The Myth About Receipts and Taxes

Real Estate Professionals across the country are stuffing their wallets, purses, and glove boxes with paper receipts. After all, the IRS does require them right?

Keeping track of paper receipts is a major pain. They're easy to lose, they tear, they smudge, and they have a tendency to fade. But here's the thing about keeping copies of all your paper receipts - you don't have to anymore!

WHAT THE IRS SAYS ABOUT RECEIPTS

It's common for real estate entrepreneurs to think they need receipts for every single write-off they claim on their taxes. THAT'S ACTUALLY A MYTH - MUCH LIKE A UNICORN (please don't tell my seven year old daughter about that)!

Don't believe us? Let's go straight to the source - THE IRS!

The IRS says you must keep RECORDS for your business tax deductions. These records need to include:

• What you bought

• How much it cost

• When you bought it

Guess what? They don’t say anything about it being a paper copy! Instead, they say this right out loud:

“Some businesses choose to use electronic accounting software programs or some other type of electronic system to capture and organize their records. All requirements that apply to hard copy books and records also apply to electronic records. For more detailed information refer to Publication 583, Starting a Business and Keeping Records.”

Let’s translate that from IRS language to English: you don’t have to keep paper receipts anymore!

HOW TO KEEP RECORDS GOING FORWARD

You can satisfy the IRS’s documentation records with two simple things:

• Bank Statements

• Credit Card Statements

Before you get too excited about this newfound freedom, keep in mind that certain expenses like business meals, business travel, and others require a little more documentation than what you will find on a bank or credit card statement.

So, our advice is this

1. Snap a picture of your receipts

2. Upload them to a digital platform like iCloud, Google Drive, or even your accounting software like QuickBooks Online..

3. If you are a ZanderFi Member, simply send us the picture through our award-winning app and we will take care of the rest.

4. Throw the receipts in the trash!!!!

5. Sleep easy knowing your books are audit ready… now that is peace of mind!

WHAT ABOUT CASH PURCHASES?

Good question! Even cash purchases don’t need receipts if they are ordinary and reasonable with one exception: Cash purchases of over $75. This rule was established in the Cohan vs. Commissioner Circuit Court of Appeals case.

But you don’t need to go reading that court ruling – simply keep your receipt if you spent more than $75 in cash and you are good to go!

ARE YOU SURE THIS WILL WORK IN AN AUDIT?

If you were to get audited, you can relax – The IRS is LEGALLY required to accept digital forms of proof for your write-offs!

Even if you lose a receipt before you store it digitally you can use your bank and credit card statements as well as other items like emails or calendar events as proof of your deductions.

THE BOTTOM LINE

Stop hoarding receipts. The BIG corporations are writing off everything and you should too. Don’t let an antiquated recordkeeping process like storing physical receipts hold you back!

At ZanderFi, we are on a mission to help self-employed real estate professionals streamline the bookkeeping process while saving thousands on taxes every year.

If you are ready to take your business to the next level visit ZanderFi to schedule a FREE Consultation today!