Why You Need to Guard Your Tax Records
We sometimes take some things for granted.
However, tax related issues should be taken seriously at all times since the IRS doesn't condone "lame excuses" like losing your receipts.
The taxman seems to have heard all the excuses under the sun justifying different situations and might have just drained itself of its cup of sympathy.
What is left is for you to take utmost care and protection of your tax related documents and save yourself the precious breath of explaining the unfortunate circumstances to the IRS.
To ensure that taxpayers don't forget the importance of their tax records, the IRS constantly issues reminders to taxpayers asking them to safeguard their tax documents.
The IRS even recommends that you create a backup set of your records which should be secured away from the originals to guard against total loss in case of an emergency like a fire, hurricane, or any other disaster that may lead to the destruction of your documents.
Further to that, you can document valuables via photographs and videos.
The IRS has the details for doing this in Publication 584, Disaster Loss Workbook.
Other than that, you are also expected to devise your own backup plan to cover you in the event of an emergency.
To the employers who use a payroll service, you can ask for a fiduciary bond from your payroll service, if it has the option.
The details for this are available in IRS Publication 583-Starting a Business and Keeping Records.
You need not to despair in case you still end up missing the receipts, despite employing all the safeguards.
Although the receipts are highly preferred, you can still use some other evidence to convince the courts.
In a past case, George Cohan, a Broadway pioneer whose travel and entertainment expenses were disallowed for lack of receipts, took the IRS to the Board of Tax Appeals; the U.
S.
tax court's predecessor.
The board upheld the IRS on grounds that receipts are the stock in trade of the tax system.
Cohan went ahead and appealed to the Second Circuit, which in 1930, took the IRS to task over the Cohan rule.
All that matters is the taxpayer's knack to somehow prove via other reliable sources that they indeed incurred deductible expenses.
Nonetheless, the Cohan rule does not always apply.
In most cases, it is classically applied to travel and entertainment but can still be utilized in practically any item not explicitly subject to heightened substantiation requirements like some travel and meal expenses, passenger automobiles, cell phones, and computers.
Despite your lack of evidence, you might still be entitled to the expenses despite the lack of documentation; you can talk the IRS into accepting oral or written statements or other sustaining proof and as long as a rough estimate can be made.
Apart from cases where special substantiation requirements apply, even charitable donations have been allowed under the Cohan rule.
A receipt is needed for small cash donations.
A contemporary written acknowledgement from the charity for donations exceeding $ 250 is required before filing your returns.
To save yourself from this frustrating pain, you can effortlessly take good care of your receipts; guard them with the seriousness you guard your Credit cards and passports, among other valuables.
Don't forget to create backups, just in case something unexpected happens to the originals.
However, tax related issues should be taken seriously at all times since the IRS doesn't condone "lame excuses" like losing your receipts.
The taxman seems to have heard all the excuses under the sun justifying different situations and might have just drained itself of its cup of sympathy.
What is left is for you to take utmost care and protection of your tax related documents and save yourself the precious breath of explaining the unfortunate circumstances to the IRS.
To ensure that taxpayers don't forget the importance of their tax records, the IRS constantly issues reminders to taxpayers asking them to safeguard their tax documents.
The IRS even recommends that you create a backup set of your records which should be secured away from the originals to guard against total loss in case of an emergency like a fire, hurricane, or any other disaster that may lead to the destruction of your documents.
Further to that, you can document valuables via photographs and videos.
The IRS has the details for doing this in Publication 584, Disaster Loss Workbook.
Other than that, you are also expected to devise your own backup plan to cover you in the event of an emergency.
To the employers who use a payroll service, you can ask for a fiduciary bond from your payroll service, if it has the option.
The details for this are available in IRS Publication 583-Starting a Business and Keeping Records.
You need not to despair in case you still end up missing the receipts, despite employing all the safeguards.
Although the receipts are highly preferred, you can still use some other evidence to convince the courts.
In a past case, George Cohan, a Broadway pioneer whose travel and entertainment expenses were disallowed for lack of receipts, took the IRS to the Board of Tax Appeals; the U.
S.
tax court's predecessor.
The board upheld the IRS on grounds that receipts are the stock in trade of the tax system.
Cohan went ahead and appealed to the Second Circuit, which in 1930, took the IRS to task over the Cohan rule.
All that matters is the taxpayer's knack to somehow prove via other reliable sources that they indeed incurred deductible expenses.
Nonetheless, the Cohan rule does not always apply.
In most cases, it is classically applied to travel and entertainment but can still be utilized in practically any item not explicitly subject to heightened substantiation requirements like some travel and meal expenses, passenger automobiles, cell phones, and computers.
Despite your lack of evidence, you might still be entitled to the expenses despite the lack of documentation; you can talk the IRS into accepting oral or written statements or other sustaining proof and as long as a rough estimate can be made.
Apart from cases where special substantiation requirements apply, even charitable donations have been allowed under the Cohan rule.
A receipt is needed for small cash donations.
A contemporary written acknowledgement from the charity for donations exceeding $ 250 is required before filing your returns.
To save yourself from this frustrating pain, you can effortlessly take good care of your receipts; guard them with the seriousness you guard your Credit cards and passports, among other valuables.
Don't forget to create backups, just in case something unexpected happens to the originals.
