Documentation 101: How to Prepare for an IRS Audit

You claimed the deduction. But if the IRS asks, can you prove it?

Mike Jesowshek, CPA, explains which records you need to support your business expenses. Learn how to document purchases, keep clean books, and organize your receipts so you’re prepared if the IRS comes knocking.

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Chapters:

00:00 Your Tax Deductions Need Documentation
Paying with a business card doesn’t automatically make a purchase deductible. You need records showing what you bought and why it was business related.

03:00 Audit Selection vs. Audit Outcome
Even well-organized businesses can get audited. Good documentation helps you support your deductions if you’re selected.

08:00 The Proof Behind a Business Deduction
Every deduction needs an actual transaction, a business purpose, and the correct tax treatment. Your supporting records should match.

12:00 Clean Books and Separate Bank Accounts
Separate business and personal accounts, update your books regularly, and clearly label expenses, transfers, and owner activity.

14:00 Business Structure, Payroll, and Reimbursements
Your tax filings and records should match your business structure. Payroll, accountable plans, and meeting records need proper implementation.

17:00 What to Record Beyond the Receipt
Document the business purpose and who was involved. Supporting invoices, calendar entries, and emails can help explain the expense.

19:00 Supporting Records for Mileage, Travel, and More
Mileage, travel, equipment, contractors, loans, and reimbursements each need records that support the transaction.

20:00 Building an Audit-Ready Workflow
Capture receipts promptly, add context, categorize expenses consistently, and save your documents digitally.

22:00 Testing Whether You Can Find Your Records
Choose an older transaction or five large expenses. Check whether you can quickly find the records supporting them.

23:00 What to Do When an Audit Letter Arrives
Read the request carefully, meet deadlines, organize your response, and speak with a qualified tax professional.

25:00 How Good Documentation Pays Off
Organized records make audit responses faster and deductions easier to defend. Clean books also help you make business decisions.

27:00 Why Tax Strategies Need a Paper Trail
Putting a strategy into practice includes documenting it. Hiring your kids, for example, requires records of their work and payments.

28:00 Key Takeaways and Next Steps
Clean books and timely documentation help you prepare for an audit. Learn where to find support implementing tax strategies.

Podcast Host:

Mike Jesowshek, CPA – Founder and Host of Small Business Tax Savings Podcast
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