What is the primary reason for documenting business expenses?

The primary reason for documenting business expenses is to justify those expenses if audited. Proper documentation provides the necessary evidence that the expenses were incurred and are legitimate. During an audit, tax authorities require taxpayers to substantiate their claims for deductions. This documentation includes receipts, invoices, bank statements, and other relevant records. By maintaining detailed and organized records of business expenses, individuals can demonstrate compliance with tax regulations and ensure that they are correctly reporting their income and expenses.

While impressing tax professionals, avoiding tax returns, or record-keeping alone have their merits, they do not encapsulate the fundamental necessity for maintaining accurate business expense documentation, which is primarily to support claims during audits.