Keep receipts for taxes that support income, deductions and asset purchases on a return. The IRS ties how long to the period of limitations: generally 3 years from filing, 6 years if income over 25% of gross income went unreported, 7 years for worthless securities or bad debt, and indefinitely if no return or a fraudulent one was filed.
How long should receipts be kept for taxes?
Receipts should be kept for taxes as long as the period of limitations for the return they support stays open. The period of limitations is the time in which a return can be amended or the IRS can assess more tax. For most returns it is three years, but several situations make it longer.
The IRS page How long should I keep records? sets out each period. IRS Publication 583 gives the same periods in its Table 3 and explains that "you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out." It adds that "Returns filed before the due date are treated as filed on the due date."
The table below collects the periods from those two IRS sources and from IRS Publication 463 for car records.
| Record type | How long to keep it | Where the IRS says so |
|---|---|---|
| Receipts supporting income or deductions, ordinary case | 3 years | How long should I keep records?; Pub. 583, Table 3 |
| Records for a claim for credit or refund filed after the return | 3 years from filing the original return, or 2 years from paying the tax, whichever is later | How long should I keep records?; Pub. 583, Table 3 |
| Records where unreported income is more than 25% of gross income shown | 6 years | How long should I keep records?; Pub. 583, Table 3 |
| Records for a loss from worthless securities or a bad debt deduction | 7 years | How long should I keep records?; Pub. 583, Table 3 |
| Records when no return was filed | Indefinitely ("Not limited" in Table 3) | How long should I keep records?; Pub. 583, Table 3 |
| Records when a fraudulent return was filed | Indefinitely ("Not limited" in Table 3) | How long should I keep records?; Pub. 583, Table 3 |
| Employment tax records | At least 4 years after the tax becomes due or is paid, whichever is later | How long should I keep records?; Pub. 583 |
| Receipts for property and assets | Until the period of limitations expires for the year the property is disposed of | How long should I keep records?; Pub. 583 |
| Records of business use of a car | Each year of the recovery period | Pub. 463, chapter 5 |
Property receipts are the ones clients most often throw away too early. A receipt for a building improvement or a piece of equipment may need to be kept for many years, because Pub. 583 says these records are needed "to figure any depreciation, amortization, or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property."
The IRS period is not the only one. The How long should I keep records? page says that when records are no longer needed for tax purposes, "do not discard them until you check to see if you have to keep them longer for other purposes," and gives the example that "your insurance company or creditors may require you to keep them longer than the IRS does." A firm's own retention schedule for client files is a separate matter, covered in the post on a document retention policy for CPA firms.
Which small business receipts must be kept?
Small business receipts that must be kept are the ones that support an entry in the books or a figure on the return: receipts for expenses, records of income received, and purchase documents for assets. A receipt that supports nothing on the return is not a tax record, though it may still matter for other reasons.
IRS Publication 583 defines the group: "Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks." It explains why they matter: "they support the entries in your books and on your tax return."
Pub. 583 then breaks supporting documents into kinds, each with its own list:
- Gross receipts, the income a business takes in. Documents named include cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips, and Forms 1099-MISC and 1099-NEC.
- Inventory, items bought for resale. Documents named include canceled checks, cash register tape receipts, credit card sales slips and invoices.
- Expenses, the costs of running the business other than inventory. Documents named include canceled checks, cash register tapes, account statements, credit card sales slips, invoices, and petty cash slips for small cash payments.
- Assets, property such as machinery and furniture. Records should show, among other things, when and how the asset was acquired, the purchase price, the cost of improvements, how it was used, and when and how it was disposed of.
Vendor invoices are receipts too. A supplier's invoice paid by bank transfer, with the payment showing on the statement, is the same kind of record as a till slip. Firms that handle many invoices can read about invoice data extraction, which covers pulling the vendor, date and totals out of invoice files.
Travel, transportation and gift expenses have their own rules. Pub. 583 points to Pub. 463 for them, and the next section covers what those receipts need to show.
What do gas and meal receipts need to show?
Gas and meal receipts need to show enough to prove the expense, and IRS Publication 463 sets out what that means for travel, meals and car costs. In general a receipt is adequate if it shows the amount, the date, the place and what was bought. Meals and car expenses each have extra details the IRS lists.
IRS Publication 463, chapter 5, says: "Documentary evidence will ordinarily be considered adequate if it shows the amount, date, place, and essential character of the expense."
