Deductions can reduce your taxable income every year, especially if you run a small business or have a side gig as a freelancer. But tracking all those expenses as you go can be tricky. The good news is that if you use your credit card or order online, you'll have the paper trail you need to track and document those expenses.
Benefits of Using Order History
At tax time, the IRS allows you to claim deductions to reduce the amount of your annual earnings subject to income tax. Both individual and business deductions must be claimed on the appropriate forms, and you'll need to be able to back up those deductions with receipts in the event of an audit. In the past, you needed to save receipts to be able to prove the expense.
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In the digital era, though, you don't necessarily have to track everything throughout the year. Any purchase made using an electronic payment method, including online orders, creates a paper trail that can be used as documentation. The IRS will accept canceled checks, paper receipts, credit card receipts, credit card statements and invoices as proof of payment.
Consider also: A List of Tax Deductions for Police Officers
Exporting Your Banking History
The first place to look for your purchases is on your own bank account history. Whether you use your credit card or debit card to make the purchases, there should be a way to export a report. If you have a card from Visa®, MasterCard® or Discover® from a separate lender, you should be able to export your purchase history on those sites, as well.
Directions for exporting your history can vary by lender, so look at your bank's FAQ if you can't find it. With Chase Bank, for instance, you go to "Search Account Activity," input a timeframe and either print or download the results. For forms of payments like gift cards, you might have a tougher time getting a transaction history.
Exporting Your Amazon Order History
If you made online purchases in the tax year, chances are your Amazon order history will come in handy. You can get order details like shipment, return and refund activity. You can view individual purchases at any time under "Returns and Orders," but for taxes, you'll likely want to pull a report.
To pull a report of your Amazon order history, visit amazon.com/gp/b2b/reports. Check your order status as you're pulling the report. If there are items that haven't shipped yet, they might not show up in your report.
Exporting Your PayPal Account Information
Of all the payment options available, PayPal can be the easiest for tracking. Your PayPal report will include the order confirmation number, sales tax charged, shipping address, shipping charges and more.
To get this payment information, you'll simply go to "Activity" in your PayPal account, choose "Statements and Custom," select the information you want and choose "Download Report." You can export it in a variety of formats, including PDF and CSV.
Consider also: Guide to Home Office Deductions
Other Payment Information Sources
If you've checked various online accounts and can't find the information, your email might be the best source. Look for any order confirmation emails related to your purchases. That confirmation email will typically have the order number, price paid and items purchased, which will be sufficient for proving that you bought the item.
In some cases, you might be able to track the information using the packing slip that was attached to the packaging that the item arrived in. As a last resort, you could try contacting customer service and use the shipping information to request a purchase confirmation.
Whether you're deducting tax-exempt purchases, taking business deductions or itemizing your individual purchases, it's important to have documentation. Using credit card information, bank account reports and your emails, you can pull the paperwork you need to make sure you don't miss a single deduction.