IRS Receipt Requirements: What You Need to Keep for Tax Deductions

IRS receipt requirements determine what documentation you need to claim tax deductions. Miss the mark, and you could lose deductions during an audit or face penalties for inadequate substantiation.

The rules aren’t complicated, but they’re specific. Some expenses need receipts no matter the amount. Others give you flexibility under $75. And if you do get audited without receipts, there’s a legal doctrine that might save part of your deductions.

Here’s what actually matters.

Table of Contents

• The $75 Receipt Rule
  • Exceptions Where Receipts Are Always Required
• What Makes a Valid Receipt
• Acceptable Documentation Types
• How Long to Keep Tax Records
• Digital Receipts and Electronic Storage
• Special Rules for Travel, Meals, and Entertainment
• What Happens During an Audit Without Receipts
  • The Cohan Rule
  • Penalties for Missing Documentation
• Receipt Management Strategies
• FAQs: IRS Receipt Requirements

The $75 Receipt Rule

For most business expenses under $75, you don’t need a detailed receipt to claim the deduction. Bank statements, credit card records, or written logs can substitute.¹

This doesn’t mean no documentation. You still need to prove the expense happened, when it happened, and what it was for. A credit card statement showing “$47.23 at Office Depot” meets the standard. A vague note saying “bought office stuff” does not.

Once you hit $75 or more, a detailed receipt becomes mandatory. No exceptions for round numbers or “close enough” amounts.

What counts as a detailed receipt:

• Vendor name and address
• Transaction date
• Amount paid
• Description of goods or services purchased
• Payment method

Exceptions Where Receipts Are Always Required

Some expenses require receipts regardless of the amount:

Lodging: Hotel stays need receipts whether the bill is $50 or $500. A credit card statement showing a hotel charge isn’t enough. You need the itemized folio showing nightly rate, taxes, and any incidentals.²

Business gifts: If you give a client a $30 gift basket, keep the receipt. The IRS limits business gift deductions to $25 per recipient per year, but you still need documentation for any gift expense you claim.³

Transportation without automatic records: Parking meters and toll booths don’t give receipts. For these expenses, maintain a written log recording the date, location, amount, and business purpose. The log serves as your receipt substitute.

What Makes a Valid Receipt

A receipt that will hold up during an IRS audit includes five elements:⁴

1. Date of transaction: Proves when the expense occurred
2. Vendor name: Shows who received payment
3. Amount paid: The total including tax
4. Description of purchase: What you actually bought
5. Proof of payment: Credit card slip, check copy, or cash receipt

Restaurant receipts deserve extra attention. Keep both the credit card slip showing the total and the itemized receipt showing what was ordered. For meal deductions, you may need to prove the business purpose and who attended.

What’s not a valid receipt:

• Handwritten notes without vendor documentation
• Credit card statements alone (for expenses over $75)
• Bank statements showing withdrawals
• Estimates or reconstructions

Acceptable Documentation Types

The IRS accepts multiple forms of documentation. Physical receipts aren’t the only option.⁵

Primary documentation (for expenses over $75):

• Original paper receipts
• Digital receipts (email confirmations, PDF invoices)
• Canceled checks with vendor endorsement
• Credit card statements with itemized receipts

Secondary documentation (for expenses under $75 or when primary is lost):

• Credit card statements showing merchant, amount, and date
• Bank statements showing cleared payments
• Written logs created at the time of the expense
• Calendar entries with expense notations

Supporting records (recommended but not required):

• Contracts and agreements
• Correspondence about purchases
• Delivery confirmations
• Appointment calendars

The strongest documentation combines multiple sources. A credit card statement plus an email receipt plus a calendar entry showing the business meeting creates a solid paper trail.

How Long to Keep Tax Records

The IRS recommends keeping records for at least three years after filing the return associated with those expenses.⁶ But that’s the minimum.

Three years: Standard retention period for most tax records. This aligns with the IRS’s general audit window.

Six years: If you underreport income by more than 25%, the IRS has six years to audit. Keep records that support income amounts for this longer period.

Seven years: If you claim a loss from worthless securities or bad debt deduction, retain records for seven years.

