What business owners should keep for expense documentation

The IRS doesn't expect a shoebox. It expects enough information to verify that a deduction was a real business expense — what it was for, how much, when, and why it was ordinary and necessary for your business. Here's how to keep that without turning your life into a filing cabinet.

What counts as adequate documentation

For most expenses, you need to be able to show four things: the amount, the date, the vendor or payee, and the business purpose. A bank or credit card statement covers the first three. The fourth — business purpose — is what receipts and notes are for.

Rules of thumb that actually matter

• Receipts for anything over $75. The IRS generally requires receipts for expenses over $75 (lodging is always required regardless of amount). Many bookkeepers and CPAs recommend keeping receipts for everything anyway — storage is cheap, audits aren't.
• Meals and entertainment need who and why. For a deductible business meal, note who was there and what you discussed. A line in your calendar or a note on the receipt is enough.
• Mileage needs a contemporaneous log. Date, destination, business purpose, and miles. Apps like MileIQ make this painless; a spreadsheet works too.
• Asset purchases need their own folder. Anything you'll depreciate — equipment, vehicles, large software purchases — should have the invoice kept separately and clearly.
• Keep records for at least 7 years. Three is the standard statute of limitations, but situations extend it. Seven is the safe default.

A simple capture workflow

You don't need a heavy system. The lightest version that actually works:

• One email address or one folder where every digital receipt goes.
• One phone app that snaps paper receipts and dumps them in the same place.
• A weekly five-minute pass to add a one-line business purpose to anything ambiguous.
• Your bookkeeper matches them to the transactions during the monthly close.

Tools that automate the matching — QuickBooks, Dext, Hubdoc, Ramp, expense modules in Bill — are nice but not required. The discipline is the system.

When in doubt, capture

The wrong direction to err is "I'll remember." You won't. Snap, save, and move on. Future-you will be glad.

If you'd like help setting up a capture workflow that doesn't rely on your memory, let's talk.