How To Prove Expenses Table 4 is a summary of records you need to prove eachexpense discussed in this publication. You must be able to prove theelements listed across the top portion of the chart. You prove them byhaving the information and receipts (where needed) for the expenseslisted in the first column. Caution: You cannot deduct amounts that you approximate or estimate. Table 4. How To Prove Certain Business Expenses You should keep adequate records to prove your expenses or havesufficient evidence that will support your own statement. You mustgenerally prepare a written record for it to be considered adequate.This is because written evidence is more reliable than oral evidencealone. However, if you prepare a record in a computer memory devicewith the aid of a logging program, it is considered an adequaterecord. Adequate Records You should keep the proof you need in an account book, diary,statement of expense, or similar record. You should also keepdocumentary evidence that, together with your record, will supporteach element of an expense. Documentary evidence.You generally must have documentary evidence, such as receipts,canceled checks, or bills, to support your expenses. Exception.Documentary evidence is not needed if any of the followingconditions apply. You have meals or lodging expenses while traveling away fromhome for which you account to your employer under an accountable plan,and you use a per diem allowance method that includes meals and/orlodging. (Accountable plans and per diem allowances are discussed inchapter 6.) Your expense, other than lodging, is less than $75. You have a transportation expense for which a receipt is notreadily available. Adequate evidence.Documentary evidence ordinarily will be considered adequate if itshows the amount, date, place, and essential character of the expense. For example, a hotel receipt is enough to support expenses forbusiness travel if it has all of the following information. The name and location of the hotel. The dates you stayed there. Separate amounts for charges such as lodging, meals, andtelephone calls. A restaurant receipt is enough to prove an expense for a businessmeal if it has all of the following information. The name and location of the restaurant. The number of people served. The date and amount of the expense. If a charge is made for items other than food and beverages,the receipt must show that this is the case. Canceled check.A canceled check, together with a bill from the payee, ordinarilyestablishes the cost. However, a canceled check by itself does notprove a business expense without other evidence to show that it wasfor a business purpose. Duplicate information.You do not have to record information in your account book or otherrecord that duplicates information shown on a receipt as long as yourrecords and receipts complement each other in an orderly manner. You do not have to record amounts your employer pays directly forany ticket or other travel item. However, if you charge these items toyour employer, through a credit card or otherwise, you must keep arecord of the amounts you spend. Timely-kept records.You should record the elements of an expense or of a business useat or near the time of the expense or use and support it withsufficient documentary evidence. A timely-kept record has more valuethan a statement prepared later when generally there is a lack ofaccurate recall. You do not need to write down the elements of every expense on theday of the expense. If you maintain a log on a weekly basis thataccounts for use during the week, the log is considered a timely-keptrecord. If you give your employer, client, or customer an expense accountstatement, it can also be considered a timely-kept record. This istrue if you copy it from your account book, diary, statement ofexpense, or similar record. Proving business purpose.You must generally provide a written statement of the businesspurpose of an expense. However, the degree of proof varies accordingto the circumstances in each case. If the business purpose of anexpense is clear from the surrounding circumstances, then you do notneed to give a written explanation. Example.If you are a sales representative who calls on customers on anestablished sales route, you do not have to give a written explanationof the business purpose for traveling that route. You can satisfy therequirements by recording the length of the delivery route once, thedate of each trip at or near the time of the trips, and the totalmiles you drove the car during the tax year. You could also establishthe date of each trip with a receipt, record of delivery, or otherdocumentary evidence. Confidential information.You do not need to put confidential information relating to anelement of a deductible expense (such as the place, business purpose,or business relationship) in your account book, diary, or otherrecord. However, you do have to record the information elsewhere at ornear the time of the expense and have it available to fully prove thatelement of the expense. Incomplete Records If you do not have complete records to prove an element of anexpense, then you must prove the element by: Your own written or oral statement containing specificinformation about the element, and Other supporting evidence that is sufficient to establishthe element. If the element is the description of a gift, or the cost, time,place, or date of an expense, the supporting evidence must be eitherdirect evidence or documentary evidence. Direct evidence can bewritten statements, or the oral testimony of your guests or otherwitnesses setting forth detailed information about the element.Documentary evidence can be receipts, paid bills, or similar evidence. If the element is either the business relationship of your guestsor the business purpose of the amount spent, the supporting evidencecan be circumstantial, rather than direct. For example, the nature ofyour work, such as making deliveries, provides circumstantial evidenceof the use of your car for business purposes. Invoices of deliveriesestablish when you used the car for business. Sampling.You can keep an adequate record for parts of a tax year and usethat record to prove the amount of business or investment use for theentire year. You must demonstrate by other evidence that the periodsfor which an adequate record is kept are representative of the usethroughout the tax year. Example.You use your car for local business