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Chapter OR Basics of DOUBLE TAP TO ZOOM WITH PHONE One: The TABLET Record Keeping Reconstructing Your Records What if you’re reaching the end of the year and suddenly realize that you haven’t been keep- ing careful track of all your records and receipts? Is it too late to claim deductions for your expenses? No! There are some ways that you may be able to reconstruct your records: • Review your credit card statements. They may remind you of additional expenses or help you reconstruct your records. • Take photographs of any items that you purchased without a written record. Return to the store where you bought the item, and record the price. The combination of a photograph and a credit card statement or other written record can be effective. • Check how many business trips you made by reviewing your receipts and bank deposit slips, and check register, field trip permission forms, and The Redleaf Calendar-Keeper or Mileage-Keeper notes. Use MapQuest, Google Maps, or another online service to figure your business mileage. • If you have forgotten to save your business receipts, try to keep enough records to show a pattern of spending. If you carefully save all your business and personal receipts for two months, you may be able to use that to show a pattern of business and personal spending, and base your business deductions on that. (This will only work if your expenses were about the same for the other months of the year.) Although the IRS may not accept this, it’s worth trying if you have no other choice. If none of these methods work, as a last resort, you can try to back up your deductions with your own testimony and that of other witnesses. For example, although you have no record of parking meter expenses, you and your children can testify that you regularly spend 50 cents on a parking meter every time you take them to the library. This approach may work. I once helped a provider win an audit by presenting her testimony about buying her furniture, photographs of the furniture, and her estimate of what it was worth. Although a receipt is always the best kind of record, don’t give up just because your records aren’t perfect. If you can make a reasonable case with “sufficient evidence,” you should be able to prevail. How Long Should You Save Your Records? The IRS requires you to save your business records for three years from the date that you file your tax return. I continue to hear providers tell me that they’ve heard from their tax pre- parer that they must save their business records for seven years. Not true! If you receive an extension and file your tax return after April 15, you must keep your records for three years after the extension deadline. If you amend a tax return from an earlier year, you must keep your records for three years after the date that you filed the amended return. The IRS will not audit you more than three tax years back unless they believe that you may have committed fraud or substantially underreported your income. COPYRIGHTED MATERIAL 25