Client's receipts

[Questionguy101]

Do you make copy of clients receipts to substantiate their expenses? Suppose a contractor give you a whole pile of materials receipts (6 inches thick), do you make copy of every single one? If not, how in the future can you prove that the figure that you put on the tax return is based on the total from the receipts?

[MariaR08]

I don't think we're responsible for keeping copies of the taxpayer's receipts - that is the taxpayer's responsibility. Ultimately, if they get audited, they are the ones that have to produce their receipts. I believe, as long as you do your due diligence, and verify your totals, you should be ok. I would probably make my own personal notations, something like "approx. X amount of receipts for materials; reviewed and totaled, etc."

~Maria

[geekgirldany]

I have one that does the exact same thing. I don't make a copy of the receipts but I keep the tape from where I totaled it. On other customers, I scan in the mortgage interest, property tax, contributions, etc. receipts as there is ususally not many of them.

[taxea]

Make it easy on yourself. I don't accept receipts but, rather, provide the client with a worksheet for them to provide the year end totals for income and expenses. They are required to be able to document their figures if audited, not me.

I have created worksheets for all frequently used forms. I keep the original and make a copy for the clients packet of the return. The only documents my clients give me are W-2, 1099, 1098 SSB...if it helps...here is my instructions to my clients:

REMINDER: Please do not include invoices, receipts or other items not specified. This will only delay the preparation of your returns and add to the preparation fees if we need to compile this information for you.

This appears at the bottom of my instructions for completing worksheets and a checklist of what other documents they need to provide. taxea

[Black Bart]

Same here.

I have one that does the exact same thing. I don't make a copy of the receipts but I keep the tape from where I totaled it. On other customers, I scan in the mortgage interest, property tax, contributions, etc. receipts as there is ususally not many of them.

I also just copy the W-2s, house interest, church contribution sheet, property tax bills, etc. Copying multiple bills is too much trouble, so I just lay the tape on the top invoice and take a shot of that -- while not real "proof," it makes me feel better (and after all, that's the point isn't it? )

I like taxea's "Reminder" note ("do not include receipts...delay...(etc.") except I couldn't get away with that around here -- half the sacks and shoeboxs in the county would go elsewhere, although we DO charge for the "adding it up" time.

[JohnH]

I do what Bart does. Photocopy the key stuff, and when there's a stack then I'll copy the tape along with the top items of whatever stack it's stapled to. At least I can show I totaled something and kept proof. If there are some major purchases in the stack I will also make a separate copy of those individual invoices or receipts.

I do charge my regular hourly rate for doing the adding up & organizing, and as long as the client doesn't mind paying then I'm fine with it. I sell my time, not specific segements of my time. It's all just billing as far as I'm concerned, so the time preparing a tax return is just as profitable for me as is the time adding up receipts.

I also see numerous times that clients make critical errors when adding up their own stuff, so I believe they're getting more than their money's worth to pay me to check behind them.

[BP.]

I don't accept receipts but, rather, provide the client with a worksheet for them to provide the year end totals for income and expenses. They are required to be able to document their figures if audited, not me.

Like your ideas here taxea -- but a question for all you guys. Say that this worksheet, completed by clients and not accompanied by receipts, doesn't pass your gut check. Do you then request backup documentation?

I ask because here's what I had. List compiled by client on business mileage (outside sales), employee business expenses, cash & non-cash charitable donations and rental property expenses. Lots of categories, very large numbers, all ending in two or even three zereos. My due diligence radar prompted me to request mileage log & receipts. And I'm not one to "audit" clients, but do make them aware of substantiation requirements.

He could only produce a recently constructed but quite passable mileage log. I had the 1098 for rental mortgage interest, real estate taxes & property insurance, so those & employee miles were the only expenses I felt able to deduct. I had a feeling he couldn't document all these very large expenses, and he couldn't. What do you guys do? I was really ready to just chuck the guy, but figured I'd give him some measure of benefit of the doubt by at least asking for the documentation. Threw him for a loop, but whatever!

[ChEAr$]

copies

I don't keep copies of any client documents, unless it's a 1099r or W2 on which there is
federal tax withholding, since this is part of my "contract" to be an ERO.

It's client's responsibility to maintain documentation. I won't do it for him.
Heck, I don't even print out a copy of the return for my files, since it's on computer and
properly backed up.

[joanmcq]

I do the 'stack with tape' as well. For one guy, that's his bookkeeping method and I'm fine with it. Except he does the tape as well. If there is something I want to take a closer look at, its there. He even does a mileage log, bless his heart. And since his van is 100% biz (non personal use vehicle, a carpet cleaning van) he really doesn't need to. But if he's audited, I know he's got the stuff. I've even recommended his method for other accounting challenged business owners!