If you have ever been audited, you know that according to the IRS, you can’t deduct amounts that you approximate or estimate.
Record keeping is key. But it doesn't have to be painful.
Records and Receipts
You are required to keep adequate records to prove your expenses or have sufficient evidence that will support your own statement.
You must generally prepare a written (or digital) record for it to be considered adequate.
What Are Adequate Records?
You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. (Or use a mileage tracking app, also included on our mobile app.)
You should also keep documentary evidence that, together with your record, will support each element of an expense.
You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses.
Exception. Documentary evidence isn’t needed if any of the following conditions apply:
You have meals or lodging expenses while traveling away from home for which you account to your employer (subject to accountability requirements from the employer.)
Your expense, other than lodging, is less than $75.
You have a transportation expense for which a receipt isn’t readily available.
What information should you keep?
Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense.
For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information.
The name and location of the hotel.
The dates you stayed there.
Separate amounts for charges such as lodging, meals, and telephone calls.
A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information.
The name and location of the restaurant.
The number of people served.
The date and amount of the expense.
If a charge is made for items other than food and beverages, the receipt must show that this is the case.