When it comes to running a business—or even filing your personal taxes—receipts are often the first thing people toss in a drawer, a shoebox, or the trash. But those little slips of paper (or PDFs, if you’re organized) can become critically important when dealing with the IRS, the state, or when your CPA comes calling.
So how long should you really keep receipts, and what happens if you don’t? Let’s break it down.
Why Receipts Still Matter
Even in a digital world, proper documentation is your safety net. Receipts support the deductions you claim, substantiate business expenses, and protect you in the event of an audit. The IRS doesn’t ask if you thought you had a qualifying expense—they want proof.
Receipts are especially important for:
- Business meals and travel
- Asset purchases and improvements
- Charitable contributions
- Home office expenses
- Medical expenses
- Any deduction over $75 (and sometimes under)
How Long Should You Keep Them?
The IRS has clear guidelines on how long taxpayers should retain documentation, and receipts fall under the same rules as returns and supporting statements.
Here’s the general timeline:
- 3 Years — Federal and State Tax Returns from Date of Filing
- 4 Years — Payroll Tax Returns
- 6 Years — If You Did Not Report Income You Should Have
- 7 Years — Specific Deductions (i.e. Bad Debt, Securities)
- Indefinitely — If You Have Not Filed a Return, No Statute of Limitations
When in doubt, default to the longer window—it’s easier than rebuilding records after the fact.
What About Digital Copies?
The IRS accepts digital copies, so scanning or photographing receipts is perfectly acceptable—if the image is clear and shows all relevant details. Many of our clients use apps or QuickBooks to organize receipts throughout the year, which makes tax preparation and audit defense much smoother.
If you’re keeping paper copies, make sure they’re legible and stored somewhere safe from moisture, sunlight, or accidental Marie Kondo-ing.
What Happens If You Don’t Have Receipts?
Missing receipts doesn’t automatically mean losing a deduction, but it does put you in a weaker position. Without documentation, you risk:
- Losing deductions during an IRS audit
- Owing sales or use tax you already collected or paid
- Paying additional taxes, interest, and penalties
- Extra time and cost to recreate or substantiate expenses
- Increased scrutiny in future years
For business owners, poor documentation can also create issues with lenders, partners, investors, and state agencies.
Our Take: Keep It Organized, Not Complicated
You don’t need a filing cabinet full of crumpled receipts to stay compliant. What you do need is a consistent process. Whether it’s forwarding digital receipts to a shared file, snapping a photo, or attaching receipts within QuickBooks Online, the key is consistency and accessibility.
Reach out to our team if you have any questions or concerns about your documentation process!
