The Right Way to Deal With Moving Expenses So You’re Not Audited

In life, there are right ways and wrong ways to deal with problems. For example, when dealing with relocation expenses with a business, you do not want to worry about getting audited. So now we have a few tips on dealing with moving expenses so it makes things a little more stress-free.

Receipts Are Integral

Keeping your receipts is a given but the way you keep them is what makes a world of difference. For instance, the Internal Revenue Service can audit you up to six years back and having your proof of moving expenses is important even if it was a long time ago.

Over time, receipts can fade or get misplaced so it is important to know that you are allowed to store your receipts electronically. This is perfect just in case the ink fades on your receipt and is no longer legible. Scan them, have your hard copies, and have a backup just in case. While the IRS states that you do not have to report expenses less than $75 and you are also allowed to use other credible evidence which is the Cohen Rule, why go through all of that? It is easier to present the evidence than to argue with the IRS.

Keep Notes

One thing that is helpful in dealing with moving expenses (or any other expenses for that matter) is to make notes on your receipt or have receipt tracking software that allows you to make notes. This is because you might have a perfectly legitimate receipt from the local moving company for packing materials and that is pretty self-explanatory. However, let’s say you bought something for the move from a place that does not detail it on the receipt or it’s there but is something that is not moving-specific – you would need to refer to your notes to be able to recall what that item was for instead of it just being something for your business in general.

A Business Journal Helps

While you may be busy enough as it is, a business journal kept through an avenue like Google Calendar or Outlook allows you to make notes each day and these can easily refer to your receipts. In some cases, you are able to print out this in case you are audited but in order to keep from being audited in the first place, this makes it easier for you to remember specific dates and what the receipt was for.

A Few Things Not to Do

There are plenty of right things to do when dealing with moving expenses and your taxes but there are also a few things not to do such as:

  • Do not deal in cash only. This makes it hard to reconcile, easier to spend, and definitely harder to track when it comes to your bookkeeping.
  • Do not depend on cancelled checks or statements from your credit card company. While both of these are integral to helping with your bookkeeping, they are not enough. The cancelled check or credit card statement may indeed show that you spent a certain amount at a retailer but it won’t specify what you bought and that is why you need a receipt as well.

Always write down your deductible expenses as you go and if you do that immediately along with scanning your receipt and filing it with notes, you are able to expenses and back them up. To avoid the audit in the first place, make sure that you do not fudge the numbers and that you report all of your income when you file your taxes.

To talk more about this, or anything else, please contact us so we can give you the answers you need.

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