Substantiating business expenses: A primer

Description

Abstract: Businesses can generally deduct their “ordinary and necessary” business expenses. But even a legitimate expense isn’t deductible unless it’s adequately substantiated. This article explains that, typically, substantiation requires proof of payment and evidence showing the character and deductibility of the expenditure. It notes, though, that if a business is unable to fully substantiate an expense, the courts have some leeway to approximate deduction amounts, provided the business presents sufficient evidence to support an estimate.