transportation to visit theoffices of clients, meet with suppliers and other subcontractors, andpick up and deliver items to clients. There is no other business useof the car, but you and your family use the car for personal purposes.You keep adequate records during the first week of each month thatshow that 75% of the use of the car is for business. Invoices andbills show that your business use continues at the same rate duringthe later weeks of each month. Your weekly records are representativeof the use of the car each month and are sufficient evidence tosupport the percentage of business use for the year. Exceptional circumstances.You can satisfy the substantiation requirements with other evidenceif, because of the nature of the situation in which an expense ismade, you cannot get a receipt. This applies if all thefollowing are true. You were unable to obtain evidence for an element of theexpense or use that completely satisfies the requirements explainedearlier under Adequate Records. You are unable to obtain evidence for an element thatcompletely satisfies the two rules listed earlier underIncomplete Records. You have presented other evidence for the element that isthe best proof possible under the circumstances. Destroyed records.If you cannot produce a receipt because of reasons beyond yourcontrol, you can prove a deduction by reconstructing your records orexpenses. Reasons beyond your control include fire, flood, and othercasualty. Additional Rules This section explains when expenses must be kept separate and whenexpenses can be combined. Separating expenses.Each separate payment is generally considered a separate expense.For example, if you entertain a customer or client at dinner and thengo to the theater, the dinner expense and the cost of the theatertickets are two separate expenses. You must record them separately inyour records. Season or series tickets.If you buy season or series tickets for business use, you musttreat each ticket in the series as a separate item. To determine thecost of individual tickets, divide the total cost (but not more thanface value) by the number of games or performances in the series. Youmust keep records to show whether you use each ticket as a gift orentertainment. Also, you must be able to prove the cost of nonluxurybox seat tickets if you rent a skybox or other private luxury box formore than one event. See Entertainment tickets in chapter 2. Combining items.You can make one daily entry in your record for reasonablecategories of expenses. Examples are taxi fares, telephone calls, orother incidental travel costs. Meals should be in a separate category.You can include tips with the costs of the services you received. Expenses of a similar nature occurring during the course of asingle event are considered a single expense. For example, if duringentertainment at a cocktail lounge, you pay separately for eachserving of refreshments, the total expense for the refreshments istreated as a single expense. Car expenses.You can account for several uses of your car that can be consideredpart of a single use, such as a round trip or uninterrupted businessuse, with a single record. Minimal personal use, such as a stop forlunch on the way between two business stops, is not an interruption ofbusiness use. Example.You make deliveries at several different locations on a route thatbegins and ends at your employer's business premises and that includesa stop at the business premises between two deliveries. You canaccount for these using a single record of miles driven. Gift expenses.You do not always have to record the name of each recipient of abusiness gift. A general listing will be enough if it is evident thatyou are not trying to avoid the $25 annual limit on the amount you candeduct for gifts to any one person. For example, if you buy a largenumber of tickets to local high school basketball games and give oneor two tickets to each of many customers, it is usually enough torecord a general description of the recipients. Allocating total cost.If you can prove the total cost of travel or entertainment but youcannot prove how much it cost for each person who participated in theevent, you may have to allocate the total cost among you and yourguests on a pro rata basis. To do so, you must establish the number ofpersons who participated in the event. Zermatt Cuartos de hotelAn allocation would be needed, for example, if you did not have abusiness relationship with all of your guests. See Allocatingbetween business and nonbusiness in chapter 2. If your return is examined.If your return is examined, you may have to provide additionalinformation to the IRS. This information could be needed to clarify orto establish the accuracy or reliability of information contained inyour records, statements, testimony, or documentary evidence before adeduction is allowed. How Long To KeepRecords and Receipts You must keep records as long as they may be needed for theadministration of any provision of the Internal Revenue Code.Generally, this means you must keep records that support yourdeduction (or an item of income) for 3 years from the date you filethe income tax return on which the deduction is claimed. A returnfiled early is considered filed on the due date. For a more completeexplanation of how long to keep records, get Publication 583,Starting a Business and Keeping Records. You must keep records of the business use of your car for each yearof the recovery period. See More-than-50%-use test inchapter 4under Depreciation Deduction. Reimbursed for expenses.Employees who give their records and documentation to theiremployers and are reimbursed for their expenses generally do not haveto keep copies of this information. However, you may have to proveyour expenses if any of the following conditions apply. You claim deductions for expenses that are more thanreimbursements. Your expenses are reimbursed under a nonaccountableplan. Your employer does not use adequate accounting procedures toverify expense accounts. You are related to your employer as defined underStandard Meal Allowance in chapter 1. Reimbursements, adequate accounting, and nonaccountable plansare discussed in chapter 6. cheap hotels in LuccaExamples of Records Examples of records that show the information you need to keep fordifferent types of expenses are included in this publication asTable 6 and Table 7. They are part of theillustrated examples shown at the end of chapter 6.