The year-end is over, but you are most likely still closing out your books for the corporate income tax
return and finalizing financial statements for the year. Accountants enjoy these details, accounting stuff
and making sure that the books and records are nice and tidy. The resulting neat and completed year-
end package is the pretty curb appeal but requires a lot of foundation building and organizing sourced
documents. Below is a review of a few of the important year-end topics to help you with the final
preparation of 2018 financial records.
Preparing for Annual Income Tax Return
To close out the year and prepare for the annual tax filing, you should organize accounting records to
provide to your tax preparer. These documents will be used to prepare the return and ultimately
substantiate income reported, deductions taken, etc. on the returns. Reports from the accounting
software are part of this support but are not the exclusive supporting records. Other accounting records
typically used include:
Payroll tax filings (941’s, 940, W-3)
Inventory valuation calculations
Sales tax filings
Organizational documents (operating agreements, ownership percentages.)
In the event of an IRS audit the business will need paper or digital records to substantiate the reported
figures claimed on the tax filing form. Retaining receipts is very important to support business expenses,
especially if the transaction was conducted using a credit card. The credit card statement itself will not
provide adequate support.
Keep a business mileage log. If you are using personal vehicles for business purposes this log will
provide the basic support needed for the deduction. This log should include:
Beginning and ending year odometer reading
Beginning and ending odometer reading for each business trip
Date of business travel
Description of where you went for business
By keeping an accurate mileage log you are entitled to a deduction for those miles.
Taxpayers may qualify to use the optional annual issued standard mileage rates for calculating
deductible cost of operating an automobile for business, charitable, medical or moving expense
purposes. The 2018 standard business mileage rate is adjusted to 54.5 cents per mile. Unreimbursed
employee travel expenses which are reported as a miscellaneous itemized deduction are suspended for
taxable years beginning after December 31, 2017, and before January 1, 2026. The deduction for
moving expenses are also suspended for the same taxable years. Activity duty members of the armed
forces of the United States may qualify for an 18 cents per mile deduction.
A taxpayer may also elect to calculate the auto deduction using the actual expenses. Adequate records
will need to be maintained as documentary evidence to support the expenses claimed. The mileage log
will still be needed which will also assist with allocating these expenses to the business usage.
Client and Prospect Business Meal Deductions
As of the date this article is prepared, the IRS has not issued proposed regulations on business meals
deductions under the Tax Cuts and Jobs Act nor have they listed any new or changed standards. The
proposed regulations should provide details for what records will be needed for providing support.
Meanwhile documentation should provide proof of payment and occurrence.
Maintain receipts to support business meals and entertainment expenses. These receipts should
Name of the restaurant (location)
Who was in attendance
Business purpose of the meal (ex. Lunch meeting to discuss timeline of tax preparation, etc.)
Often business expenses are overlooked when they are paid from personal funds. To help prevent this
oversite, use one credit card exclusively for business purposes which will also support proof of payment.
You may deduct 50 percent of your client and prospect business meals if the expense is:
Ordinary and necessary expense incurred during the taxable year in carrying on any trade or
Not lavish or extravagant under the circumstances
The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or
The food or beverages are provided to a current or potential business customer, client,
consultant, or similar business contact
In the case of food and beverages provided during or at an entertainment activity, the food and
beverages are purchased separately from the entertainment, or the cost of the food and
beverages are stated separately from the cost of the entertainment on one or more bills,
invoices or receipts
Hopefully, these topics will assist you prepare for your 2018 income tax returns and be audit ready of if