer is there is no answer. There is no correct answer. The irs just wants to be able to see that you are making an effort to be organized and it doesn’t matter and what format it’s kept, as long as it’s kept in such a format that uh, you can, you can go back in history and pull it and show it to the irs. So for most business expenses, you’re going to need a, just a simple invoice or receipt. Okay? So a lot of people will say, well, you know, you can say, comment there, my bank, well that’s not good enough for the irs. They actually want to see the backup documents.

Now that is not to say that I have been in an audit with another client where the irs did except actual bank transactions as proof of payment for a certain expense. But the code says you need to have the backup documentation. And I’m sure not all irs auditors would be as nice as the one that we sat in that day. So make sure that you have your backup documentation and whether you put it in a file folder in a file cabinet, uh, by vendor or by month or use some online system. And, and that’s what I would recommend us some system like Hubdoc or bill.com or even quickbooks will allow you to take pictures of your invoices and attach them to transactions. Because what the irs is going to do is whenever, let’s just say you, you claim $5,456 and office expenses.

And if your current Jacksonville CPA is not giving this information that you needed to give us a call, then the irs wants to see the backup documentation for that $5,456. So you know the importance of keeping a good general ledger or optimization per category. And then going back into your files and finding the source documents to match that is very important. So some of these online systems will, um, will automatically receipt bank is another good one. Receipt Bank, they will, um, they will pull the bills automatically in some cases and attach them to the transactions and the accounting software. So all you have to do is just pull up the report and bent me had the documentation. So that is, that is ideal. Um, it’s, I mean it sounds nice and, and uh, but there is a little bit of work involved in making sure that everything is pulled in and you have to be diligent about it.

Now let’s talk about section two, 74 expenses, which is a Jacksonville CPA talk for a certain, a certain category of expenses. And section two, 74 just means the code and the irs for this category of expenses. But these would be travel expenses, meals, it used to be meals and entertainment, but now it’s just meals. Um, any expense that is a could be considered personal or business. For instance, you know, if you’re in the restaurant industry and you purchase, um, something from restaurant depot, irs is okay with just seeing the invoice from restaurant depot. Now, if you’re in the restaurant business and there is a hotel charge for Las Vegas, you can’t just provide the invoice. You have to actually go above and beyond and give additional documentation. So for instance, you have to say a purpose. So I went to Las Vegas to attend the 50th annual restaurant show and you’re in your, let’s just say you’re, you went to a steakhouse in Jacksonville, you took your Jacksonville CPA to a steakhouse.

You have to go above and beyond and either write it on the receipt or put a note in the file. I took my Jacksonville CPA to a steakhouse to discuss business expansion and the tax consequences of set expansion because the irs closely monitors those because they’re a highly abused category of expenses section to 74 expenses, meals, travel, um, and also, uh, automobile expenses. Mileage is a big one and I’m telling you, you need to get some kind of mileage tracker, Mile Iq, quickbooks something and they are going to create an audit log for you. You’re gonna still have to do some work and make sure you, you, um, put in the additional formation, you know, what business, what was not, um, what was the business purpose. Um, so definitely make sure you do that. Um, so yeah, just, just to kind of wrap things up, make sure that you’re, you are keeping track of, of your, your receipts.

And I see so many people. So many people say, Oh God, I didn’t keep track of my receipts and you know, I’m so scared. I don’t know what I’m doing. It takes them forever to get their records together for, to prepare the tax return and they’re nervous at the irs is going to come. They’re not gonna have the receipts down your people. If you’re Jacksonville CPI is not helping with this. Give us a call because it’s not, it’s not rocket science. It’s not as hard as it seems. And, you know, you can, um, even a personality, an artist’s personality or a doctor or somebody who’s just not into the numbers, can, uh, with just a little help and a little systemization and we can help make sure that you have these expenses and, and, um, documentation put together like you should. So, and this goes back to what I’ve said in prior episodes, make sure you keep your business and your personal records separate.

Okay. So then when we’re going through the business bank account or credit card and we’re, we’re sorting these transactions were categorizing them into the right categories and the accounting system, it’s much easier to go through and get the documentation then sorting through a mess of transactions of a was this business is personal, done, need a receipt, do I not? You know, just being, just be intentional. Just you have to be a little bit more intentional about what you’re doing. Get yourself into the habit of, of keeping these, making sure, you know, with a smart phone today, nobody has an excuse to not keep the proper documentation. Uh, it’s just so easy. Snap a picture and you have it right there. Well, that’s all for this podcast.