Yes, you do!
While our job is to track your actual income and expenses, your job is to keep the records that support them. The IRS actually requires more than just the merchant name, amount and date that we get from your bank statements. If they come asking, they will ask for details of what you purchased, something that is listed on receipts but not bank statements.
For example, you spend $25 at 7-Eleven. There is no way to validate that you spent that money on gas (a legit biz expense) or on hot dogs & beer (a legit dinner in my book, but not a legit biz expense). You must save your receipts to prove that the purchase was for gas.
Our recommendations for managing receipts: save all of your receipts in a folder (paper or digital, doesn't matter, you just need to have them)
- Paper Receipts:
- Traditional Folders: buy a 12 month expandable folder for each tax year, file receipts by month, keep for 7 years
- Electronic Receipts:
- Folders: use HubDoc for $20/month to snap photos of receipts using your mobile device, then you can toss the paper receipt. Pro Tip : set up a secondary location and HubDoc will also send copies of receipts to Google Drive folders etc!
See also How can I track Accountable Plan Expenses?
See also What is "Cash Basis" Accounting?
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