Kathy (online entrepreneur) asks:
I run an online business. A friend told me that I’m allowed to spend a certain amount of cash for business expenses every week without having to keep receipts to prove where I spent the money. He says this is called a “petty cash” fund. Is this true?
Answer:
Keeping a petty cash fund is a very common practice for businesses. It simplifies the recordkeeping by compiling all the bookkeeping entries for these tiny expenses into one larger entry.
However, it’s not the same for taxes. If you’re audited, the IRS is going to require receipts (or some other supporting documentation) to prove your expenditures. If you can’t provide that, you’re almost certain to lose your deduction. If that’s a risk you’re willing to take, go ahead and use a petty cash fund for miniscule, legitimate expenses. (Assuming they really are small amounts, it won’t be a financial tragedy if the deduction is disallowed.)
For More Information, See My Related Book:
 |
Independent Contractor, Sole Proprietor, and LLC Taxes Explained in 100 Pages or Less
|
- Estimated tax payments: When and how to pay them, as well as an easy way to calculate each payment,
- Self-employment tax: What it is, why it exists, and how to calculate it,
- Business retirement plans: What the different types are, and which one is best for you,
- Click here to see the full list.
"Quick and easy read. No fluff, just straight to the point and gives you more helpful information that you might imagine. If you are looking to get the bottom line information you need to start your business right then this book is a must have."
Comments on this entry are closed.