We are looking for some options to not require receipts on expense reports ...

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Q. (cont.) 

We receive the credit card transactions through a feed that shows the transaction and information about merchant, date and dollar amount. With that said, knowing that the transaction was incurred by the credit card holder and settled with our card vendor, we are thinking through the true need to obtain the copies of the physical paper receipts.

A.

All companies have varying policies on obtaining receipts. Some require "all" receipts, which is very costly when compared to the benefit.

Most require receipts over $25, some (although very few) an even higher amount. However, the government requires receipts over $75 for T&E.  

But what constitutes a "receipt?" The IRS considers a receipt "adequate evidence".  A credit card transaction would not suffice because it does not contain details required by the IRS, which specifies a receipt must contain:   

  • The name and location of purchase
  • Dates service/purchase was used
  • Separate amounts for charges (e.g., a hotel bill that detailslodging, meals, telephone calls and other charges)

Quoted from the IRS:

Adequate evidence. Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information.

  • The name and location of the hotel.
  • The dates you stayed there.
  • Separate amounts for charges such as lodging, meals, and telephone calls.

A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information. The name and location of the restaurant.

  • The number of people served.
  • The date and amount of the expense.
  • If a charge is made for items other than food and beverages, the receipt must show that this is the case.

In addition, either on the receipt or on your expense report document the business purpose and who attended the dinner. 

Canceled check. A canceled check, together with a bill from the payee, ordinarily establishes the cost. However, a canceled check by itself does not prove a business expense without other evidence to show that it was for a business purpose.

If your T&E expense report data satisfies the above information requirements, then you should be in compliance. We also encourage you to seek the advice of your tax advisors, who know your specific situations and what information you receive on your T&E expense reports.

With regard to retention of records and receipts, the IRS record guidelines are concerned with any records that are relevant to tax reporting and returns, including records for employment taxes and information reporting. (See IRS Publication 583, Starting a Business and Keeping Records, and also the AP&P2P Network's article on record retention.

However, you may want to consider raising the amount of expenses requiring receipts to $75, which will save you many hours of reconciliation and the time and expense of managing all those smaller receipts.

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