Alonzo asks the following question: I made some business payments via wire transfers from my bank account to their bank account. Can I deduct this? I don't have a receipt for it.
In today's business world, we frequently make payments to vendors using online banking or wire transfers. Alonzo's question about documenting these transfers is critical to making sure the IRS allows a deduction for such payments. After all, documentation this the number one key to convincing the IRS to allow your deductions.
There are two simple ways to document these payments. First is good bookkeeping. If your books properly reflect the payments and properly categorize them to the right accounts, the IRS is likely to allow the deductions. Having a full set of books is a critical part of this. So, don't just use a checkbook accounting program such as Quicken. You need to use a full accounting program that has a balance sheet and income statement (i.e., dual-entry accounting) such as Quickbooks.
Second, you do need to have backup documentation. This can be in the form of an invoice from the vendor, a HUD-1 in the case of a property purchase, or a contract. You can keep these in scanned form if you do not want to maintain paper files (scanned copies are actually safer and last longer than paper copies).
Don't be afraid of using wire transfers or online banking. Just be sure to maintain proper accounting and backup documentation and you should be fine.
Thanks for the question, Alonzo. I'm sure a lot of people are wondering the same thing.
For more information on documentation, go to http://www.provisionwealth.com/wealthu.
Be financially free now!
Tom