A business client of mine recently went through an IRS audit and was worried he hadn’t kept all the receipts for his business expenses.
Does my client need a receipt for all his business expenses?
Not necessarily, according to the IRS regulations.
In fact, the IRS makes an exception to keeping expense receipts under $75 related to travel expenses, entertainment expenses, gifts and listed property expenses, such as a passenger automobile. What this means, for example, is that you do not need to keep a receipt for a vehicle expense less than $75.
Notwithstanding, tax law actually requires you to provide proof for an expense even when the law says you don’t need a receipt. Go figure.
This is because in an audit, you still have to substantiate expense claims for items under $75. You just won’t need the receipts. If you don’t have receipts, however, you will have to show convincing documentation, such as a detailed business appointment calendar, to substantiate the expense claims
Therefore, I advise my clients to always think proof, no matter how small the expense is.
Don’t face an IRS audit without professional assistance. Contact us today if you are facing either a personal or business IRS audit.
