Ask an Accountant: “When am I supposed to keep business receipts and when can I get away without them?”
by Blake Oliver of Cloudsourced Accounting
Unfortunately, in many cases you need to hold on to business-related receipts. In addition to basic recordkeeping, the IRS usually requires supporting documentation for deductible expenses, such as receipts, account statements, canceled checks, and petty cash slips. In a world that seems to be going paperless, this might seem unreasonable, and luckily there are a few exceptions.
IRS Publication 463 allows you to ditch the receipt for entertainment, gifts, and travel expenses if either of the following situations apply:
- The expense, with the exception of lodging, is less than $75.
- You have a transportation expense for which a receipt is not readily available.
While you do not need to hold on to those receipts, you do need to keep a written or electronic log of the expenses. A simple spreadsheet will do the job perfectly. Make sure to include:
- the amount of the expense
- date the expense was incurred
- a description of the expense
- the business purpose or use of the expense
Paper records are not as important as they once were, and as long as your electronic storage system is within compliance, the IRS will accept electronic records. Electronic storage systems are subject to the same controls and guidelines as those imposed on paper records. According to IRS Publication 583, “the electronic storage system must, index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format”. With Abacus, your receipts and documents are stored in an electronic system that is compliant with IRS guidelines. You have the option to print copies of receipts or expenses at any time, and Abacus recently released a PDF export. All you have to do is set the search parameters to your specifications and Abacus generates a document listing all the expenses. Even the receipt images are included!
With Abacus, it’s easier than ever to maintain an expense log. Simply snap a picture with your smartphone, add the dollar amount, date, name of merchant, and the business purpose/use and save. Most business owners dread receiving an audit notice. Luckily for Abacus users, it’s a cinch to prepare all the information for the audit just by hitting print.
‘Ask an Accountant’ is a recurring Q&A series on the Abacus blog where we take questions from you and get real world professionals to deliver clear and concise answers. Have a question you want answered? Drop us a line at firstname.lastname@example.org