Today TaxMama hears from Plucky in the Tax Parlor, who tells us. “I started a business in 2006 and incurred costs exceeding $5,000. I do not have the appropriate documentation for all costs. Can I still deduct the “standard” $5,000 deduction? ”
First of all start up costs are essentially the costs you incur before your business opens its doors to customers. So, from the day you started earning income, those are no longer start up costs. So your start-up costs may be less than you think. The rest of the costs are operating costs. Even if they generate a loss of over $5,000.
Now, what about not having documentation for what you spent?
Oh that’s a toughie. See if you can get documentation.
Checks and credit card statements will help. The companies you spent money with may have records. If you paid cash – and got something tangible, like office equipment, supplies, etc. and no longer have the receipt – at least take a photo of what you bought and attach notes explaining the cost and date of purchase. Record these amounts and dates into your accounting system.
DO SOMETHING to document your expenses. And never, ever spend cash again. Use a check or credit card. It’s always easier to reconstruct expenses when a third party (like a bank or credit card company) also have copies.
Also, since you’re in business, READ THIS BOOK. Small Business Taxes Made Easy https://www.taxmama.com/AskTaxMama/book/
It will help you with your record-keeping and it will save you a ton of money as your business grows.
And remember, you’ll find answers to lots of questions about start-up costs, documentation, and other tax information, free. Where? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips. Please click on the subscribe link and join us.]
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