Client Question: Do I need to keep business expense credit card receipts?
With the increase in audits (both federal and state) over the past year, knowing what documentation is needed in the case of an audit is essential. Many businesses think that a credit card statement is sufficient in proving a business expense. This is not the case. In the eyes of the IRS, credit card statements are the same as a cancelled check. Yes, it proves that an expense was incurred, and paid, however it does not prove that the expense was an “ordinary and necessary” business expense. For example, you purchased some items from an office supply store with your credit card. Without the receipt you have no proof that this was a business expense and not, let’s say, school supplies for your children. Another good example is a restaurant charge. In this case, make sure to keep the receipt as well as a note documenting who you took out to eat and the purpose of the meeting. The receipt alone will not prove that the meal had a business purpose, so it is good to keep notes in case of an audit.
Another reason to keep credit card receipts is to match the charge on your receipt and the charge on your credit card statement. You want to make sure you are being charged the correct amount.
Finally, saving credit card receipts is a good internal control. If other people at your office have a company credit card, you can review the receipts from their credit card charges to make sure the purchases are legitimate business expenses and not personal charges.