Toss the Receipts: A Modern Guide for Freelancers and Contractors

Ever found yourself drowning in a sea of crumpled receipts, wondering if there’s a better way to keep track of your expenses? If so, you’re not alone. For many 1099 contractors and freelancers, the habit of stuffing wallets, drawers, and glove compartments with paper receipts feels like the only way to stay tax-compliant. But it doesn’t have to be this way.

The Hidden Costs of Paper Receipts in Tax Preparation

Keeping track of paper receipts isn’t just stressful — it’s inefficient. Receipts can easily be lost, torn, or smudged. By the time tax season rolls around, you might find yourself staring at faded ink and wondering what the receipt was for in the first place. Plus, clutter from years of paper records can make organizing your finances overwhelming.

IRS-Approved Alternatives to Paper Receipts

Here’s the liberating truth: Paper receipts aren’t your only option for recordkeeping. In fact, they’re often not the best option.

What Does the IRS Say?

Contrary to popular belief, the IRS doesn’t require physical receipts for every deduction. Instead, they require records that indicate:

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

Physical receipts are just one way to meet these requirements. The IRS also accepts various other forms of documentation.

Modern Recordkeeping Options

Thanks to modern technology, it’s easier than ever to maintain accurate and audit-ready records. Here are some alternatives the IRS recognizes:

• Bank Statements
• Credit Card Statements
• Invoices
• Canceled Checks or other proof of electronic funds transfer
• Account Statements

These documents often contain all the information needed for tax purposes: what, when, and how much. Plus, they’re less likely to get lost or damaged than paper receipts. If you’re using our bookkeeping subscription, we’ll automatically scan your accounts for deductible expenses and generate the necessary records for you.

When Are Receipts Not Required?

Rule of Thumb: Receipts aren’t strictly required for expenses under $75. This applies even for cash purchases, as long as the expense is "reasonable and ordinary." This principle is backed by the "Cohan Rule," a tax precedent that allows taxpayers to estimate write-offs for work-related expenses without a physical record.

Exceptions to the Rule

There are a few situations where receipts are still essential:

• Cash purchases over $75: For example, if you pay cash for office supplies or client gifts exceeding this amount, you’ll need to keep the receipt.
• Business travel, meals, and gifts: Special rules apply to these categories, and receipts can be crucial for substantiation.
• Travel lodging: Even if your lodging costs less than $75, it’s a good idea to keep receipts for audit purposes.

Special Rules for Business Expenses

Some expenses require additional documentation beyond a receipt:

🗺️ Business Travel: Keep records of the purpose of the trip, dates of travel, and expenses incurred. Digital breadcrumbs like booking confirmations or itinerary emails can also suffice.

🍽️ Business Meals: Note the names of attendees and the business purpose of the meal in addition to keeping the receipt.

🎁 Business Gifts: Document the recipient, the gift’s purpose, and its value.

Streamline Your Tax Prep

Digital tools and services can make tax preparation much simpler. Bank and credit card statements, combined with calendar events or emails, provide a clear audit trail. At Personal Touch Tax, we take the guesswork out of recordkeeping. Our team ensures you’re always ready for tax season — and any potential audits.

Key Takeaway: Paper receipts are no longer the cornerstone of tax compliance. By embracing modern recordkeeping practices, you can save time, reduce stress, and avoid clutter.

At Personal Touch Tax, we’re on a mission to empower freelancers and small business owners to conquer financial challenges. We simplify taxes so you can focus on growing your business and achieving financial freedom. Contact us to learn how we can help you save on taxes and build a brighter financial future.