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Finance Speak – ‘What is the IRS policy for requiring a receipt for a travel expense?’

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Our customers frequently ask us questions on this topic. Mainly – What is the IRS policy for a receipt? And is it only needed for expenses greater than $50? There seems to be a lot of confusion and misinformation on this topic. So, to clarify doubts, here is the scoop –

1) The IRS accepts electronic receipts, but there are a few caveats (read more on this from a previous blog article we wrote. Click here)

2) Actually, the IRS does not need a receipt for expenses less than $75 (believe it or not!). Here is the text from the IRS publication 463 that validates it –

What Are Adequate Records?

You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. You should also keep documentary evidence that, together with your record, will support each element of an expense.

Documentary evidence. You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses.
Exception. Documentary evidence is not needed if any of the following conditions apply.

  • You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging. ( Accountable plans and per diem allowances are discussed in chapter 6.)
  • Your expense, other than lodging, is less than $75. <——
  • You have a transportation expense for which a receipt is not readily available.

If you want to read the entire publication, it is available here. Hope you found this article to be useful! Now you can light a mini-bonfire and burn those <$75 receipts.

Please note that this is NOT legal or tax advice. Please contact your attorney or accountant for more information.

The IRS and electronic receipts

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Over the last several months, we have been receiving questions about the IRS’s acceptance of electronic receipts. The IRS does accept electronic receipts, but there are a few caveats. All the details are specified under IRS Rev. Proc. 97-22 which can be found:

Here

The general requirements (page 10 of 36) in this PDF specified by the IRS are:

“(1) reasonable controls to ensure the integrity, accuracy and reliability of the electronic storage system
(2) reasonable controls to prevent and detect the unauthorized creation of, addition to, alteration of, deletion of or deterioration of electronically stored books and records
(3) an inspection and quality assurance program, evidenced by regular evaluations of the electronic storage system including periodic checks of electronically stored books and records
(4) a retrieval system that includes an indexing system
(5) the ability to reproduce legible and readable hard copies of electronically stored books and records.”

Please note that this is NOT legal or tax advice. Please contact your attorney for more information.