IRS Receipt Requirements When You're Self-Employed

Paying attention to the IRS receipt requirements for your small business makes it easy to track your expenses when it comes time to file taxes. Plus, your records will be organized and complete in case you ever get audited. Keep reading to find out the kind of receipts you need to have on hand and for how long.

IRS receipt requirements

The IRS guidelines for receipts apply to any transaction you want to claim as a business deduction on your taxes. Your receipts provide proof that you spent a specific amount of money on a business-related expense.

Here’s what information needs to be visible in order to meet the IRS itemized receipt requirements:

• Payee
• Amount paid
• Proof of payment
• Date incurred
• Item description

Keeping records of all these details is especially important for large purchases. If you’re ever audited and need to explain your purchases, a receipt is helpful to have on hand to show proof of the transaction.

Other eligible documentation includes canceled checks or proof of electronic funds transfer, cash register tape receipts, credit card receipts or statements, and invoices.

In addition to tracking receipts for your expenses, you should also keep records of your gross receipts (which show your income) and any charitable contributions you can deduct. However, the IRS charitable donation receipt requirements only apply if you itemize deductions on your individual tax return.

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IRS requirements for receipts under $75

One common tax-related myth is that no IRS receipt requirements exist for purchases under $75. Unfortunately, this is not true. It stems from an IRS rule that applies to employers who reimburse employees for work-related travel expenses. In this scenario, employees don’t need to submit paper expense reports and reports for travel expenses that are $75 or less.

But if you have a small business, you must keep receipts for all business expenses that you want to claim as a tax deduction, no matter how large or small.

IRS meal receipt requirements

In some instances, you may be able to deduct meal and entertainment costs, but only if they directly relate to your business. According to the IRS, meal receipt requirements include entertaining clients, customers, or employees at any type of recreation, amusement, or entertainment venue. 

However, whether or not the meal itself is deductible depends on whether the expense is directly related or associated. If there’s no correlation between the event or meal and any kind of business activity, it can’t be deducted, and you don’t need to keep a receipt.

How long you need to keep receipts

In most cases, you need to keep business receipts for each tax year for three years from the date you file. However, the IRS requirements for expense receipt record keeping change if certain situations apply.

How to organize your receipts

All of the IRS business expense receipt requirements are the same whether you opt for paper or digital copies. It’s perfectly acceptable if you prefer to scan copies or import digital documents from your online records. The IRS just states that your electronic storage system indexes and stores your copies in a legible way. 

You can either create your own electronic filing system or use an app that tracks and stores receipts for you. There are no legal requirements to keep paper copies if you have a reliable electronic system in place.

What to do if you lose your receipts

If you happen to get audited and don’t have all of your receipts for business expenses, you may be able to recreate the information from additional sources. Other supporting documentation includes bank and credit card statements, canceled checks, deposit slips, invoices, emails, and paid bill statements.

Another option is to request a receipt from a vendor, even after the fact. For extra flexibility, the Cohan rule provides some leeway by allowing reasonable estimates for some expenses if you don’t have an actual receipt during an audit.

Finally, remember that in the eyes of the IRS, you’re ultimately responsible for keeping records on hand for the correct amount of time. Understanding the IRS requirements for expense receipts makes tax season much less stressful. It also ensures you can confidently take the maximum amount of deductions for your small business.