Indefinitely: Property records (purchase price, improvements, depreciation) should be kept as long as you own the asset, plus three years after selling it. Employment tax records must be kept for at least four years after the tax becomes due or is paid.⁷

Practical approach: Keep everything for seven years and you’ll cover most scenarios. Digital storage makes this easy, so there’s little reason to purge records earlier.

Digital Receipts and Electronic Storage

The IRS officially accepts digital receipts and electronic storage as of Rev. Proc. 2024-37.⁸ Paper and digital copies carry equal weight for substantiation purposes.

Requirements for digital storage:

• Images must be legible and complete
• Files should be accessible upon IRS request
• Storage system must be reliable and secure
• Original information must be preserved (no alterations)

Acceptable digital formats:

• PDF documents
• Digital photographs (if clearly legible)
• Email confirmations
• Scanned images of paper receipts
• Screenshots of online purchases

Best practices for digital receipts:

• Scan paper receipts before they fade (thermal paper degrades within months)
• Use consistent file naming: YYYY-MM-DD_Vendor_Amount.pdf
• Back up to multiple locations (cloud + local)
• Organize by category or tax year for easy retrieval

For tax professionals managing client documentation, this is where receipt scanning automation pays off. Manually organizing thousands of client receipts is a bottleneck that modern tools eliminate.

Special Rules for Travel, Meals, and Entertainment

Travel, meals, and entertainment expenses face stricter substantiation requirements under IRC Section 274(d). These categories have no Cohan rule protection (more on that below).⁹

For each expense, you must document:

• Amount of the expense
• Date and place
• Business purpose
• Business relationship of the people involved

Travel expenses require records showing:

• Dates of departure and return
• Number of days spent on business vs. personal
• Destinations and business purpose for each stop
• Itemized lodging, transportation, and meal costs

Meal expenses must document:

• Who attended
• Business relationship to you
• Specific business purpose discussed
• Date and location

Entertainment expenses (where still deductible) need:

• Nature of the entertainment
• Date and duration
• Place
• Business purpose and expected benefit
• Attendees and their business relationship

A calendar entry showing “Lunch with Sarah at Cafe Milano” isn’t enough. You need “Lunch with Sarah Chen (potential client, ABC Corp) at Cafe Milano to discuss Q1 marketing proposal.”

What Happens During an Audit Without Receipts

Missing receipts during an IRS audit creates problems, but not necessarily complete loss of your deductions.

The IRS approach: they’ll first ask for receipts. If you can’t produce them, they’ll request alternative documentation. If that’s unavailable, they may disallow the deduction entirely and assess additional taxes, interest, and penalties.¹⁰

The Cohan Rule

The Cohan rule comes from a 1930 court case involving Broadway star George M. Cohan, who claimed entertainment expenses but couldn’t produce receipts.¹¹

The Second Circuit Court ruled that when a taxpayer clearly incurred expenses but can’t prove exact amounts, the court can estimate a reasonable deduction. The judge wrote that “absolute certainty in such matters is usually impossible and is not necessary.”¹²

What the Cohan rule allows:

• Courts may estimate deductions when the taxpayer proves an expense occurred
• The estimate will “bear heavily” against the taxpayer (you’ll get less than you claimed)
• Works best when you have some supporting evidence, just not perfect documentation

What the Cohan rule doesn’t cover:

• Travel, meals, entertainment, and business gifts (Section 274(d) expenses)
• Charitable contributions
• Expenses with no evidence of occurrence
• Situations where you could have kept records but didn’t

The Cohan rule is a last resort, not a planning strategy. And it typically requires going to Tax Court or IRS Appeals to invoke. Auditors in regular examinations can disallow deductions without applying Cohan.¹³

Penalties for Missing Documentation

Beyond losing the deduction, inadequate documentation can trigger penalties:

Negligence penalty: 20% of the underpayment resulting from disallowed deductions. The IRS applies this when you “fail to make a reasonable attempt to comply” with tax rules.¹⁴

Accuracy-related penalty: Also 20%, applied when there’s a substantial understatement of income (greater than $5,000 or 10% of the tax shown on the return).

