Mark Kohler explains why receipts matter in an IRS audit. Bank statements alone won't protect you, but scanned receipts stored digitally will. Keep them for six years.
Hi, Mark Kohler here with another tax and legal tip. Let's talk about those receipts. Do you really need to keep all those little pieces of paper out doing business? Well, let me share the truth. Number one, credit card statements and bank statements do not qualify as receipts. Now, I know on your statement it's going to say you spent $250 at Home Depot, but the IRS wants to know what you bought at Home Depot. The receipt is critical. So those statements are good and they're important for bookkeeping, but they do not qualify as receipts. Number two, which brings me to the point, receipts are audit protection, but they are not bookkeeping. You're going to use the bank statements and the credit card statements in your QuickBooks to put together your accounting for the end of the year. So you know what's a write off. And put together that financial statement. Receipts just go in a drawer and you're going to pull them out. And six years from now or three years from now, when you have an audit, receipts protect you in an audit. But you don't want to rely on receipts for bookkeeping. They're two separate things. Which brings me to number three. Do you really want to keep all that paper? The answer is no. And here's the truth. The IRS will take a scanned receipt versus the actual receipt. So this is where we are going. Paperless. I want you to use your smartphone and take pictures of receipts at the end of the dinner or when you're out and about. And believe me, if you've ever been to Home Depot, those receipts are printed with disappearing ink, right? A few weeks later, a few months later, they're gone. So you want to scan your receipts, put them on a little thumb drive or flash drive, put them in the cloud. And then if you need them in the case of an audit, you're going to have the scanned copy and you can print them out and organize them. And number four, how long do you want to keep these receipts? I want you to keep them up to six years. The IRS can come back after you in an audit up to six years later. So put the receipts in the cloud on a flash drive in a fireproof safe, and then you can print them out if you need them again. They're not there to do your books at the end of the year. They're audit protection. In sum, receipts are important. Keep them, but don't worry about organizing them and going through them at the end of the year. They're there in the future if you need them. Thanks for watching. And if you love that video. I've got a lot more. Please subscribe to my channel and I shoot weekly videos that can help you in your business, personal life and better live your American dream. Also, check out my newsletter free newsletter every week with blog articles, tips, strategies, tax deadlines. You'd love it. Also, if you like social media, please follow me on social media with some daily tips and if you like to connect that way, it can be a lot of fun. But finally, please check out my tax and legal Library. I have 50 plus videos on these topics and more where I pull out a whiteboard and break them down. Hours and hours of helpful information that can better help you live the American dream.
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