Why Do Even the Most Obvious Expense Claims Require Proof?

If you run a law practice, you likely pay annual dues to the American Bar Association. Do you really need to keep the receipt? While professional fees are tax-deductible and may appear to be clearly for business use, don’t cut corners with the IRS.

As a recent article on the Inman News website underscores, even the most obvious expense claims require documentation — and streamlined expense management software to capture and store this proof.

Inman News explains that when the IRS audited a licensed real estate agent, it disallowed some of her business expense claims, including $4,725 paid to a well-known real-estate franchise. The agent said the payments were standard affiliation fees and provided some documentation, but the IRS decided that she could not prove the source or nature of the charges.

The agent successfully appealed the IRS audit in tax court, according to Inman News. But carefully documenting the business purpose of these professional fees could have saved her significant time and hassle.

However, few business expenses are as clear-cut as membership dues or professional fees. When expense claims include conference travel or taking a client to dinner, for example, hard proof is even more crucial. The Inman News article advises noting the business purpose on receipts and similar documents.

If you want employees to correctly track business purpose and receipts, the process needs to be simple, rewarding and always on hand. An easy-to-use mobile expense report software can help accomplish all three at once.

1. Ease of use. A well-designed mobile web app for expenses can make online expense reporting fast and easy. When entering an expense, the app can prompt an employee to enter the date, amount, expense type and project or client code, along with a description of the business purpose. With business meals, for example, an app can log the names of those present or the subject discussed.
2. Always ready. When using a mobile app on their smartphones, employees can enter expenses anytime and anywhere instead of waiting to get back to their desks. Rather than carrying around a receipt and perhaps misplacing it, simply snap a photo of receipts with the smartphone’s camera.
3. Incentives for compliance. Employees have strong incentives to log expense claims as they go; it’s easier than waiting until the end of a business trip to compile an expense report, and it speeds up the expense reimbursement process, putting money back in their pocket.

When it comes to the IRS, even the most obvious expense claims require proof. Mobile online expense reporting tools can help your organization capture and store this documentation, saving time and hassle in the event of an IRS audit.

We’d like to hear your thoughts. What are some easily overlooked and “obvious” business expenses that should be documented?