If your small business has been selected for an IRS audit, having qualified expense receipts is essential. You will need to be able to show the IRS auditor that all of the deductions that your business claimed on its return are viable. Following IRS audit guidelines on receipts can help increase your chances of passing the audit.

Dollar Amounts

If the dollar amount of items you purchased and deducted from your taxes was in excess of $75, the IRS will need to see the receipt to warrant the deduction. While it is always important to retain receipts for anything you plan to deduct from your taxes, they will only ask you for receipts for purchases over that dollar amount. However, you may want to have your business credit card statements handy for smaller purchases just in case you are questioned about them.

Adequate Records

The IRS states that companies must retain adequate records. This means keeping track of all of your expenditures that will be written off and maintaining actual physical records in addition to any digital archiving you use. These receipts and documents must be retained for at least three years. During your audit, you may be asked to supply records dating back three years if your deductions are questionable. These documents must be kept safely stored. However, if you lost your records due to fire, flooding or a natural disaster, the IRS will accept digital copies.

Timely Kept Records

Keeping a daily business journal is a very effective way to document business expenses. This is particularly important for business travel. The IRS will accept journal entries that show times and dates of travel. If you do not have receipts for purchases greater than $75, if you can prove your track record of being at a certain place at the time the expense was incurred it will help you during the auditing process.

What Else May Suffice

Credit card statements may be used to prove purchases if receipts are not available. The IRS may also accept canceled checks as proof of expenses. However, canceled checks must be accompanied by another form of proof, such as your business journal or other receipts you may have for that time period. You may also need to provide written proof for an expense if its purpose is not clear. For example, a business dinner receipt must be accompanied by a brief explanation of the purpose of that dinner.