Posted by Abundant Wealth Planning LLC

Does Credit Card Statement Suffice as Receipt for Taxes?

Does Credit Card Statement Suffice as Receipt for Taxes?

During tax filing, it is not compulsory to submit a receipt or any other paperwork to prove your deductions. However, when you get an audit deduction, you need to verify your expenses with the auditor. 

You need to be able to show your complete bookkeeping details to the IRS auditor. Ideally, acceptable proofs are bank statements, receipts, credit card statements, invoices or bills from suppliers, etc. 

In the absence of the proper documentation, Uncle Sam will not approve your deductions.

 

Importance of Tax Records 

Uncle Sam requires all businesses to have a detailed record showing their expenses, making it essential to have the perfect bookkeeping. With good records, you also derive the following advantages:

  • Track your business’s progress

  • Prepare your taxes

  • Know the total taxes you need to pay in the income of 1099

  • Prepare all financial statements

  • Monitor your write-offs and tax deductions

  • Know the sources of all taxable income

  • Serve as proof for items you have on the tax return

A business owner needs an adequate record, including bank and credit card statements, should there be an IRS audit. If Uncle Sam needs to review your return, your detailed records will make the process faster and save you from penalties.


Types of Record to Keep

With an idea of why it is essential to keep records, here are the types of records to keep:

Gross Income

What method will allow you to prove the receipts of goods sold or services rendered to our business? For example, your clients will send you a 1099-NEC (for payments over $600) and 1099k from the credit card firm (for payment above $20,000). This is in addition to supporting documents that reveal details like the description of services rendered. 

Sample documents you will need for gross income are cash register tapes, invoices, and receipt books.


Cost of Goods Sold / Inventory

For businesses that buy and sell goods, there will be inventory alongside the cost of goods sold in the current year's financials. Such expenses are tax deductions from the 1099 income. You can document all purchases using cleared checks, payment on credit card statements, and expense reports. 

You can also document and support other expenses generated by your business with your credit card statement. It is even possible to deduct credit card interest from your tax. 


Assets

For all business properties (vehicles, buildings, tools and equipment, furniture, etc.) you purchased in the year, you need a detailed record that reveals a series of information like original price, date of acquisition, and date of arrival to your business. 

Since it is impossible to claim the asset purchased as a current year expense, you need to track all depreciation and deduction information well. In the same way, you need to report the selling price, date of disposition, and method well. This is essential to the calculation of the tax basis. 


How Long Do You Need to Keep Records?

The recommended time frame essential for a taxpayer to keep a record for federal tax is a factor of the event, expense, and action factor. However, according to tax laws, it is compulsory to keep records that support the deduction or credit on your tax return until the limitation period is exhausted.

The period of limitation is referred to the time when you can adjust your tax return to claim a credit or a reimbursement. For people that do not qualify for a refund, Uncle Sam can check for additional tax. 


FOR MORE INFORMATION ON HOW ABUNDANT WEALTH PLANNING, LLC. CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.


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