The Myth of Paper Receipts for Taxes

by
Justin W. Jones, EA, JD
Updated 
March 26, 2022
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Across America, 1099 contractors and freelancers everywhere continue to stuff their wallets and glove compartments with paper receipts.

Keeping track of paper receipts is stressful. They're easy to misplace, tear, or smudge. And by tax time, the ink has likely rubbed off the paper — which might be little more than torn pocket lint by that point anyway.

Here's the liberating truth about paper receipts: you don't need them.

Contents

What the IRS says about paper receipts

Freelancers often think they need receipts for every single tax deduction. That's actually a myth. To debunk it, we're going straight to the source — the IRS.

The IRS says to keep records for your business tax deductions indicating:

  • What you bought
  • When you bought it
  • How much you spent

And guess what? It doesn't mention requiring paper receipts at all.

Instead, the IRS says, quite bluntly, that “Electronic information management has become the standard in the private sector... instead of continuing to use traditional paper books”. 

For an organization not exactly known for being progressive, that’s about as clear as it gets: paper is out.

How to keep records for taxes

You can satisfy the IRS’s need for documentation with two simple things:

  • Credit card statements
  • Bank statements

They contain all the critical information — what, when, and how much. 

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One exception: Cash purchases of over $75

Even cash purchases don’t need receipts, as long as they’re “reasonable and ordinary.”

We call this principle the “Cohan rule,” established in the famous Cohan vs. Commissioner Circuit Court of Appeals case.

Rule of thumb: Keep your receipt if you spent more than $75 in cash.

If you took a dozen clients out for lunch at the best steakhouse in town and then paid with cash, you should probably hold onto that receipt. 

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What to do if you get audited

If you do get audited after going paperless, don’t worry. The IRS is legally required to accept digital forms of proof for your write-offs, including bank and credit card statements.

Even if you forgot to document a cash purchase of over $75, you’re not out of luck. You can use digital breadcrumbs like emails and calendar events as proof.

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Bottom line: Stop hoarding receipts

At Keeper Tax, we’re on a mission to expose regressive misconceptions like the paper receipts myth.

At the end of the day, we hate seeing freelancers and contractors held back from getting the tax savings they deserve.

You can bet that corporations claim every tax write-off possible. So you should too. And antiquated recordkeeping practices should not be holding you back.

Justin W. Jones, EA, JD

Justin W. Jones, EA, JD

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Justin is an IRS Enrolled Agent, allowing him to represent taxpayers before the IRS. He loves helping freelancers and small business owners save on taxes. He is also an attorney and works part-time with the Keeper Tax team.

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At Keeper Tax, we’re on a mission to help freelancers overcome the complexity of their taxes. That sometimes leads us to generalize tax advice. Please email support@keepertax.com if you have questions.