This article addresses common questions about business receipts and record-keeping, as required by the IRS for private practice business owners.
What should a business receipt include?
A receipt is a document that proves you incurred a business expense. For a receipt to be considered valid by the IRS, it should generally include:
- Amount: The cost of the expense.
- Date: When the expense was incurred.
- Vendor/Payee: Who you paid (e.g., store name, service provider).
- Description: What you purchased or the service you received.
- Proof of Payment: This could be indicated on the receipt itself (e.g., "Paid," "Cash," credit card details) or corroborated by bank or credit card statements.
For some business expenses like travel, meals, or entertainment, additional details may be required.
How long do I need to keep receipts?
The general rule of thumb is to keep business receipts for as long as the IRS can audit your records. Usually, the IRS audits three years' worth of records. Keep your business receipts for at least three years in case you need to show proof of purchases or sales.
Note: Heard will request receipts at year-end for any assets purchased for $2,500 or more, as these are required for annual taxes.
Do I need to upload a receipt for every transaction?
Heard does not require you to upload receipts for every transaction. This feature is simply for your own safekeeping. In the unlikely event of an audit, the IRS requires receipt of any business purchase of $75 or more.
Can I upload a receipt that includes both business and personal purchases from my business bank account?
Yes, it is optional, but we recommend uploading receipts, including commingled receipts, to ensure you have a copy of the business purchases for your records.
Can I upload receipts for business purchases made from a personal bank account that is not linked to Heard?
Yes, although you would need to manually add a transaction in your Heard account business bookkeeping to upload the receipt to that specific transaction.
Do I need to save the original paper receipts, or can they be digital or a photo of the receipt?
You can save receipts as paper copies, digital copies, or photos. The important point is that you have a copy somewhere in your records.
Do I need to upload receipts to my Heard account if I am keeping them on my own computer?
No, it is completely up to you where and how you save your receipts. We allow you to upload receipts to the transactions they relate to, keeping everything in one place. If you have a system for saving receipts that works well for you, please continue doing it that way!
What if I don't have the receipt, but I have the purchase on a statement?
In general, statements do not serve as receipts. That said, statements can be acceptable when you do not have a receipt, though they will likely require additional documentation to support them in the event of an audit. Statements don’t include the specific items purchased; they only display the total amount spent. This would be problematic if you purchased personal and business items together, as the statement would not help differentiate the business from personal expenses, unlike a receipt. Also, some expenses, such as business meals, may require additional supporting documentation beyond a statement to prove they were business-related.
Will Heard use my statements or only my receipts to account for write-offs, deductions, expenses, etc?
Heard will primarily use your monthly business bank statements to complete monthly reconciliations to account for income and expenses for your business. The exception is that Heard will request receipts at year-end for any assets purchased for over $2,500, as these are required for annual taxes.
The IRS requires you to retain receipts as documentation for your expenses. However, Heard and your tax preparer generally only need receipts for expenses of $2,500 or more, as those are typically recorded as fixed assets rather than regular expenses.
How can I download receipts uploaded to Heard?
You can easily access and download your receipts by:
- From your Heard Account
- Go to Your Practice, then Documents
- At the top of the Documents page, click on the Receipts tab.
- You can then view/download/print all the receipts you have uploaded.