The IRS and Your Expense Report

Have you ever wondered about your company’s Travel and Expense Policy?  Chances are that if you’ve thought about it at all, it’s been at the end of the month as you’re working on an expense report.  In general, these tend to be written policies, they reimburse only certain kinds of expenses and they almost always require that you submit receipts to back up the items on your expense report.

And if you work in the US, these policies tend to look pretty similar.  In part, that’s because the IRS generally allows businesses to take a deduction for certain qualified business expenses.  A business can deduct those travel, meal and entertainment expenses that are necessary to carry on the business.

To be deductible, expenses need to meet several IRS requirements, including that employees adequately account to the business for their expenses.  Our friends at the IRS give clear guidance on the types of records that will keep them happy.

Not surprisingly, receipts satisfy the IRS requirement for documentary evidence.  Interestingly, the IRS doesn’t require documentary evidence where you have an expense (other than for lodging) that is less than $75.  But you may want to keep those receipts because many companies require receipts for all expenses, irrespective of amount.

The good news is that the IRS allows you to use scanned receipts to meet these requirements, provided that your electronic storage system meets a few requirements.  These include that the system can index store, preserve and reproduce the electronic image.