What documentation is legally doing
A deduction needs two things proven: that the expense happened (amount, date, payee) and that it was business (purpose). A bank or card statement proves the first; it cannot prove the second. 'AMZN Mktp $214' on a statement is an expense; the receipt showing it was a printer, not a PlayStation, is the deduction. That division of labor explains every rule below.
The $75 rule, and its limits
The IRS's documentary-evidence rule says receipts aren't required for most expenses under $75 (you still need the record, amount, date, place, purpose, which your categorized books provide). But the exceptions swallow much of the comfort:
- Lodging: receipt required regardless of amount, always
- Meals & travel: under $75 skips the receipt, never the purpose note, who, where, why is still required for meals, and it's the part people skip
- Anything a state or your industry regulates separately (fuel for IFTA, per-diem logs for drivers) has its own record rules that don't care about $75 ( Owner-Operator Tax Deductions: The Complete List )
Practical translation: automate receipt capture for everything and the threshold stops mattering, which is cheaper than remembering rules.
The always-keep list
- Equipment and assets (anything depreciated or Section 179'd): invoice + proof of payment, kept for the asset's life plus the statute period
- Vehicle records: purchase docs, and a mileage log if you claim mileage, the single most-requested item in small business audits
- Travel, lodging, meals: receipts + business purpose
- Insurance policies, loan agreements, leases, contracts
- Payroll everything: timesheets, W-4s, I-9s, filings (their own retention rules, generally 4+ years)
- Anything reimbursed to you personally by the business under an accountable plan
How long to keep it
The working rule is seven years, and here's the logic: the standard audit window is three years from filing, it stretches to six if income was understated by 25%+, and employment/asset records run their own clocks. Seven covers the realistic worst case; 'forever' applies only to asset records while owned, and to the returns themselves (keep every return permanently, they're one page of storage and irreplaceable).
The system that takes minutes a week
- Photograph at the counter: QuickBooks' receipt capture (or Dext and similar) attaches the image to the transaction, done forever, searchable, backed up
- Email receipts: forward to the capture address; a rule can automate the recurring ones
- Weekly, not quarterly: ninety seconds of matching while you remember what things were
- Paper originals can be tossed once digitized, the IRS accepts electronic records that are complete and legible (thermal receipts fade to blank anyway; the photo outlives the paper)
Attached-receipt books are also simply worth more: cleaner audits, faster loan diligence, and a bookkeeper who never has to ask what the Home Depot run was. It's part of the workflow we set up for every client. Bookkeeping Services for Small Businesses
Frequently asked questions
I lost receipts. Are those deductions dead?
Not automatically, reconstruction is allowed: statements, vendor reprints, calendars, photos, and reasonable testimony (the Cohan rule lets courts estimate ordinary expenses, meals-and-travel excluded). Weaker than a receipt, better than surrender. Going forward, capture beats reconstruct.
Are credit card statements alone ever enough?
For small, obviously-business recurring charges (software subscriptions in the business's name), you'll rarely have trouble. For anything sizable, mixed-use-looking, or cash, the statement alone is half the proof.