I run a small landscaping business and for years I kept every receipt, even $3 gas station coffees. It was a nightmare. Last year I said screw it, I only keep receipts over $75 and just log everything else in a spreadsheet. My accountant didn't freak out. But now I'm second-guessing after a buddy got audited. Am I playing with fire?
Recordkeeping
I stopped worrying about keeping every tiny receipt, but should I?
You're probably fine. The IRS isn't going to hang you over a $3 coffee. That said, a spreadsheet entry is not a receipt. If you claim it, you should have it. But audit risk for small landscaping? Low unless you have other flags.
Wait, you kept coffee receipts? Why? Those aren't even deductible usually unless it's a meeting or something. You might have been wasting your time on the wrong receipts.
I do the same thing except I don't even do the spreadsheet. I just shove everything in a shoebox and pray. My accountant is a saint. Honestly though, my buddy got audited last year and they didn't even ask for receipts under $50. They focused on big stuff.
The rule is you need proof of expense. A spreadsheet is a log, not proof. A bank statement is also not proof. So technically you're not compliant. But practically, a coffee receipt is not going to sink you. The bigger question is whether you're claiming things you can't substantiate. What's your total expense claim look like?
My accountant told me to stop keeping receipts under $10 too. Said it's not worth the shoebox space. He also said to scan everything I do keep. So now I have a folder on my phone. Way better.
This thread is making me feel bad about my own shoebox.
Also, for the record, an audit isn't just about receipts. They look at your income vs expenses, lifestyle, etc. If your landscaping business claims 40k in expenses on 50k revenue, they might dig. If you're just sloppy with small receipts, they'll probably adjust and move on. Not legal advice, just my experience.
Yeah, my buddy had a 30% expense ratio and they didn't even blink. But he also had every receipt in a binder. So maybe don't listen to me.
I'm not saying you're definitely fine, but I've been dooing the over-$75 thing for five years and no letters yet. And if they ever come knocking, I'll just tell them to look at my bank statements. They can see the gas station charges. What are they gonna do, deny the whole expense because I didn't keep the paper? Maybe. But I'll take my chances