Do I need to keep receipts for my business?

Yes, for most expenses. A bank statement shows you paid, not what you bought. Travel, gift and car costs have their own rules, with a $75 line.

A receipt is a paper or email from a seller that shows what you bought, when, and for how much. An invoice from a supplier does the same job.

Your bank statement shows that you paid someone. It does not show what you bought or why. For most business expenses, the IRS wants proof of both. So yes, you need to keep receipts.

The short version

A bank or card statement can prove payment (IRS, Publication 583).
Payment alone does not prove you can deduct the cost. Keep receipts or invoices too.
Travel, gift and car expenses have stricter rules. You need a written record for each one (IRS, Publication 463).
For those, you can skip the receipt if the cost is less than $75. Lodging always needs a receipt.
Scans and photos are fine if they are complete and easy to read.

Words to know

Deduct: take a business cost off your income so you pay less tax. See what counts as a business expense.
Proof of payment: a record that money left your account, such as a statement line.
Documentary evidence: a receipt, bill or canceled check that shows the amount, date, place and kind of expense.
Business purpose: the reason the cost was for your business.

What a statement proves

The IRS accepts a bank or card statement as proof of payment if it shows the right details (IRS):

If you paid by	The statement must show
Check	Check number, amount, payee and the date it posted
Electronic transfer	Amount, payee and the date it posted
Credit card	Amount, payee and the date of the charge

But the IRS also says: “Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction.” It tells you to keep slips and invoices too (IRS).

A card line that says “COSTCO $212.48” can be business supplies or groceries. The receipt shows which.

Travel, gifts and car costs

For gifts, see how the business gift deduction works. These costs are easy to mix with personal life, so the rules are stricter (IRS, Publication 463).

You need a written record of each expense: the amount, the time and place, and the business purpose. A record on a computer is fine.
You cannot deduct amounts that you estimate.
You also need documentary evidence, such as a receipt. It should show the amount, date, place and kind of expense.

There are exceptions to the receipt rule. You do not need one if the expense, other than lodging, is less than $75. You also do not need one for a transportation cost when a receipt is not easy to get.

Two points are easy to miss:

Under $75, you skip only the receipt. You still need the written record.
The $75 rule is only for travel, gifts and car costs. For supplies and other normal costs, keep the receipt.

Digital copies

You do not have to keep paper. The IRS says the rules for paper records also apply to electronic records. Your copies must be complete, accurate and easy to read (IRS). In practice: take a clear photo, file it by date, and back it up, as part of a simple routine to track business expenses for taxes. Thermal paper fades, so photograph those receipts soon.

An example

Sam runs a mobile dog grooming business from a van. (Sam is an example, not a real person.) This year Sam went to a two-day trade show.

A $14 lunch on the trip: no receipt needed, but Sam notes the cost, date, place and the trip’s purpose.
A $65 motel: Sam keeps the receipt. It is lodging, so the $75 rule does not apply.
$180 show entry fee: Sam keeps the emailed receipt.
$212 of shampoo and towels: Sam keeps the store receipt, because the card line does not show what was bought.
The van: Sam keeps a mileage log with the date, place, purpose and miles of each trip.

A Righto tip

Receipts prove what you bought. Your books show the full year. Righto is a free accounting app for Mac. You can import your bank statement as CSV, OFX or PDF and give each line a category. Then the Profit and Loss report shows your expenses by category, and you know which receipts each total needs. See how to categorize bank transactions.

Common questions

Is a credit card statement enough proof? It proves you paid. It does not show what you bought, so keep the receipt or invoice too.

Do I need receipts for expenses under $75? For travel, gift and car costs other than lodging, no. You still need a written record. For other costs, keep the receipt.

How long do I keep receipts? Usually 3 years after you file the return. Some cases need longer. See how long to keep business records.

What to do now

Pick one place for receipts, such as a folder for each year and month.
Photograph paper receipts on the day you get them.
For each business meal, gift or trip, write one line about the business purpose that day.
Save emailed invoices in the same folder.
Keep a mileage log if you drive for business. The mileage deduction calculator shows what those miles are worth.

Righto is free, easy to use and needs no account.

Sources

Righto gives general information, not tax or legal advice. Ask a tax professional about your business.