Q. What does the IRS mean by contemporaneous record keeping? How do you do that?
A. Strictly speaking, it means keeping your records as they occur. This is a requirement pertaining especially to business travel & entertainment. Due to the abuses in this area, the IRS expects taxpayers to keep records of the date, who they saw, the business purpose, topics discussed etc., on the day the business travel or entertainment expense happens. In the past I advised my clients to keep a little pocket calendar along with a pen or pencil in the glove box in their car. This way they could easily jot down odometer readings for travel and make notes of any entertainment expenses. In our digital world today, many people record their expenses on laptop computers, tablets, etc. This begs the question: How do you prove it was recorded contemporaneously? I don't have an answer for that. None of my clients have been audited recently. If any of you have experience in this area, please let me know what standards the IRS required along with the outcome.