The IRS Receipt Rules Behind Every Missing Document Request

What Section 274(d) Requires for Each Category of Expense

The IRS does not leave much guesswork about what backup belongs in client files. Section 274(d) of the Internal Revenue Code spells out the substantiation rules for travel, meals, entertainment (before the Tax Cuts and Jobs Act), gifts, and listed property, including vehicles and computers. Each type of expense comes with a checklist of details that must be proven if the client is ever audited.

The requirements all center on four elements: amount, time, place, and business purpose. These are not just helpful for the IRS; they are line items every bookkeeper and accountant must chase down for a complete file. The goal is to show not just that money left the account, but that it did so for a legitimate business reason, at a specific time and place, for an allowed purpose.

For travel, meals, and lodging, the IRS wants to see who was present, where the expense occurred, when it happened, and how it relates to the business. For gifts, the recipient's name and the business relationship are necessary, along with the amount and date. For vehicle use, the documentation must support each trip's date, destination, miles driven, and purpose. If any of these are missing, the deduction can be disallowed, even if there is no question the expense was real.

Keep reading: A January 1099 Checklist for Bookkeepers With 40 Clients

The $75 Exception and the Lodging Carve Out

Most clients remember the $75 threshold, but few understand where it applies, and where it does not. The IRS allows businesses to claim most expenses under $75 without a receipt, provided there is another form of documentation, such as a contemporaneous log or a note. But this is not a free pass for every small charge.

The exception does not apply to lodging, regardless of amount. Every hotel bill, even for one night under $75, still requires a proper receipt. It also does not apply to expenses for listed property such as vehicles, or to other categories the IRS singles out for stricter recordkeeping, such as certain gifts and entertainment (where those are still deductible). For meals under $75, a written record can be enough, but anything travel- or lodging-related must have an actual receipt.

Bookkeepers must double-check every request: if a client uploads a credit card charge for $65 at a hotel, more will be needed. The rule on its face sounds simple, but the carve outs create traps for the unwary.

Adequate Records Versus Sufficient Corroborating Evidence

When it comes to proving a deduction, the IRS recognizes two main tracks: adequate records and sufficient corroborating evidence. Adequate records usually means a receipt, invoice, or bill that lists all required details, plus a notation of the business purpose. This is the gold standard. The IRS wants the original or an exact copy, prepared at or near the time of the expense.

When Adequate Records Are Missing

If a receipt is lost or never available, the IRS may accept "sufficient corroborating evidence." This means a combination of other documentation, such as diaries, logs, calendars, or third-party statements, that together prove the expense. But the bar is high. The evidence must be specific and credible enough to prove each element: the what, when, where, and why.

This is why client memory or a vague explanation rarely works. The IRS expects the taxpayer to take reasonable steps to reconstruct records, contacting the vendor for a duplicate, or gathering supporting details from email, calendars, or logs. The process is time consuming, and the result is always less certain than having the right paperwork from the start. For bookkeepers, the message is clear: ask for receipts and records before the trail goes cold.

Keep reading: How to Run a Repeatable Month End Close Across 30 Clients

Mileage Logs: The Four Elements Every Entry Needs

Vehicle deductions are a regular friction point with clients. The IRS treats vehicle use, whether actual expenses or the standard mileage rate, as "listed property." This means there is zero flexibility: a mileage log must be kept and must show all four required elements for each trip.

• Date: When the trip took place.
• Destination: The location of the business stop.
• Miles Driven: The number of miles for each specific trip (not just total for the week or month).
• Business Purpose: A note explaining why the trip was necessary for the business.

Logs must be kept contemporaneously, not reconstructed after the fact. The IRS will discount entries that appear made up at year-end, or logs with round-number mileage entries for every day. Electronic logs are accepted, as long as they are accurate and contain all required information.

Commuting does not count. Only trips between business locations, or from home to a temporary worksite, qualify. Bookkeepers should verify that logs do not include routine commutes, which are never deductible under IRS rules.

Scanned Images and Electronic Storage Under Rev. Proc. 97-22

Paper receipts get lost, fade, and clutter up client offices. The IRS addressed this reality in Revenue Procedure 97-22, which allows businesses to store scanned copies or digital images of receipts and other records. If a client uses a scanner or a phone app to capture receipts, the IRS will accept these images, provided the system meets a few rules.

Requirements for Electronic Records

• Accuracy: The scanned image must be a true and complete copy of the original, showing all information clearly.
• Accessibility: The records must be easily retrievable and viewable for as long as the IRS requires retention.
• Security: The storage system must prevent edits or deletions that could compromise document integrity.

PDFs, JPEGs, and proprietary formats are all acceptable if they capture the entire document. The IRS does not require a specific resolution, but the document must be legible and unaltered. Cloud storage, document management systems, and dedicated receipt apps all qualify, as long as they follow these principles.

Bookkeepers should encourage clients to scan or photograph receipts immediately and store them in a consistent folder or system. This reduces lost documents and makes year-end review more efficient. When an auditor asks, "Show me the backup for this expense," an electronic copy is as good as the original.

See how ReceiptChase handles this for bookkeeping and accounting

Why a Bank Statement Alone Is Not Substantiation

Clients often ask if a credit card or bank statement is enough to justify a business expense. The answer, almost always, is no. Statements show the date and amount paid, and the vendor. But they do not prove what was purchased, who was present, or why the expense was business-related.

For travel and meals, this is especially critical. A statement might show a charge at a restaurant, but it does not reveal who attended the meal or the purpose. For vehicle expenses, it might show a gas station charge, but not whether the gas was for business or personal use. The IRS wants details that only a receipt or a detailed log can provide.

There is a narrow exception for certain routine expenses, such as monthly subscription fees, but only if the nature of the expense is unmistakable and it is clear the purchase was ordinary and necessary for the business. For almost every other type of expense subject to Section 274(d), the statement alone will fall short.

Bookkeepers should explain to clients that the paper or PDF statement is only one part of the backup. It must be paired with receipts, logs, or other documentation for a deduction to stand up to scrutiny.

How Long the Client Has to Keep the Originals

Record retention is a regular point of confusion for clients and new staff alike. The IRS rule is to keep all receipts, logs, and supporting evidence for as long as the return may be audited. For most taxpayers, this is three years from the date the return was filed or the due date, whichever is later. However, if the client omits more than 25 percent of gross income, the period extends to six years. There is no statute of limitations for fraudulent returns or those not filed at all.

For assets such as vehicles or equipment, receipts should be kept for as long as the asset is owned, plus the standard retention period after it is sold or disposed of. This covers potential depreciation and basis questions. Electronic copies are allowed, but they must be complete, accurate, and accessible for the full period.

Clients sometimes want to toss paperwork once a return is filed, but this can be risky. If the IRS questions a deduction two years later, missing records can turn a legitimate expense into a denied deduction, plus penalties and interest. Bookkeepers should reinforce the habit of organized storage, whether digital or paper.

State tax agencies may have their own retention requirements, often matching the IRS but sometimes longer. It is safest to check state rules for each client.

When in doubt, keep the records.

Most bookkeepers spend more time than they want chasing missing receipts, reconstructing logs, and clarifying details with clients who did not know what to save. Automated document request tools that create checklists, send reminders, and show status by client can cut the time spent on this work, reduce errors, and keep files audit-ready. For those supporting dozens of clients, systems that manage and track each client's open items help keep everyone on the right side of the IRS rules.