For each business expense, the IRS wants you to document:
The amount
The place
The date
The “character” (category) of the expense
If you're ever audited, you may be asked to provide proof of your expenses. Things like store receipts, canceled checks, and bill copies are all sufficient. Tax experts say physical or digital receipts are acceptable, so you can choose whichever method works best for you. For digital receipts, the IRS has minimum requirements. Receipts must be:
Accurate
Readily stored
Preserved
Retrieved
Reproduced for the IRS when necessary
When you don’t need documentation
The IRS has exceptions for requiring receipts in specific categories: travel, gift, entertainment, and car expenses. These exceptions are detailed in IRS Publication 463 and are:
You have an expense, other than a lodging expense, less than $75 dollars. (You’ll need documentation for all lodging you claim as a business travel expense.)
You have a transportation expense for which a receipt is not readily available.
You have a per diem allowance from your employer that includes meals or lodging. (Being self-employed, you can use in lieu of an employer.)
Examples of these exceptions might be:
Bridge and roadway tolls.
A taxi, Uber, Lyft, or other rideshare charge.
Tips for helpful hotel staff.
A $40 happy hour charge with a potential client. (Although you might not need the actual receipt, you will need to document the client and the business purpose of the meeting.)
A $25 box of donuts you deliver as a gift to your accountant for recommending QuickBooks Self-Employed to you.
Ditch the shoebox
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