The law requires businesses to keep books and records of income and expenses. And to take deductions and other tax breaks, you need to meet certain substantiation requirements. Fortunately, there are ways to do what’s required with minimal effort. Here are 7 ideas to help you with the records you need for income tax purposes.
7 ideas include:
1. Use software to auto-pull transactions
Most of your expenses are paid through credit cards, electronic payments (e.g., PayPal), and bank checks. You can have your accounting software connect to the financial institutions to feed transactions automatically into books. QuickBooks, FreshBooks, Wave, and Xero can handle auto-pull. All you need to do is set up categories into which your expenses are fed. For example, a charge from Staples would go into an account for office supplies.
2. Digitize receipts
Receipts and invoices are required to back up certain deductible items. When you obtain paper receipts, you can take a photo at the point of sale and attach it to the transaction.
You can also use apps, such as a special QuickBooks app, Expensify, and Shoeboxed, that capture and organize receipts. These apps aren’t free, but the cost (which is deductible) can save considerable time.
3. Use the standard mileage rate to avoid receipts
If you use your personal vehicle for business driving and are self-employed, you can deduct this cost as a business expense. There are 2 days to deduct the cost of business driving: the actual expense method or the IRS standard mileage rate. Either can be used, regardless of whether you own or lease the vehicle. This rate takes the place of deducting gasoline, repairs, car washes, and more. For 2026, the rate is 72.5¢ per mile. Parking and tolls are separately deductible.
There are certain conditions for using the standard mileage rate, so check if you are eligible before you discard receipts for car expenses.
4. Use an app for tracking mileage
Whether you use the actual expense method or the IRS standard mileage rate for purposes of the cost of business driving, you must maintain a record of business mileage. This includes the date of each trip, the specific location (the name or address of the destination), the reason for the trip (e.g., to meet with a prospective customer), and the odometer reading (the miles for each trip). You can simplify the mileage log requirement by using a mileage app. QuickBooks has its own mileage app, and there are others (e.g., MileIQ; Cardata). Again, check the cost. And note that you’ll still need to add the purpose of the trips; the app doesn’t know this automatically.
5. Use sampling to avoid logging business mileage
You know you need to track business mileage to deduct the cost of business driving. But the chore can be lessened with an IRS-created shortcut: sampling. You keep an adequate record for parts of a tax year and use that record to prove the amount of business use for the entire year. Sampling allows you to extrapolate business use from a sample period, such as the first week of every month or 3 full months, provided you can show by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year.
The IRS offers this example: You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. There is no other business use of the car, but you and your family use the car for personal purposes. You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Your weekly records are representative of the use of the car each month and are sufficient evidence to support the percentage of business use for the year.
6. Use per diem rates to account for travel costs
Usually, you need receipts and other records to substantiate the cost of business travel, including lodging, meals, and incidental expenses. But you can substantiate the cost by relying on a government-set per diem rate. The rates are fixed annually on the government’s fiscal year starting October 1:
The per diem rates only substantiate cost. You still need records of time, place, and business purpose of each trip.
7. Use a de minimis rule for certain equipment purchases
When your business buys machinery and equipment, you can write-off the cost using a variety of options. The basic method is depreciation, which requires tracking of this expenditure throughout the years. Other options include first-year expensing (the Section 179 deduction) and bonus depreciation, assuming eligibility for these options. But handling write-offs for certain equipment purchases can be simplified by using an IRS-created de minimis rule. This means a full deduction of up to $2,500 per item or invoice for tools, laptops, and other equipment below this cost threshold. The write-off is treated as deduction for materials and supplies, and the items aren’t added to the balance sheet.
More details about this de minimis safe harbor election on in IRS FAQs.
Final thought
The value of good recordkeeping goes way beyond taxes. It enables you to know how your business is doing (profit or loss) and to prepare financial statements that may be needed for loans. But whether you handle recordkeeping yourself, use a bookkeeper, or rely on a tax professional, recordkeeping can be onerous. The best way to handle recordkeeping for taxes is to set policies that you and your staff can easily follow…on a daily, weekly, and/or monthly basis.
And check out IRS resources on recordkeeping, including Publication 463 and Publication 583 (while these publications haven’t yet been updated to change numbers, the recordkeeping concepts are unchanged).
Additional information about managing business expenses can be found in this list of blogs.
