According to the Internal Revenue Service (IRS), small business owners must keep receipts, records, and other documentation to support the income and expenses reported on their tax returns. This includes receipts for any business-related purchases, such as office supplies, marketing materials, and equipment.
The IRS does not have a specific threshold for keeping receipts, but it does have rules for what types of expenses are deductible and what documentation is required to claim a deduction. In general, business owners must be able to prove that an expense is ordinary and necessary for the business and must have documentation to support the expense.
For example, if you are claiming a deduction for office supplies, you must be able to show that the supplies were used in your business and must have a receipt to support the expense. If you are claiming a deduction for travel expenses, you must be able to show that the travel was for business purposes and must have documentation such as receipts, tickets, and itineraries to support the expense.
While the IRS does not have a specific threshold for keeping receipts, it's generally a good idea to keep receipts for any significant business-related purchases, especially those that have tax implications. This can help you accurately track your income and expenses and ensure that you have the documentation you need to claim deductions and credits on your tax return.
It's also important to note that the IRS may ask for documentation to support your deductions at any time, even after you have filed your tax return. For this reason, it's a good idea to keep receipts and other documentation for 6 years in case the IRS asks for documentation. Remember, credit card statements are not receipts! An IRS auditor can deny a deduction if you can only provide a credit card statement, so keep those receipts. The best way to keep receipts is within your bookkeeping software like Xero or Quickbooks. Another method for smaller business owners is to utlize apps or a folder in your photos. Snap a pic of every receipt and store them in your phone by year.