Today I wanted to help you understand the miscellaneous category, so that you don’t land yourself in hot water with the bullies at the IRS.
There is a weird category we see a lot from our clients that I wanted to go over with you today.
First, I want you to think about your ledger from the eyes of an IRS auditor… If your company is ever audited, the auditor is going to want to go over your profit and loss statement or they are going to look at what is labeled as “expenses” on your tax return.
If they see anything on your statements that is marked as “other”, or even worse “miscellaneous”, what they are going to think is “They are claiming this is a business expense but they can’t even tell me what category it should go into? I don’t think so.”
From there, they are going to go over those expenses with a fine tooth comb and find ANY reason they can not to allow those deductions. (Trust me, they take great pleasure in finding things to say no to…)
It’s for that reason, we recommend avoiding this category completely. If you need a catch-all category, a better one is “office expenses”, but the BEST IDEA would be to create new specific categories for those expenses.
Now, I am not saying have 100 different categories, that is way too much. Just avoid using other or miscellaneous or anything that looks like you just lumped a bunch of things together.
The IRS will have a field day with that, save yourself the headache!
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