IRS Requirements for Receipts

Receipts can protect you from a huge bill if you're audited.

Receipts can protect you from a huge bill if you're audited.

The Internal Revenue Service doesn't make taxpayers go through the headache of attaching receipts to returns, but this doesn't mean you're home free if you keep poorly-organized records. You still need to hang on to your receipts in case you're audited. The IRS makes people prove every single deduction and credit in an audit. If you can't, you could be slapped with a massive tax bill as well as penalties and interest.

Documentary Evidence

The IRS requires taxpayers keep "documentary evidence" of most expenses. Documentary evidence is tangible, written proof you actually had an expense. Receipts, canceled checks, bank statements or bills are generally fine, but an estimate of an expense won't cut it. The IRS wants taxpayers to prove the exact amount they spent. If you do most of your shopping online, you'll probably be home-free because you'll have receipts in your email.

Other Evidence

If your expense is less than $75, you don't need a receipt. If you deduct driving and other transportation expenses, you can keep a mileage log instead of providing receipts. For example, if you fill up your car and then use half of the tank to drive to meet clients, you wouldn't be able to verify this with a receipt and could instead use a log. Finally, you or your employer don't have to show receipts if you use per diems, but you do have to show a log or some other proof of the expense.

Precise Accounting

You're not allowed to estimate your expenses or to give a general ballpark figure of how much you think you can deduct. This is when you'll need your receipts. If you're audited, you'll have to show them. But even if you're not audited, your receipts can help remind you of your expenses, making it easier to get every possible deduction.

Record-Keeping

The IRS has three years to audit a normal return. If the IRS believes you under reported your income, or underpaid by more than 25 percent, it has six years. If you don't file, or the return was fraudulent, there's no time limit. To be completely safe, you should retain your receipts forever. If you can't hang on to receipts forever, keep them at least seven years.

About the Author

Van Thompson is an attorney and writer. A former martial arts instructor, he holds bachelor's degrees in music and computer science from Westchester University, and a juris doctor from Georgia State University. He is the recipient of numerous writing awards, including a 2009 CALI Legal Writing Award.

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