When doing taxes do you have to prove how much how you make?

Question

I buy and sell stuff and im gonna have to pay taxes this year for the first time... i record all my expenses and such but i usually dont have proof for stuff i buy to sell thats less than 1k. This makes up like 40% of what i make. The other 60% i have purchase receipts and stuff...

Will this work out ok if i just tell the truth, like if they look at my bank records theyll see that it all adds up - or can i get in trouble for this or what?

Answer 1

Why don't you have documentation for purchases less than $1,000 which make up 40% of your sales? Yes you can get in trouble for not keeping records.

If you have no record of your purchase, the IRS may decide that all of the sales price is income and that you paid nothing for the item you are selling.

Even if you are telling the truth, without records you may end up paying more taxes than necessary.

Answer 2

You need receipts for everything. You should keep an accurate record of debits and credits. You must keep all information on all of your business transactions. You must always have receipts for everything. You can have petty cash but there is also a limit to that. Did you not take an accounting class, if not, sign up for one or get an accountant.

Answer 3

Your records will serve as proof of income. For expenses, if you don't have proof they can disallow it if you get audited, but if you have records that make sense, they'd probably work with you on it and allow at least some, maybe all, of the expenses.

Answer 4

Just keep good records of what you do. Regularity in what you can prove will set a pattern to show that you are accurate in what you can't prove.

Answer 5

time will tell you...
you don't need to prove any thing...
let them find their best how deep they can go...

Answer 6

Only if your audited.