CBS News suggests that deductions increase your chances of an IRS audit listing the top three deductions as: Charitable Contributions, Business Expenses, and Medical Expenses. What can your business do now to substantiate your deductions or expenses?

We find it is easiest to go back to basics saving you trouble, time, and money in the long run.  This is an elementary step that any organization, big or small, can do and it is as simple as asking the following questions for any expense you may come across:

WHO incurred this expense? Having record of who purchased the item or service will validate proper authorization of the transaction. Examples include, but are not limited to, your authorized staff or authorized personnel with written authorization (such as an independent contractor).

WHAT did you buy? The receipt or supporting documentation should itemize the good or service received and the amount paid.

WHEN did this occur? Confirm the date of the transaction is visible on the receipt or document.

WHERE did you buy it from? What vendor and location? The receipt or invoice should include the vendor name and business location. If needed, auditors may request third-party documentation substantiating your records. They may request items such as a customer statement or proof of delivery for larger items.

WHY did you buy it? What business purpose did it serve? You should document the business purpose of incurring the expense. In theory, all business expenses should relate to the nature of your business.

This activity takes minutes as opposed to the hours it will take at year-end. Answering these questions will determine the proper accounting treatment for your business expenses and the proper book-keeping entry for tax purposes. Please seek the advice of our accounting and tax professionals here for more details.