Board Converting News, August 2, 2021

Maximize Tax Deductions (CONT’D FROM PAGE 28)

When it comes to state law, Flemming cautions, the rules can be more onerous. Montana, for example, can go back 10 years. “Find out what the rules are in your own state, because each one is different.” Bonus tip: “Consider charging all of your business ex- penses on a dedicated credit card,” says Cawley. “Then you’ll have a permanent record of where you went and how much you spent.” And that credit card’s statements will provide an easily accessible journal of your business activities. Per Diem Rates Does collecting meal receipts—digital or otherwise— seem like a hassle? Ask your accountant if you are eligible to utilize “per diem” rates—daily cash amounts that are set by the government. “Each year the IRS comes out with a per diem rate for each geographic area,” says Cawley. “The rule is that you can either deduct your actual expenses in terms of meals and incidentals or just use the per diem rate, based on how many days you are there. You should track both in tandem, then use whichever number is higher. This can be really handy in high per diem cities.” The per diem option is often overlooked by business travelers. “Many people will deliberately keep their meal expenses low, because they are on a budget,” says Caw- ley. “But then they forget that they have a right under the IRS code to take the higher per diem rate. As a result, they CONTINUED ON PAGE 32

often low hanging fruit for auditors,” says Rhodes. “That’s because many people fail to keep adequate records.” If your paperwork does not support your deductions, they can be taken away. In addition to the increased taxes that will result, there may also be penalties and interest payments. So how can you track your expenses in a way that will satisfy the authorities? The tried and true medium is paper—and many people still keep folders bulging with receipts. But with the arrival of the digital age, things can be a bit easier—at least for anyone comfortable with tech- nology. “Smart phone apps are especially valuable for keeping receipts of your meals,” says David Cawley, Partner and Certified Valuation Analyst at Fraim, Cawley & Company, CPAs, Roanoke, VA ( ). “You can just take pictures of your receipts and store them in a database.” Alternatively, you can have vendors email receipts to your smart phone. Then file the emails in a folder which is easi- er to access—and to back up—than faded paper files. One more thing: Once you have your records in hand, hang onto them. “The IRS can go back three years when auditing your returns,” says Flemming. “If they find any- thing they can go even further back than that. So we rec- ommend keeping documentation for seven years, which is as far back as the IRS can go.”

. . . IS NOW ONLINE! Please visit:


August 2, 2021

Made with FlippingBook Annual report maker