Do I Need To Keep My Receipts?
The importance of documentation for business expenses and how you can make your process stress-free
What to keep and why
Most business owners assume that because keeping every receipt is a huge pain, the IRS couldn’t possibly require it. What they don’t realize is that the IRS exists to make your life miserable.
From what we have seen in recent case law, receipts should be kept for all business transactions. Although it may seem like a credit card statement with each transaction should do the trick, I can assure you it will not. During IRS audits, the auditor needs you to substantiate your expenses and prove that they were ordinary and necessary. The best way for you to do this is to keep your receipts. Without them, you can bet that many of your expenses will be disallowed. This is almost certainly true of any travel or meal expenses. The IRS has strict requirements for these categories, and without a receipt those expenses are toast.
So how do you store receipts? Do you keep each one in a folder within a file cabinet? Do you throw every one of them in a shoe box labeled 2020 receipts and just hope you never have to open the box again? While both of these may get you through an audit, there’s an easier, faster way. This is where Quickbooks Online comes into play.
Receipt storage with Quickbooks Online
The receipts function in Quickbooks Online is easily one of the biggest selling points for using the software. Snap a picture of your receipt using the Quickbooks app as you walk out of the restaurant/gas station/office supply store. Then throw your receipt right in the trash.
When you log in to your Quickbooks account, Quickbooks will pull information from the receipt automatically. If there is a transaction that matches the date/amount of the receipt, Quickbooks will match them up and attach the receipt to the transaction. If there isn’t a record of the transaction yet, you can create one using the receipt and Quickbooks will match it when the transaction comes through on your bank feed.
This is the best way to make your books audit-proof. If an auditor asks for any information on a transaction, you can export the receipt that’s attached to it and send it to them. I also like making the habit of putting notes in the description of each transaction. If it’s a meal, I put who I dined with and what business matters were discussed. This is an IRS requirement for meals in case you haven’t heard.
Technology is a beautiful thing and can make your life as a business owner a lot easier. I highly recommend using Quickbooks Online for your accounting needs for this function and all of its other tech-savvy features. For questions on how to get set up or for a wholesale discount on Quickbooks Online, contact me. It’s kinda my thing.