Donna Bordeaux explains why paper receipts fail for audits: thermal receipts fade in 6 to 12 months, and the IRS requires records for at least three tax filing years. She recommends capturing receipts with apps instead.
At least three years ("three tax filing years"), which she notes can be interpreted as about four years.
About six months to a year (she says they "vaporize" after ~6 months–1 year).
Hi, I'm Donna Bordeaux with calculatedmoves.com keeping receipts for documentation is always a pain. I know it. I've been there, done that. But I'm going to tell you how technology can help you make this not be such a tedious task and maybe even fun. All right, Records from an IRS perspective, you're going to need to keep those receipts and documentation showing where you spent money and you're receiving money even for at least three years. And that is three tax filing years. So that's really four years. Okay. Also, you may want to keep them longer if it's not a pain to keep it. Hey, nobody really minds keeping that stuff longer. It may come in handy one day, not only for the case of income tax, but also sales and use tax audits, property tax audits. Anytime you buy something big, like a fixed asset, a piece of property, a piece of equipment, you definitely want to keep that stuff. And sometimes three years isn't even enough. So let's talk about what you can do first. One other problem area. If you've ever looked at a thermal printed receipt, which is what you get at the grocery store at Walgreens, and you know the Walgreens receipt, take a look at those. After they're about six months to a year old, they vaporize, they're gone, they disappear. There's nothing left of them. So how do you think that looks? Three years? I once had a client who had an IRS audit and she said, no problem. I have my receipts all in one place. They're all in this nice filing system. I've got them all sorted out by vendor and I'll get those to you. She got those to me and they were about three years old and I had just blank pieces of paper. I don't want to put you through that. So I'm going to tell you from a technology aspect, you need to be taking pictures of your receipts. Now, if you take a picture of your receipt using an app, and we have a great tool that we use along with our clients that can help streamline this process. But there are several choices out there. If you take a picture of those receipts as you get them, you can do a lot of fun things with them. They can link into your accounting system. In our case, they'll flow right through with the transaction that we record. We also can see better what you've purchased to make sure that we're coding appropriately for you, too. But that receipt then does not need to have all the labor and time intensive process of being filed away. Guess what? You can do with the receipt, Crinkle it up and throw it away. You don't even need it once you snap the picture of it. And that is a part of your record system. You don't need to worry about the paper anymore. It's such a relief. No storage, no filing, no finding out where you put that box in the attic or in that back closet where the spiders are going to be in the box too. You don't have to worry about that anymore. So if you're not using a receipt capture system and you're working with me, you let me know and I will hook you up. If you aren't working with me yet, maybe that's a good reason to start. But there are also some alternative products. Shoot me an email and I'll be happy to help lead you in the right direction for how you can accomplish this task and not have to worry about being audit proofed and not have to worry about where all those pieces of paper are going to be. Thanks a lot. I'm Donna Bordeaux with Calculated Moves.
