How To Take A Deduction Without A Receipt

by Wayne M. Davies

© 2005 Wayne M. Davies Inc.

The mantra of small business bookkeeping has been
relentlessly burdensome for decades:

"No Receipt, No Deduction."

My own tax clients are quick to remind me of this basic
recordkeeping rule. Over the years I've heard this
countless times: "But I don't have any receipts.
I guess I can't take the deduction, right?"

What's my response to the "No Receipt, No Deduction"
lament? "Not so fast! Wherever there's a tax rule,
there's an exception to the rule."

In certain situations, taking deductions without a receipt
is actually sanctioned by the almighty IRS. Here are
three legal exceptions to the "No Receipt, No Deduction"
rule.

EXCEPTION #1: Vehicle Expense
You are allowed to deduct your vehicle expenses to the
extent that you used your vehicle for business. If
you drove your car 100% for business, then 100% of your
vehicle expenses are deductible.

And you have two options for determining those vehicle
expenses:
1) The Actual Expense Method
2) The Mileage Method

Our focus here is on Option #2 -- because with the
Mileage Method your vehicle expense is simply the number
of business miles times the official IRS mileage rate.
For 2004, this rate is 37.5 cents per mile. For 2005,
the rate increases to 40.5 cents per mile.

So, in 2004, if you drove your vehicle 10,000 miles for
business, you can report a deduction of $3,750 -- without
having to keep any receipts for gasoline, oil changes,
repairs and maintenance, insurance, etc.

You do have to document your business mileage via a
written log of some sort, but this is usually much easier
than saving all those receipts for actual vehicle expenses.

For a more thorough explanation of these two vehicle
expense options, as well as details regards how to
easily maintain a mileage log, see the article,
"How To Drive The IRS Crazy" at:
http://www.YouSaveOnTaxes.com/drive.html

EXCEPTION #2: Meals While Traveling
When traveling out-of-town on an overnight business trip,
you can deduct the actual expense of your meals (by keeping
the receipt), or you can rely on the little known "Per Diem
Method" (which requires no receipt).

The Per Diem Method gives you a daily meal allowance for
each day of the trip, depending on what part of the 
country you visit.

For example, the per diem meal rate for Birmingham, AL
is $42. For San Francisco, it's $50. 

To find the per diem amounts for every state, go to:
http://www.policyworks.gov/perdiem

And for a more complete treatment of the Per Diem Method,
read the article, "Carpe Diem -- Seize The Per Diem
Method (and Throw Away Your Receipts!)" at:
http://www.YouSaveOnTaxes.com/tax-tidbit-3.html

EXCEPTION #3: The $75 Dollar Rule
Here's another easy way to avoid the hassle of saving
receipts -- this one involves your business meal and
entertainment expenses.

Believe it or not, the IRS does not require a receipt
when your business meal or entertainment expense is
less than $75 per expense.

Sound too good to be true?

Well, there is a "catch", of course: you still must
maintain a record of the following five facts related
to the deductible event:

1) WHO did you eat with or entertain?
i.e. the names of the people and the nature of their
business relationship to you

2) WHEN did the entertainment occur?
i.e. the date

3) WHERE did the entertainment occur?
i.e. the name of the restaurant or other venue

4) WHY did you meet?
i.e. a description of the business purpose of
the meal or event

5) HOW MUCH did you spend?
i.e. the dollar amount

You should record these five facts in a log of some
sort. Your daily appointment book or day-timer is
the perfect place to jot this down in less than
a minute.

Having met the IRS substantiation requirements, you
can then throw away the receipt! In the event of
an audit, you'll be covered.

Two final comments . . . 

Exception #2 applies to overnight travel situations,
regardless of whether you eat your meals alone or
with business associates.

Exception #3 applies to meals and entertainment
expenses incurred when you are with someone
with whom you have an existing or prospective
business relationship, regardless of whether you
are in town or in overnight travel status.

About The Author:

Wayne M. Davies is author of three tax-slashing eBooks for small business owners and the self-employed:

The Tax Reduction Toolkit
http://www.YouSaveOnTaxes.com/toolkit

Incorporation Tax Secrets Revealed
http://www.YouSaveOnTaxes.com/secrets

How To Incorporate Yourself For Free
http://www.YouSaveOnTaxes.com/how-to-incorp

Wayne's eBooks are available separately, or at a discount as a 3-volume set:

The Ultimate Small Business Tax Reduction Guide 
http://www.YouSaveOnTaxes.com/ultimate-guide

To receive a free copy of Wayne's 25-page Special Report, 

"How To Instantly Double Your Deductions"

click here: 

http://www.YouSaveOnTaxes.com

www.YouSaveOnTaxes.com

A Division of Wayne M. Davies Inc.

4660 W. Jefferson Blvd., Suite 220

Fort Wayne, IN 46804

Tel: (260) 459-3858 / Fax: (260) 459-0124

email: YouSaveOnTaxes@aol.com

http://www.YouSaveOnTaxes.com

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