Top 5 Tips for IRS Record Keeping & Expense Management

Have questions about best practices relating to expense management? Tallie serves as a powerful receipt repository, so our Product Expert Team is well-versed in the do’s and don’ts of record keeping. Essential to any business, record keeping and proper documentation is critical to an optimized expense report workflow.

Fortunately, IRS regulations have evolved technologically, and electronic records can now directly replace hard copies. Gone are the days of filing cabinets stuffed with paper receipts! If an electronic system can efficiently and reliably house a complete reproduction of hard copy records, the IRS approves of businesses ditching paper copies. Here are some of the most common questions that the Tallie Product Expert Team receives regarding keeping records:

1. How long do I have to keep my records?

As a rule of thumb, CPAs tend to follow a 7-year rule (CPA.Net), although the IRS only requires that records be kept for as long as the tax return can be amended. There are regulations surrounding what changes can be made to a tax return post-deadline, including how long companies must retain records. For example, if you filed and paid your taxes on time, you have 2 years to file a claim for a refund. You would have to keep your records for that 2 years.


2. Do you know of any instances where a receipt would not be required?

There are two examples in IRS Publication 463: If your expense, excluding lodging, is less than $75 OR if you have a “transportation expense for which a receipt is not readily available.”

3. Are there different documentation requirements for different types of expenses?

Yes. For example, for entertainment expenses a record must include the specifics (cost, date, location, description of type of entertainment) in addition to a description of the business purpose for the entertainment, the people that were in attendance, their business relationship, and whether or not your employee was present at the entertainment.

Conversely, gifts only require a record of the cost, the date it was purchased, and a description of the business gift. Here are additional details on what is required to prove specific types of expenses:


Generally, as long as the record has the date, amount, merchant and any additional pertinent details, that should suffice (IRS table 5-1, pg 26). Most receipts have all of that information; however, Tallie transaction tiles  also have text field “Reasons” where additional information can be added. Companies that use Tallie can easily pull the address from the receipt image or look up attendee names in their CRM system.

4. Are there any types of expenses that I can combine to reduce the amount of records I have to keep?

Yes, there are a few types of expenses that can be combined. If you are traveling and take multiple taxis throughout the day, they can be combined into one taxi expense. Also, if you take a client out for drinks, even if you pay for each round separately, you can combine them into one expense.

5. Are my cancelled checks sufficient records for expenses?

No, not as the sole piece of evidence. Cancelled checks do have to be accompanied by a bill from the party the check was written to or some other form of documentation.

In the spirit of tax season, the Tallie Product Expert Team would like to know what questions you may have regarding proper record keeping and expenses best practices. Leave your questions in the comments below and we will reply immediately!

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