This is general information, not tax advice. Confirm anything material with your CPA or enrolled agent.
What the IRS actually requires
Under IRC §162, a business expense must be ordinary and necessary. Under §6001 you must keep records that support what you report. IRS Publication 583 and Publication 463 spell out what those records look like. For most expenses the substantiation has four parts:
- Amount — what you paid, including tax
- Date — when the expense was incurred
- Place / vendor — who you paid
- Business purpose — why it was a business expense, and for meals, who was there and the business relationship
A statement line delivers the first three. The business purpose almost always has to come from you — a memo, a calendar entry, a note in your accounting software.
The $75 rule — and its big exception
Under Treas. Reg. §1.274-5(c)(2)(iii) and Rev. Proc. 2000-7, documentary evidence (a receipt) is generally not required for travel, entertainment, gift, and listed-property expenses under $75, provided you still record the amount, date, place, and business purpose in a timely log. Two things people get wrong about it:
- Lodging is excluded. A receipt is required for any lodging expense, regardless of amount.
- It is not a "no records" rule. The written record still has to exist. Only the paper receipt is waived.
Many businesses set an internal threshold below $75 anyway, because a consistent policy is easier to defend than a case-by-case judgment call.
Expenses with stricter rules
- Meals (50% deductible, generally). Record attendees and the business relationship. This detail is the most common thing missing on audit.
- Vehicle mileage. A contemporaneous mileage log with date, destination, purpose, and miles. Reconstructed logs invite scrutiny.
- Travel. Lodging always needs a receipt; keep itineraries and confirmations.
- Home office. Utility bills, rent or mortgage interest, and square-footage math — unless you use the simplified $5/sq ft method.
- Assets over your capitalization threshold. Keep the invoice for the life of the asset plus the retention period, since it drives depreciation basis.
How long to keep records
- 3 years — the standard assessment period from the filing date
- 6 years — if income was understated by more than 25%
- 7 years — for bad-debt deductions or worthless-securities claims
- Indefinitely — if no return was filed or a fraudulent return was filed
- Asset life + retention period — for property and depreciable equipment
- 4 years after the tax is paid — for employment tax records
Digital copies are acceptable. Rev. Proc. 97-22 permits electronic storage as long as the records are legible, complete, and retrievable — so scanning and shredding is fine if your system is organized.
When the receipt is genuinely gone
A missing receipt does not automatically kill the deduction. Under the Cohan rule (Cohan v. Commissioner, 1930), an examiner may allow a reasonable estimate of a legitimate expense supported by credible evidence. But Cohan does not apply to the §274(d) categories — travel, meals, gifts, and listed property — where strict substantiation is required. Those need real records.
Rebuild the file in this order:
- Request a duplicate from the vendor. Most systems can re-email one for 12–24 months.
- Pull the transaction from your bank or card statement — this establishes amount, date, and payee.
- Redact the statement before it goes into your books or to a client. Black out the full account number, balances, and every unrelated transaction so a single line becomes clean proof of payment. See our redaction guide.
- Write the business purpose in a contemporaneous memo — attendees, project, or client — and attach it to the transaction.
- Attach any corroborating artifact: order confirmation email, calendar invite, delivery notice, or contract.
Doing this inside QuickBooks
QuickBooks Online lets you attach files directly to a transaction, which is the right place for a redacted statement page:
- Open Transactions → Bank transactions and locate the charge.
- Expand the row and use the Attachments field to upload the redacted PDF.
- Put the business purpose in the Memo field — not just the vendor name.
- For meals, list attendees in the memo and assign the correct meals expense account so the 50% limitation is applied at tax time.
- Use Receipt capture (Transactions → Receipts, or forwarding to your QuickBooks receipt email) going forward so images attach automatically.
A useful habit: run the Transaction Detail by Account report quarterly, filter for large amounts, and confirm each has an attachment. It is far cheaper to fix a gap in March than during an exam three years later.
The same workflow in other software
- Xero — attach files to a bill or spend money transaction, or email them into your Xero files inbox. Hubdoc pulls statements and bills automatically.
- Wave — upload to Receipts and match to a bank transaction.
- FreshBooks — attach to an expense and set the client/project so it is billable-ready.
- Expensify / Ramp / Brex — use the missing-receipt affidavit feature, then attach the redacted statement line as corroboration. See our affidavit guide.
Whatever the tool, the test is the same: can someone who has never seen the transaction tell what was bought, when, from whom, and why it was a business expense — without asking you?
Owner-specific traps
- Mixing personal and business cards. The fastest way to lose a deduction and to weaken liability protection for an LLC or S-corp. Separate accounts, always.
- Statement-only bookkeeping. Categorizing straight from the bank feed with no memos produces books that look fine and substantiate nothing.
- Faded thermal receipts. They can go blank within a year. Photograph them the day you get them.
- Reimbursing yourself without an accountable plan. Without one, payments to owner-employees can be treated as taxable wages.
- Handing an unredacted statement to a bookkeeper or client. Redact first — your account number and unrelated spending do not belong in someone else's file.
Sources
- IRS Publication 583, Starting a Business and Keeping Records
- IRS Publication 463, Travel, Gift, and Car Expenses
- IRC §162, §274(d), §6001; Treas. Reg. §1.274-5(c)
- Rev. Proc. 2000-7 ($75 threshold); Rev. Proc. 97-22 (electronic records)
- Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930)