Thursday, April 11, 2024

What deductions can I claim without receipts for US businesses?

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For business expenses, receipts are generally required to support deductions claimed on your tax returns. However, there are circumstances and specific expenses for which the Internal Revenue Service (IRS) may allow deductions without a physical receipt. It's crucial to note that while you may not need a receipt, some form of documentation or substantiation is usually necessary. Here are a few examples where deductions might be claimed without a traditional receipt:

1. Standard Mileage Rate

Instead of keeping receipts for gas, repairs, and other car expenses, businesses can use the standard mileage rate to calculate deductions for business use of a vehicle.

The standard mileage rates for 2024 are:

* Self-employed and business: 67 cents/mile

* Charities: 14 cents/mile

* Medical: 21 cents/mile

* Moving (military only): 21 cents/mile

Learn more from the IRS - "Standard mileage rates"​​ []

What methods can I use to compute the deduction for my vehicle expenses?

You can generally figure the amount of your deductible car expense by using one of two methods:

1. Standard mileage rate method.

2. Actual expense method.

If your business requires a lot of traveling, fuel, and vehicle maintenance, we recommend using the actual expense method and keeping receipts for your expenses to maximize your return. If you don’t have receipts, you should use the standard mileage rate and keep a log of the miles driven for business purposes.

Learn more from the IRS - "Topic no. 510, Business use of car" []

2. Meals and Entertainment

Since 2023, the IRS allows a 50% deduction for business meals if the expense is ordinary and necessary to the business. While receipts are important, for expenses under $75, detailed records or a log of the expenses (date, location, business purpose, and attendees) can suffice.

3. Travel Expenses

For business travel, you’re required to keep records that prove the amount, time, place, and business purpose of your travel. For lodging, receipts are necessary, but for other travel expenses (like meals and incidental expenses), you can use the per diem rates for the locality of travel instead of receipts for each expenses.

What is Standard Meal Allowance?

Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs.

Learn more from the IRS - "Publication 463, Cat. No. 11081L, Travel, Gift, and Car Expenses"[]

4. Home Office Deduction

If you use a portion of your home exclusively for business, you may be eligible for the home office deduction using the simplified option, which doesn't require detailed expense records. The simplified method allows a standard deduction based on the square footage of your office space.

Beginning in tax year 2013 (returns filed in 2014), taxpayers may use a simplified option when figuring the deduction for business use of their home. Standard deduction of $5 per square foot of home used for business (maximum 300 square feet).

Learn more from the IRS - "Simplified option for home office deduction" []

While these options can reduce the need for keeping every small receipt, it's important to maintain thorough records and logs to substantiate these expenses in case of an audit. Always consult with a tax professional or refer to the guidelines provided by your country's tax authority (like the IRS in the United States) for the most accurate and current tax advice specific to your situation.

We recommend using Receipt-AI to record every expense and receipt through Email and SMS. This way you don’t have to worry about losing any evidence. Simply take a picture and text when you receive them on the go.

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For more detailed information and additional guidance, you can refer to the IRS's pages on "Standard mileage rates" [], "Topic no. 510, Business use of car"​​ [], "Simplified option for home office deduction" [], and "Publication 463, Cat. No. 11081L, Travel, Gift, and Car Expenses" []. These resources offer insights to understand documentation requirements for claiming business deductions without receipts. These guides explain that while receipts are typically necessary for tax deductions, certain circumstances and specific expenses may not require them, but maintaining some form of documentation is still essential.