Can I use check copies & credit card statements for expenses?

Question

I'm living in a tri-plex house hack. Renting out 2 units and living in one. This is currently the only property I own. I've had work done on the building itself (roof repairs) and remodeling work in one of my previously vacant units last year. My biggest expenses were for contractor work (totaled around $8000 last year). And supplies from Home Depot.

In the event that I'm audited, would my credit card statements and copies of the checks I wrote to the contractors be enough to support my expense claims? Some of the contractors wrote me receipts, so I have those on hand. But some others did not but I did write them a check, so I have the records of those on hand. And the same goes for Home Depot purchases for supplies. I have the credit card statements but not the receipts. In a pinch, I could go to Home Depot and have them print up all of the receipts I need since all of the purchases were made on 1 credit card.

In the future, I plan to keep record of all receipts and require receipts from all contractors. And file them using some tax software.

Natalie Kolodij · Answer

@Steven Hamilton II would be a good resource for you- He's an EA based in Chicago who does a lot of audit defense and he's close by.

You'll want to keep records for potential audit but also find a system (spreadsheet, software, ect) that works for you for tax purposes.

A house hack is actually more complex for tax reporting than a buying a full rental since you've got some allocations related to the expenses between business and personal.

Steven Hamilton II · Answer

There are some items that can be proven via statements; however, for many such as a rehab you will want your detailed receipts. There is also a thing called and NRP Audit. Where they will specifically be allowing items based upon receipts and documentation.

Steven Hamilton II · Answer

Actually that is not correct. You do need receipts. You have to prove what the expense was actually for. If you go to home depot and spend $500 on materials, but don't have the receipt, how would the IRS know you did not purchase a new grill or patio furniture for yourself. You as the taxpayer have the burden to prove you are entitled to deductions. There are some items that are reasonably assessed(insurance, RE Taxes) from what is provided; however, the general rule is to keep all of your receipts.

How do I know this? I typically represent anywhere from 25-50+ taxpayers in audit at any time. Most of them filed their own tax return or are referred to my firm.

Account Closed · Answer

Home Depot has a "Pro" account which is easy to sign up for and allows you to set up automatic email receipts to your chosen email address. Just set up an email for that purpose. When you purchase at Home Depot it asks for the job name so you can keep things sorted by project . I have three flips going right now and keeping the expenses separate is important to me.

Also, the IRS auditor loves to see organized and properly tallied lists. I have my staff sort all Home Depot, Lowes, and Ace receipts, along with USPS postage receipts and Staples and Office Max receipts into separate piles by store name. Then sort each pile by date and scan the receipts (because receipts fade over time). Receipts fit about 6 to a page. Then I make an excel spreadsheet listing store name, amount, date and project columns so I can sort them in any order I need and then tally the results. Then I have them print copies of the scans and spreadsheet and clip them together. Then I put them into a tax folder on my computer and print the spreadsheet & put the originals in my tax box sorted and clipped together by project. If the receipts have faded over time, I have the scanned sheets that are still readable.

I need all of this organized so I can track my costs, do tax planning and be prepared if an audit should be called.

It makes it very easy for the auditor to find what he is looking for, sees that I am organized and creates for a better visit for both of us. You don't want to annoy the auditor with a shoebox of receipts. That's when he wants a second and more detailed visit. Second visits are not in your favor.

Crystal Smith · Answer

My opinion: Yes. Your credit card statements and checks should be enough evidence for an audit. The real concern in the audit won't be the statements or checks but how what % of the expense you're applying as a business expense.

Dave Spooner · Answer

@Byron W. In the case of an audit, the IRS typically looks for two pieces of evidence supporting an expense:

• a receipt or invoice of the expense
• a check copy, cancelled check, credit card statement, etc. proving the payment

It's also useful to note that different types of expenses are often treated differently by the IRS. For example, the home office deduction and travel expenses are examined really carefully. You should treat all expenses seriously, but be particularly cautious in your record keeping for these.

If you're using rental management software, many of them allow you to upload copies of receipts when creating an expense, which makes record keeping really quite easy. I'd highly recommend using one of these to manage the triplex. There are plenty free platforms available.

Can I use check copies & credit card statements for expenses?

Can I use check copies & credit card statements for expenses?

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