When it comes to the IRS, recordkeeping, and reimbursements, you would think that the process was black and white. Instead, IRS publications on recordkeeping and reimbursements are a world of gray. In this edition of Tallie Truths, we expose what is fact and fiction in the world of eReceipts created by an expense software system in terms of audit preparedness. Read more to learn about the facts and industry best practices to prepare for a potential IRS audit. Enjoy!
#1: eReceipts and credit card statements are acceptable proof for a $50 business meeting expense.
IRS Publication 463 Ch5: “Documentary evidence is not needed if your expense, other than lodging, is less than $75.”
Ereceipts and credit card statements are acceptable for expenses, other than lodging, less than $75. This is because the IRS does not require any documentation for non-lodging expenses less than $75.(IRS Publication 463 Ch 5) This means after a purchase is expensed using Tallie’s credit card feature, the IRS will not require a documented copy of your receipt for tax deduction purposes. So if you lost the Safeway receipt for that case of sparkling water you bought for last week’s Board of Directors meeting – don’t stress!
That being said, there is a very gray area in regards to what the IRS considers necessary business expenses. For example, the IRS may not blink at a $70 bill at Kinko’s, but may reject a $70 bar tab for a client meeting , deeming it “lavish and extravagant.” Team Tallie suggests you do not push the limits and stick with only claiming the most necessary business expenses. This is particularly important when dealing with business gift and entertainment expenses.
#2: eReceipts and credit card statements can be submitted for a work conference hotel bill that is not paid with a per diem.
For all lodging expenses – a business trip hotel stay, temporary housing if you move cross country for a new job, and any other necessary lodging for business related activities – a documented receipt IS required by the IRS. The only exception would be if these expenses were covered by a company per diem.
#3: Ereceipts and credit card statements are acceptable for a 30 mile drive to a new customer site visit.
IRS Publication 463 Ch5: “Documentary evidence is not needed if you have a transportation expense for which a receipt is not readily available.”
Say you need to hop on CalTrain to drop off a contract at a new client’s office, or drive an hour north for a 3-day industry conference. If you need to replenish your gas tank because of this work commuting, the IRS does not require you to obtain a receipt of these gas purchases. An electronic receipt or credit card statement is sufficient. It should be noted that mileage/fuel costs are only reimbursable to the extent that the cost goes above and beyond the individual’s normal commute.
#4: In the event of an audit, the IRS will accept eReceipts and credit card statements for purchases over $75
Remember that case of sparkling water you bought earlier? Well, let’s say you also bought $100 worth of gourmet foods for the meeting to impress the board. The IRS has no way of proving this trip wasn’t for your own personal groceries with a simple credit card statement. For this purchase you would need a documented and reliable receipt to prove the expenses were business related.
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