Receipts serve as primary source documents for business expenses.  They provide evidence that business expenses are ordinary and necessary and eligible for tax deductions, which reduces your overall tax liability and can potentially help you avoid tax penalties.  In addition, having receipts allows business owners to track their expenses and monitor where money is being spent, which is essential for budgeting and financial planning.

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In addition to keeping your receipts, it is important that the receipts are clear and legible.  They should clearly show the merchant’s name, date, amount and payment method on the receipt.  It is a good practice to include a note on the receipt indicating the business-related nature of the expense.  For any expenses related to travel, meals or gifts, the Internal Revenue Service requires that the business relationship of the people at the event are documented.

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Paper receipts can fade over time so it is crucial to have a system in place to scan and store receipts, preferably in a cloud storage system.  There are many affordable systems that will allow you to organize and store scanned receipts, many times from your smartphone or other mobile device.  Taking these steps will give you peace of mind knowing that you have the proper documentation to support your tax return if you were ever audited.

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