Meal receipts. Pub. 463 says a restaurant receipt is enough to prove the expense for a business meal if it has all of the following:
- "The name and location of the restaurant."
- "The number of people served."
- "The date and amount of the expense."
It adds: "If a charge is made for items other than food and beverages, the receipt must show that this is the case." A card slip showing only a total and a tip line does not show the number of people served, so the itemized receipt is the better record to keep.
Gas and other car receipts. Pub. 463's Table 5-1 lists what car records must show. Under amount: "the cost of the car and any improvements, the date you started using it for business, the mileage for each business use, and the total miles for the year." Under time: "the date of the use of the car." It also asks for the business destination and business purpose. A gas receipt covers the cost and date of one fill-up, but the mileage log is what ties the car's use to the business.
Hotel receipts follow the same pattern. Pub. 463 says a hotel receipt is enough if it shows the hotel's name and location, the dates of the stay, and "Separate amounts for charges such as lodging, meals, and telephone calls."
None of this says what a client may deduct; that is the preparer's call. It describes what the IRS publication says a receipt should show.
Receipt storage options: paper folders, scans or both
The best way to keep receipts for taxes depends on the client's volume and habits: paper folders by year, scanned or photographed copies, or both. Paper is simple but fragile and bulky. Scans are searchable and compact but must meet IRS conditions to replace the paper. Keeping both is safest while a client's scanning routine is new.
Paper folders. One folder or envelope per year, split by type, is what IRS Publication 583 suggests when it says to organize supporting documents "by year and type of income or expense." Paper suits clients with few receipts. It breaks down when receipts fade, get wet, or simply number in the thousands.
Scans or photos only. Digital copies are easy to back up and search. Before they can replace the paper, the system holding them has to meet the requirements of Rev. Proc. 97-22, the IRS guidance on electronic storage, including legibility and an index that lets a record be found. Those conditions are covered in what makes a digital receipt acceptable to the IRS.
Both. Many clients scan every receipt and keep the paper in a box for the year. The scans do the daily work; the paper is the fallback. Once the client's scans have been checked and a routine is in place, the paper question can be revisited.
| Client situation (example) | Storage that fits |
|---|---|
| Retired client, a few dozen receipts a year | Paper folder per year |
| Sole proprietor, receipts every week | Phone photos sent monthly, paper kept for the year |
| Small business with a bookkeeper | Scans plus a spreadsheet index, paper kept until scans are checked |
| Client with equipment and property purchases | Scans plus paper originals kept until the property is sold |
Whatever the method, keep an index: a list with date, vendor, amount and file name for each receipt. An index turns a folder of images into something a reviewer can search. The index can start from the receipts themselves: Schema CPA reads receipts and vendor invoices and exports what it reads to Excel or CSV, which gives the firm rows to build the list from instead of a blank sheet. The homepage lists the document types it reads.
When a receipt for taxes is not required
A receipt for taxes is not always required. IRS Publication 463 lists situations where documentary evidence, such as a receipt, is not needed for travel, gift and transportation expenses, including most expenses under $75 other than lodging. A record of the expense is still needed even when the receipt is not.
IRS Publication 463 says documentary evidence "isn't needed if any of the following conditions apply," and lists three:
- Meals or lodging while traveling away from home, accounted for to an employer under an accountable plan using a per diem allowance method.
- "Your expense, other than lodging, is less than $75."
- "You have a transportation expense for which a receipt isn't readily available."
The exception covers the receipt, not the record. The same chapter says to keep proof "in an account book, diary, log, statement of expense, trip sheets, or similar record," and it is blunt about guesses: "You can't deduct amounts that you approximate or estimate." A $30 parking charge with no receipt still needs a written entry showing the amount, date, place and business purpose.
The exception is also narrow in scope. It sits in Pub. 463, which covers travel, gift and car expenses. The general rule in Pub. 583 for business expenses, that supporting documents should show the amount paid and that it was for the business, has no dollar threshold. A $40 box of printer paper is not a travel, gift or car cost, so the Pub. 463 exception does not reach it.
Lodging is the main carve-out from the carve-out. A hotel bill needs a receipt at any amount, which is why the hotel receipt details in the previous section matter even for a cheap one-night stay.
When a receipt is lost for reasons beyond the client's control, Pub. 463 says, "you can prove a deduction by reconstructing your records or expenses," naming "fire, flood, and other casualties" as examples. Reconstructed records are weaker than originals, which is the strongest argument for keeping receipts in the first place.