If I own business and one of my primary supplier only accepts cash and doesn’t give receipts, how do I go about claiming the expenses on my taxes since I have no proof?

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If I own business and one of my primary supplier only accepts cash and doesn’t give receipts, how do I go about claiming the expenses on my taxes since I have no proof?

I’m pretty sure he’s avoiding taxes himself. Unfortunately, we’re pretty dependent on this guys product right now and cannot shop elsewhere.

Asked on October 14, 2016 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

Claiming the expenses and proving them later IF audited are two different things. You can claim them just by claiming them on your tax return--you don't submit proof with the return, after all. You only need it if audited.
If later challenged or audited, then the issue is, how do you prove them. Keep copies of all your orders (submit the orders in writing, even if only by text or email which you later print out--even if you initially order orally, confirm with a text or email); keep any proof of delivery of product (e.g. shipping labels, delivery confirmations, etc.); and when you take out cash to pay, take out specifically for that order, in the exact amount, so withdrawals of that amount appear on your bank statement. When you sell the goods, keep of record of their sale. Try to create a consistent tapestry of documentation showing you ordered $X of goods; receiving goods; paid $X out; selling the goods (which backs up having ordered them in the first place--can't sell what you don't have).


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