I'm a member of several business groups. The topic was raised on how to handle business entertainment expenses, so I linked to the IRS site, which is pretty clear in explaining rules to avoid a tax audit. Although tax season has passed for many of us, it's good to be on our best behaviour year-round.
IRS RESOURCES FOR HANDLING ENTERTAINMENT EXPENSES
1. Publication 463 (2006), Travel, Entertainment, Gift, and Car Expenses. This is the comprehensive resource that covers the entire gamut of deductions that can often lead to an audit.
2. Publication 512 on Business and entertainment expenses. Explains that expenses must meet one of two tests. One is whether this is a directly-related business expense. The other is the "associated" test, which means a bona fide, direct event proceeded or followed the expense.
3. Publication 305 helps us follow good record keeping.
4. For the mileage, just keep track on your mileage log. I take the standard mileage deduction each year, but there are other methods.
NOTES:
My CPA mentioned that leasing a business-only vehicle could be better than purchasing because you can write off all associated expenses and repairs. When a car is purchased, it is often depreciated over a long period of time.
Best bet is to have someone like Candace Beauchamp, a bookkeeper that I use. You can send or provide access to receipts each month and the bookkeeper will classify and updated them in Quickbooks. At the end of the year, the bookkeeper can export to a simple file that can be sent to your CPA.
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