Fraud penalty: If the IRS believes you fabricated deductions or created fake receipts, civil fraud penalties reach 75% of the underpayment. Criminal fraud charges can result in fines up to $250,000 and prison time.¹⁵

Interest: Runs from the original due date of the return until you pay, compounding daily.

Example: You claimed $15,000 in business expenses with no documentation. The IRS disallows $12,000 during an audit. At a 24% tax rate, that’s $2,880 in additional tax. Add the 20% negligence penalty ($576) plus interest (approximately $200-400 depending on timing), and you’re looking at $3,500+ in total liability.

Receipt Management Strategies

The goal is simple: capture documentation at the time of the expense, before it’s lost or forgotten.

At time of purchase:

• Photograph receipts immediately with your phone
• Forward email receipts to a dedicated folder
• Use expense apps that auto-capture purchase data
• Add notes about business purpose while it’s fresh

Weekly habits:

• Review credit card and bank statements
• Match transactions to receipts
• Note any missing documentation and follow up
• Categorize expenses by deduction type

Monthly process:

• Reconcile expense reports to bank statements
• Verify all expenses over $75 have proper receipts
• Follow up on any gaps in documentation
• Export data to accounting software

Year-end tasks:

• Organize records by category before tax filing
• Identify any missing documentation
• Prepare summary reports for your accountant
• Archive the previous year’s records securely

For businesses with high transaction volumes, manual tracking becomes unsustainable. This is where data extraction tools that automatically process receipts, categorize expenses, and flag missing documentation become worthwhile investments.

The staff time spent chasing down missing receipts often exceeds the cost of automation. And automated systems create audit trails that manual processes can’t match.

FAQs: IRS Receipt Requirements

Q: Do I need receipts for expenses under $75?

A: Not detailed receipts. Bank or credit card statements showing the merchant, amount, and date are acceptable for most expenses under $75. Exceptions: lodging requires receipts regardless of amount, and business gifts need receipts even under $75.

Q: Can I deduct expenses without any documentation?

A: Not reliably. While the Cohan rule allows courts to estimate some deductions when you can prove an expense occurred, it doesn’t apply to travel, meals, entertainment, or charitable contributions. And the IRS has no obligation to apply Cohan during a regular audit. Some documentation is always better than none.

Q: Are digital photos of receipts acceptable?

A: Yes. The IRS accepts digital copies as equivalent to paper originals, provided the images are legible, complete, and stored in a reliable system. Scan or photograph receipts before thermal paper fades.

Q: How long should I keep receipts for business expenses?

A: At least three years from the date you filed the return. Seven years is safer and covers most extended audit scenarios. Property records should be kept as long as you own the asset plus three years after disposition.

Q: What if I lose a receipt for a large expense?

A: Request a duplicate from the vendor. Most businesses can reprint receipts from their records. Credit card companies can provide detailed transaction data. Bank statements can serve as supporting evidence. The key is having something rather than nothing.

Q: Does the $75 rule apply to personal expenses on Schedule A?

A: The $75 rule primarily applies to business expenses. For personal itemized deductions, documentation requirements vary by category. Charitable contributions over $250 always require written acknowledgment from the charity. Medical expenses and other Schedule A items have their own substantiation standards.

Q: Can I estimate expenses on my tax return?

A: For legitimate deductions, you should use actual amounts when known. Estimating is only defensible when you have partial records and make reasonable calculations. Never inflate estimates or claim deductions you can’t support. The penalties for inaccurate returns can exceed the tax benefit.

Q: What happens if I’m audited three years after filing?

A: The IRS has three years from your filing date to initiate most audits. If you discarded records after two years, you’ll have difficulty substantiating deductions during an audit. This is why keeping records for the full three years (or longer) matters.

The Bottom Line

IRS receipt requirements aren’t onerous once you build systems to capture documentation at the source. The $75 threshold gives flexibility for small purchases. Digital storage makes long-term retention cheap and easy. And understanding what the IRS actually requires prevents both over-documenting and under-documenting.

The worst time to think about receipts is during an audit. The best time is when you make the purchase.

Conto automates receipt and bank statement processing for tax professionals. Try it with your most disorganized client.