People keep receipts for 2 reasons: to make tax preparation easier, and in case of an audit. Keeping receipts is super important for taxpayers, but...things happen. The receipt you kept from dinner was washed with your pants. Your pet gerbil ate it. You ate it...
First, breathe. Do not panic!
While bank statements can be useful for getting your taxes organized, they unfortunately don't cut it for an audit. These statements only show where you spent the money, how much you spent, and when you spent it (such as “Freelance Supplies Inc. - $159.00 - 2/4/2020”). For an audit you have to show what you bought and why it was a reasonable business expense in addition to the where, how much, and when.
Luckily, if you can't find your original receipt, written records have been deemed acceptable methods of proof by the IRS.
If you have expenses with no record at all (say you bought something off of Craigslist), take a picture of the item, then write down where, when, and why you bought it, as well as how much you paid. Also note if you bought it used or brand new. We have a super useful Expense Tracker on our website that can help keep you organized!
Other business expenses to record include car mileage, travel meal per diems, and home office costs. We have related articles here on our FAQ to help you understand these different categories.
Long Story Short
The better you are at keeping records of your expenses, the easier it will be to do your taxes and the faster you could get organized if you are ever audited.*
Want to talk with one of our advisors about your expenses? Send us an email at firstname.lastname@example.org.
*The likelihood of an audit is low, but they do happen. How organized your receipts are will determine whether this process takes a few hours or a week.