Reciepts

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Reciepts

Postby Foolish Mortal » Wed Jun 06, 2012 2:27 am

Okay, this is a dumb horrible newb question I probably should know better than to ask. But...for tax purposes how important are receipts for business expenses?

Can I use bank statements to stand in for them? Or is that a big no?

I never really made enough profit on the tables to worry about income taxes but...this year I think things are going to fall out a bit...differently.
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Re: Reciepts

Postby caliban821 » Fri Jun 08, 2012 11:42 am

Your bank statements should be sufficient when calculating things for paying sales tax. I would say try to item and break things down for your records regardless
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Re: Reciepts

Postby meauho » Fri Jun 08, 2012 12:22 pm

For your own calculations: Bank statements are fine.
However, if you are looking to be IRS Audit compliant, you need to keep receipts.

Another thing to look into is opening your own business checking account. Running a business through your personal account has IRS agents screaming about commingling of funds - and typically results in the IRS determining that your business is a "hobby business". Hobby businesses only get to count revenue (income) and do not get to count expenses.


To meet the "Business vs Hobby" threshold, you can view the requirements on the IRS website
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Re: Reciepts

Postby Foolish Mortal » Sat Jun 09, 2012 12:15 am

Thanks - I am pretty sure I've got most of my receipts...somewhere.

Also getting a separate business account is definitely on my to do list now.

Though stupid question: how does one use the money in it? Can I take money out of it to like pay rent or other non business things or does that sort of count as commingling of funds? I am sort of lost on this part.
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Re: Reciepts

Postby caliban821 » Tue Jun 12, 2012 10:05 am

Really your busniess account should be for just that. business related expenses

At the moment we dont have a separate accoutn like we should but we keep all our receipts. In fact I've got my tabulated by month and filed accordingly so any auditor can trace stuff easily
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Re: Reciepts

Postby meauho » Tue Jun 12, 2012 12:43 pm

Foolish Mortal wrote:Thanks - I am pretty sure I've got most of my receipts...somewhere.

Also getting a separate business account is definitely on my to do list now.

Though stupid question: how does one use the money in it? Can I take money out of it to like pay rent or other non business things or does that sort of count as commingling of funds? I am sort of lost on this part.


In order to pay your personal expenses, you really need to write a check to yourself. Basically, you are paying yourself. The down side is that you should count it on your income tax as self employment income.

When counting self employment income on your taxes, you will have to calculate what is typically called the "self employment tax". With a real job, employers pay half of your Social Security and Medicaid taxes. When you are self employed - you don't have an employer paying half of that tax for you - so you end up paying the whole thing. I can go into a whole accounting and economics class about how you aren't actually paying more in taxes, but it will still seem like you are from your perspective.
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