What is Substantiation?
Substantiation is the IRS requirement that taxpayers maintain adequate records to prove the validity of claimed business expenses and deductions. Proper substantiation requires documenting the amount, date, place, and business purpose of each expense, supported by receipts, invoices, or other documentary evidence. For Meals deductions, substantiation must include the names and business relationships of attendees and the specific business topics discussed. Without proper substantiation, the IRS may disallow claimed deductions during audits, resulting in additional taxes, penalties, and interest charges on previously asserted benefits.
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