It's not what you know, it's what you can prove

Paraphrasing this line spoken by Denzel Washington in the film Training Day, we are struck by how it can apply to many aspects of life and, more specifically, to accounting and tax matters.

There are many cases in which a taxpayer has incurred an expense but lacks the supporting documentation required for it to be properly deductible. Having every expense properly documented is the best tool for being able to apply the relevant accounting and tax rules in each case, in full and without any fear.

The hectic lives we lead often make this task of organizing, documenting, and safekeeping more difficult. Often we even think that we will never need to substantiate a particular expense, and we do not give it the importance it deserves. However, this small effort will undoubtedly help us in the future. It is not necessary to carry on a business activity or to be a businessperson; this applies to any ordinary citizen. After all, we are all taxpayers.

A fairly common example would be the purchase of a home, which involves a series of associated expenses. Years later, we may even invest money in some improvement or extension. Our excitement is focused solely on our home, where we are going to live for many years, and we attach no importance to requesting and keeping supporting documentation for the expenses we have incurred. Years later, our circumstances change and we decide to sell the home. At that point, taxes come into play: Will I have to pay tax on the sale? How much? Many years have gone by, and we remember all the expenses we had; we also have an idea of the total amount, but for some we never asked for supporting documentation, and for others we do not know where it is… The capital gain or capital loss to be reported in our Personal Income Tax (IRPF) return will be calculated on the basis of the expenses we can document, which will not necessarily match those we actually incurred, because it's not what you know, it's what you can prove.