Tax season, even in 2019, tests whether you’ve held onto bits of paper. The W-2 is the biggie, as is the 1099 for freelancers. Even more elusive are the pocket-sized documents: receipts.
For deducting business expenses, receipts are crucial. But Donna Cuiffo, a tax partner at New York-based Clarfeld Financial Advisors, says you can make do without a few of them.
She answered a reader’s question about how to deduct business expenses on your taxes, even if you’re missing the receipts.
First off, the allowable business expense deductions have narrowed, Cuiffo said.
“When we talk about business expenses, we're no longer talking about employee un-reimbursed expenses. That deduction has gone away for 2018,” Cuiffo says.
“So we're talking about someone who has their own business and they didn't pocket all their taxi receipts or they've taken somebody out for lunch and they didn't have that,” she adds.
Cuiffo offered some good news for those business owners: “They're not required to take every little piece of paper,” she says.
Tax filers can substitute other records in place of receipts
When deducting small expenses, tax filers can substitute other records in place of receipts, Cuiffo said.
“If the expense is under, say $75,” she adds. “But the IRS says, ‘How do I know you've incurred these?’ You really need something that shows that you're in a trader business.”
“Maybe you keep a calendar, and in that calendar you write down meetings so that you know, ‘I had taxi receipts going to this client,’ or ‘I had this project due, and these are all the expenses that I incurred,’” she adds.
A few lost receipts won’t sink a deduction, so long as detailed records remain, Cuiffo said.
“If somebody is very diligent in keeping their records for their business expenses, if you're missing one or two, that isn't going to cause you not to take up that expense,” she says.
Max Zahn is a reporter for Yahoo Finance.