For travel and entertainment expenses, the IRS requires receipts for every expenditure of $75 or more, and all hotels charges. (Note that many companies require a receipt for any expenditure of $25 or more.)
What the IRS is concerned about is the evidence of the transaction. The following is an excerpt from IRS Publication 463, the guidelines that outline the documentary evidence supporting an expense transaction such as charges for T&E:
"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 requirement 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 TAPN's Record Retention Checklist).