Q&A: If I have expenses on my bank statement, do I still need a receipt?

Today we’re going to be talking about a frequently asked question, and it’s all about receipts!

If I had a list of FAQ’s, this one would probably be at the top. You’re going to want to tune in to this because it’s a common misconception that I don’t want you to get confused by.

The question that I get asked all the time is “If I have my expenses on my bank statement, isn’t that enough? Do I still have to keep receipts?”

And the answer is yes. And like I said, this is a common misconception. If you haven’t been keeping your receipts, I don’t want you to dwell too much on the past, but let me give you a little background of why this is important.

Receipts in general are important to keep for the IRS sake. Now, the term audit gets thrown around in different ways in sometimes positive and sometimes negative context. So, in this context and IRS audit means that an IRS agent would take your tax return and go through the numbers.

They’re going to want to verify and figure out things like:

• Are these numbers legitimate?
• Are they either over or understated? Meaning, did you actually make more and you didn’t report it or did you make less and you. Added some numbers for some reason.

They’re going to go through and try to legitimize the numbers. How they’re going to do that is looking at your invoices, your receipts, your things, to validate and make sure that these were actually business expenses and not just stuff that you were making up.

When you’re looking at your bank statement and you see a charge from Amazon, an IRS auditor isn’t going to be able to determine if the Amazon charge for pajamas or for office supplies just by having that amount come through on the bank statement. That’s why it’s really important to keep receipts. Especially for those kinds of places that it might be a little bit more gray because otherwise they may throw out. Those expenses, which ultimately lower your tax bill, because they’re tax deductible.

Hopefully you will never be audited by the IRS but best business practice is to keep those receipts so that it can be very clear to the auditor.

I do have another episode about ways to manage receipts if you need a system.

I know sometimes when I talk about this, people freak out. They’re like, oh my gosh, I’ve thrown away all my receipts up until now. And you know what? We can’t dwell on the past too much. If you don’t have a way to go back and reproduce it well, we’ll just cross that bridge when we get to it. But going forward, it is the best practice to keep your receipts. Go check out that episode where I talk about different ways to do that.

In summary, you can do this in multiple ways.

• You can use QuickBooks
• You can just put pictures on a Google drive
• Pictures on your desktop.
• Keep an email folder.

Those are all a few of the ideas that I give in that episode to manage keeping your estate receipts. And sidebar one awesome feature about QuickBooks is that you can download the app on your phone, take a picture of your receipt, and it will automatically sync into your QuickBooks. That way you have one place where you can house all of that stuff.

TLDR? The answer to the question of, ‘do I have to keep my receipts if I have my bank statement?’ Yes. You definitely still need receipts to show if those expenses and charges or legitimate business expenses are not.

Until next time, happy bookkeeping.

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