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Definitions: Expense, Account, Category, Business Purpose

Summary:

Account - sources of money (including your pocket of cash).
Category - Grouping of similar expenses (used for ease in identifying numerous individual types of expenses).
Description - detailed explanation of the activity performed to validate it as a "deductible" expense.

More detailed explanation:
ACCOUNT:

An account is a source of money (including your pocket that has cash in it) ... so an account is cash, a bank, a debit card, or a credit card. It is a place that records the original transaction (like eating at a restaurant, filling the car with gas, etc).

CATEGORY:

A category in deductr is a list of various types of expenses that are similar. Within each category are popups of the individual expenses that you identify on your tax return. On the tax return, there are 30+ types of expenses that can be used as deductions. Rather than having you scroll down the list of 30 each time, we created 6 broad "categories" to make it easier for you to identify first the broad category, and then the actual expense category.

Business Purpose:

The IRS requires at least 4 pieces of information for each deduction. The first three are found on the receipt; date, payee, and amount. The 4th is a description of the business purpose for the expense.

Therefore the “Business Purpose” outlines the details of the expense (such as "lunch with Jennie to discuss the mlm opportunity"). All those "descriptions" are included as line entries in the Tax Report. This is why this report is such a valuable tool for a tax preparer/accountant to determine if a particular expense is a valid business expense.

Even for an "Owner draw," it might be a good idea, for your personal information, to include a description of what the draw was used for.

Consult your tax professional to see if this fits your circumstances. This is not to be taken as tax advice. Please refer to our End User License Agreement.

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