I'm a small business owner in Oklahoma. Do I need to keep the receipts for absolutely every business-related purchase I make, in case the IRS audits my return?
There are two answers to this question. The “official” one is yes, of course you should keep all of your receipts in a secure file (including the printed versions of electronic receipts), and total them up with a calculator at the end of the year to determine what business-related deductions to which you are entitled.
The “unofficial” answer is that practically no business owner in the world keeps every single receipt he has generated over the course of the year—and even if he does, these receipts wind up being thrown into a big box, where sorting through them at the end of the year, much less adding them up, becomes a major headache.
Most people end up taking a middle course. The fact is the IRS isn't much interested in the $1.99 you spent on safety pins, or that $5 latte you bought for a potential client at Starbuck's. You should keep receipts for major purchases: rent, office equipment, business trips, and entertaining expenses, if these are genuinely related to your business.
Look at it this way: if you have a modest income, the government isn't likely to debate a $500 claim for miscellaneous business expenses, which is just as much of a headache for an IRS revenue officer to sort out as it is for you. But, if you earn $20,000 a year, and claim you invested $5,000 in a new inventory-tracking system, you will have to supply solid proof of that purchase.
Questions? Call the Oklahoma tax experts at Travis W. Watkins, PC (800-721-7054) to find out more today!