The police and auditors have one thing in common: they make even the most honest and law-abiding citizens nervous.
After all, who hasn't felt their hearts flutter when they hear police sirens close behind them, even if they obey all traffic rules? In general, the same feeling arises in people when the topic of an IRS audit arises. If you want to learn the fundamentals of project auditing then you can browse various online sources.
Most taxpayers are afraid of audits because they don't know if they are prepared enough. You may ask yourself: Do I keep the right documentation? Are all of my pieces legal?
Can I answer all IRS questions? For home-based business owners, these questions are even more pressing, so waiting for an audit to test their preparation is not the best choice. By following a few easy guidelines, they can take the guesswork out of keeping notes.
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Clearly, any claimed reduction needs to be documented, but many taxpayers are unclear about what is adequate evidence.
The IRS needs more than a few notes in a notebook, but no more. First, each reduction must be recorded with a copy of the invoice or bill.
For example, if you claim utility costs as a deduction, you must keep a copy of the bill every month. In addition to proving the costs incurred, you must also prove that they are paid.
So along with that utility bill, you might want to take a canceled check or a credit card statement that includes fees. Receipts, bank statements, and even invoices labeled "paid" are also considered as proof that expenses have been taken care of.