Use Tax Audits (Rebecca Schmidt)

June 15, 2014

We recently represented two business clients in audits; one an IRS audit and the other a Virginia Use Tax audit. Through the course of the audits, we discovered that neither client had retained receipts for business expenses processed by credit cards. They believed that the expense appearing on the monthly credit card statement was sufficient documentation. It is NOT!


If you are audited, you are required to show that a tax deduction is 1) an ordinary and necessary business expense, which means having a receipt showing what was purchased and 2) proof of payment, which is a cancelled check or other charge against the business cash account. A paid monthly credit card statement does not meet this compliance and is not by itself sufficient documentation for a business expense deduction. You must have the receipt the same as you would have to support a check written.


Please visit our website and click on Helpful Links in the Tools and Resources section to read the Documentation of Business Expenses client letter. Please review the letter and feel free to give us a call to personally discuss the implications to your business.

The commonwealth of Virginia has found a goldmine in performing Use Tax audits so please be sure to read the client letter and alert us if use tax filings need to be prepared for your business.

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