One of the easiest ways for taxpayers to lose an audit with the
IRS is to fail to substantiate their expenses or time. You may have
closely followed the arcane and often confusing tax laws, but
failing to keep adequate records of your time spent on an activity,
receipts detailing your expenses or logs describing the type of
work you did or the places you traveled can easily cost you the tax
benefits to which you’re entitled.
This is especially important for taxpayers who own and operate
their own businesses. The IRS requires expenses incurred by an
employee or business owner to be documented through “adequate
records” when those expenses are incurred. At the same time,
a taxpayer must prove that he or she is actually participating in a
trade or business by keeping adequate records that reflect the time
spent working in that trade or business. Those records must show
the amount, the time and place, and the business purpose of the
expense, or in the case of someone
