To view this page ensure that Adobe Flash Player version 11.1.0 or greater is installed.

DOUBLE TAP TO ZOOM WITH PHONE OR TABLET Family Child Care Record-Keeping Guide a good idea. It’s better to save all of your receipts, since this will allow you to prove how much you spent in total, and then you can claim 50% of that amount for your business. If you don’t have all business and personal receipts, the IRS may argue that some of your busi- ness receipts are actually for personal use. Develop the habit of saving receipts every time you make a purchase—don’t skip a week here and there. If you’re afraid that a receipt will fade and be illegible by the end of the year, photocopy it. (The cost of copying your receipts is 100% deductible.) An increasing number of providers are scanning their receipts into their computer. (NeatReceipts is one scanning system.) If you do scan your receipts, you do not need to save a paper copy of the receipt. If you are audited by the IRS, the more receipts you have that show your personal expens- es, the easier it will be to claim your business deductions. The reason for this is that there are hundreds of common expenses that may or may not be business deductions. Although per- sonal expenses are not deductible, if you can prove your personal expenses it will be easier to claim that your business expenses really are for business. For example, if you spent $100 on paper towels for the year, and your Time-Space percentage is 40%, you are entitled to deduct $40 as a business expense. (For more about the Time-Space percentage, see chapter 3.) However, if you only save $40 worth of receipts, the IRS may suspect that this was your total expenditure for paper towels, and demand that you prove you also purchased paper towels for personal reasons. Although there is no IRS rule that says you must save your personal receipts, you should make a point of saving as many as you can, in case you are ever audited. Always Get a Receipt There’s no law that requires you to have a receipt for an expense before you can claim it as a business deduction. The IRS regulations simply state that you need to support your claims for business deductions by showing “adequate records” or other “sufficient evidence.” However, if you’re ever audited, the burden will be on you to prove that your deductions are proper, and in that case the best evidence you can have is a complete folder of business receipts. After a receipt, the next best form of evidence would be a canceled check. But a canceled check isn’t as convinc- ing as a receipt, because it doesn’t provide a record of exactly what you purchased—a check that you wrote to Wal-Mart could have been for baby wipes or shotgun shells! Other types of records that are occasionally useful for tax purposes include credit card statements, written records, photographs, or notations in a calendar or notebook. But it is most important to have receipts to back up all your expenses. 20 COPYRIGHTED MATERIAL