Tracking Your Expenses To Pay Less Tax
It’s crucial for you to properly track your business expenses to ensure you do not have to pay Uncle Sam too much at tax time.
The IRS considers a business expense as any cost that is “ordinary and necessary” to operate your business (baseball). These expenses are tax-deductible (write-offs).
As you can imagine, claiming your business expenses as tax-deductions is not based on the “Honor System.” You must be able to prove that you incurred the claimed expenses in the event that the IRS examines your return.
Your best line of defense against an audit is to maintain good records to back up your business deductions. If you develop good record-keeping habits and follow them consistently, you will not only avoid trouble with Uncle Sam, but you will also save a ton of money on taxes by taking every deduction you can.
Tax Myth #1 – “My Credit Card Statements Are Enough”
This may be the biggest misconception about tracking business expenses. Your credit card statement only shows that you bought something; it does not show what you bought and why it is a business deduction. So, hang onto those receipts!
Tax Myth #2 – “My Accountant handles that tax stuff“
Your accountant’s ability to prepare your returns is only as good as your records. If your records are a mess, then your return will not capture everything properly or cost you a bundle, as your accountant tries to recreate your financial records for the last year.
Track Your Expenses Regularly
Record your business expenses as you make the purchases, rather than trying to figure out what you spent money on months later. When you miss a business expense, you are forcing yourself to pay more in taxes. As former players, we realize that this is time consuming and difficult to stay on top of throughout the year.
This is why we believe your financial team should be responsible for this. Utilizing our Athlete Wealth Plan Platform we automatically track every expense for our clients, ensuring they do not miss a single deduction. A dollar saved is a dollar earned.
If your financial team does not provide this service, we have provided you with the Athlete Wealth Expense Log Report to help you stay organized.
Do I Need To Keep My Receipts?
The short answer, yes. If you are going to tell the IRS something, you need to be ready to back it up. Here is a short list of important records to keep.
Pay your clubhouse dues with a check
Save all your receipts for the attached list of Unreimbursed Business Expenses
Save charitable contribution receipts
Maintain a mileage log to any baseball related activities during the off-season
You should keep important records for at least 3 years, because that’s how far back the IRS goes for normal audits.
There is no better time than now to save yourself money.
If you are interested in learning more about utilizing our FREE Athlete Wealth Plan Platform to automatically track every expense to ensure you do not miss a single deduction contact us to learn more.
