The February Filter: Will This Still Make Sense When the IRS Looks Back?

February is when my most prepared clients ask a question that sounds simple—but it changes how they make every money decision: “Will this still make sense when the IRS looks back?”

Because here’s what many business owners think they’re optimizing for: “I want the biggest deduction possible.”

And sure—everybody wants to keep more of what they earn. But the real win (the calm, confident win) is this: Can we defend the deduction if it’s reviewed later?

That one shift turns tax season from “let’s hope this works” into small business tax planning that feels clean, intentional, and sustainable.

Why this question matters more than chasing the biggest deduction?

An IRS audit is, at its core, a review of your books, accounts, and financial records to verify what was reported and whether it follows tax law.

That means the IRS isn’t auditing your intentions.
They’re reviewing your evidence.

And the IRS is direct about recordkeeping: you must keep records long enough to prove the income and deductions on a return.

So, the February filter becomes less about fear—and more about clarity:

• Is the expense legitimate?
• Is it documented?
• Will it still be understandable years from now?

IRS recordkeeping requirements: what “proof” really looks like:

The IRS doesn’t require one “perfect” system for everyone. You can choose a method that fits your business—as long as it clearly shows income and expenses.

But there’s a key concept business owners often miss: The burden of proof is on the taxpayer.
In other words, you’re expected to be able to substantiate the deductions and statements on your return. That’s where business expense documentation stops being a boring admin task and becomes a business asset.

The “3-year” idea is real—but the full rule is smarter than most people think: Most people hear “keep records for 3 years” and stop there.

The IRS guidance is more nuanced:

• In many cases, you should keep records for 3 years.
• The IRS also notes that, generally, returns from the last three years may be included in an audit—and if there’s a substantial issue, they may go back further (often not more than six years).
• Some situations call for longer retention:
  • 6 years if you omitted more than 25% of gross income reported on the return.
  • 7 years for certain claims like a loss from worthless securities or bad debt deduction.
  • Indefinitely if you don’t file a return or file a fraudulent return.
  • Employment tax records should generally be kept at least 4 years after the tax is due or paid (whichever is later).

This is exactly why the February filter is so helpful: it trains you to ask, “If I had to explain this later, could I?” The February filter for tax deductions for small business owners.

Here’s the simple framework I use when reviewing tax deductions for small business clients:

1) If we can’t back it up with records, we don’t claim it

For certain categories—especially travel, meals, gifts, and vehicle expenses—the IRS expects specific elements to be substantiated. Publication 463 explains that you must be able to prove key elements, and that you can’t deduct “estimated” or “approximate” amounts.

A practical way to think about it:

If the receipt (plus your notes) can’t tell the story, the deduction is fragile.

2) If it will create a mess later, fix it now (while it’s still cheap)

This is the part most people underestimate.

Fixing documentation now often takes minutes.
Fixing it two or three years later takes:

• searching old inboxes,
• reconstructing calendars,
• guessing “what that dinner was for,”
• and hoping the details match your memory.

The IRS specifically emphasizes the value of timely kept records—records created at or near the time of the expense carry more weight than something recreated much later.

3) For travel/auto-type expenses, treat logs like a “profit-protection habit”

Publication 463 doesn’t just say “keep receipts.” It describes keeping records in tools like an account book, diary, or log, supported by documentary evidence like receipts or bills.

A weekly mileage log can qualify as “timely” if it accounts for that week’s use.
This is one of the simplest habits that strengthens your position if your return is ever examined.

A light, real-world documentation checklist:

If you want an easy standard for your IRS recordkeeping requirements, aim to capture these details for each deduction category:

• Amount (what you paid)
• Date (when it happened)
• Vendor/place (who you paid)
• Business purpose (one sentence: “why this was necessary/ordinary for the business”)
• Proof (receipt, invoice, confirmation, or other documentary evidence)

This isn’t about creating paperwork.
It’s about making your records so clear that future-you (or an auditor) doesn’t need “context” to understand what happened.

The takeaway

The best tax outcome isn’t just “largest deduction today.”
It’s a deduction that still makes sense later—because it’s supported, clean, and easy to explain.

And that’s what strong small business tax planning looks like in real life.

If you fast-forward three years and imagine an IRS audit reviewer reading your receipts with zero context…

Which decision you’re considering this month would you feel most confident explaining—and which one would you want to clean up before it becomes a problem? not tax advice.

Important Notice

This article is intended for general informational purposes only. Nothing in this article is intended to constitute legal, tax, or accounting advice, nor should it be relied upon as such. Tax outcomes depend on individual facts, filing status, and tax year. Consider consulting a qualified tax professional. Readers should consult with their own professional advisors before taking any action based on the information discussed here.