You paid for it with the business credit card. It’s recorded in QuickBooks. Your bookkeeper categorized it correctly, and it appears on your Profit & Loss statement. So that proves it’s a legitimate tax deduction, right?
Not necessarily.
The IRS requires taxpayers to be able to substantiate the business expenses they deduct. A recent U.S. Tax Court case provides an important reminder: having an expense recorded in QuickBooks does not, by itself, prove it qualifies as a tax deduction. For small-business owners and real estate investors, keeping receipts and other supporting documentation remains an essential part of good recordkeeping.
What Does the IRS Require for Business Expense Receipts?
The IRS requires businesses to maintain records that support the income and expenses reported on their tax returns. Depending on the expense, your records may need to establish:
- The amount
- The date
- What was purchased
- The business purpose
- Where appropriate, the person, property, or project involved
Supporting documentation can include receipts, invoices, canceled checks, bank and credit-card records, mileage logs, and other evidence. The IRS explains that supporting documents should back up the entries in your books and tax return.
But there is an important distinction: proof that you paid for something is not necessarily proof that it was a deductible business expense.
Recent Tax Court Case: QuickBooks Records Weren’t Enough
That distinction was demonstrated in Simmons v. Commissioner, T.C. Memo. 2026-34, decided in April 2026. The taxpayer presented QuickBooks transactions showing the date, amount, and payee for numerous expenditures, along with categories such as gasoline, parking, car repairs, vehicle leases, and mileage.
The problem? The Court found that the evidence did not adequately establish the business purpose of those vehicle expenses and denied the deductions. QuickBooks entries relating to other deductions were also insufficient where the necessary supporting information was missing.
The lesson is not that QuickBooks records have no value. Far from it. The lesson is that:
- QuickBooks shows how a transaction was recorded.
- It does not necessarily prove why the expense was incurred or whether it qualifies as a tax deduction.
- A Profit & Loss statement or General Ledger is part of your accounting records.
- It should not be viewed as a substitute for the source documentation behind those records.
Does the IRS Require a Receipt for Every Business Expense?
Not always. You may have heard of the IRS “$75 rule.” Under certain IRS substantiation rules, documentary evidence such as a receipt generally is not required for an expense of less than $75, with lodging being an important exception. There is also an exception for certain transportation expenses where obtaining a receipt is not readily practical.
However, an expense under $75 is not automatically deductible just because you do not need a receipt. You still need adequate records establishing the expense and its business purpose. IRS Publication 463 explains the documentary-evidence rules and the information that adequate records should support.
That is why my practical recommendation is much simpler: keep the receipt anyway. With digital receipts and smartphones, keeping documentation is easier than ever, and remembering what a $47 transaction was for three years later can be considerably harder.
Business Meals: The Receipt Is Only Part of the Story
Meals are an excellent example of why the transaction itself is not enough. Suppose your business credit card shows: Texas Roadhouse, $96.42.
That proves you spent $96.42 at Texas Roadhouse. It does not establish whether you were meeting a client or having dinner with your family.
For business meals, retain the itemized receipt and record the business purpose and business relationship while the details are fresh in your mind. For example:
Lunch with John Smith, ABC Construction, discussed proposal for renovation work at Oak Street rental property.
That is considerably stronger documentation than: Meals, $96.42.
Qualifying business meals are also generally subject to the 50% deduction limitation. Your tax professional can advise you on how the rules apply to your particular situation.
As a practical habit, make the note at the time of the meal, either on the receipt, in a receipt-capture app, or in the transaction memo. Waiting until month-end often means the details are already fuzzy. The payment record establishes the amount and date, but the note explains the business reason for the expense.
Gas Receipts and Business Mileage
Vehicle expenses are another area where business owners can get into trouble. If you claim actual vehicle expenses, receipts can document gasoline, repairs, maintenance, and other costs. But if the vehicle is also used personally, those receipts do not establish what percentage of its use was for business.
That is why maintaining a contemporaneous mileage log is so important. Your records should generally identify:
- Date
- Destination
- Business purpose
- Business miles driven
If you are using the standard mileage method, the mileage record becomes even more important. A shoebox full of gas receipts does not prove your business mileage. Neither does a QuickBooks account called Auto Expense.
A useful log is made as trips occur, not rebuilt at year-end from memory. It can be kept on paper, in a spreadsheet, or in a mileage-tracking app, as long as it captures the facts consistently. For a vehicle used partly for personal purposes, the log helps establish the business portion rather than simply showing that you paid for fuel or repairs.
Bank and Credit Card Statements Aren’t Necessarily Enough Either
Consider another common transaction: Amazon, $327.46.
Your credit-card statement proves you paid Amazon. But what did you buy? Office equipment? Rental-property supplies? Tools? Something personal?
The Amazon invoice or receipt identifies what you purchased. Your records should then establish the business purpose where it is not obvious. Think of a strong documentation trail as:
Payment + Receipt/Invoice + Business Purpose + Accounting Record
Together, they tell the complete story.
Real Estate Investors Should Be Particularly Careful
Receipt documentation is especially important for rental-property owners and real estate investors. Suppose your credit-card statement shows: Home Depot, $847.26.
What was purchased? Which property was it for? Was it a routine repair or a capital improvement?
Those answers can affect not only whether the expenditure is deductible but also how it should be treated for tax purposes. For investors with multiple properties, identify the specific property whenever possible. Instead of simply:
Home Depot, $847.26
Your records might say:
Home Depot, materials to replace damaged bathroom flooring, 123 Main Street.
That gives your bookkeeper and tax professional considerably more useful information.
Do not throw away documentation for major improvements simply because it is old. Records relating to roofs, HVAC systems, renovations, and other capital improvements can remain important for depreciation and for establishing a property’s adjusted basis when it is eventually sold. The IRS advises keeping property records until the applicable period of limitations has expired for the year in which the property is disposed of.
Can You Keep Business Receipts Digitally?
Yes. Good recordkeeping does not require filling filing cabinets with paper. Receipts and invoices can be scanned, photographed, downloaded, or stored electronically. You can also attach them directly to the appropriate QuickBooks transaction.
In fact, digital storage can be preferable for thermal-paper receipts, which have an unfortunate habit of fading into blank pieces of paper over time. What matters is that your records remain legible, organized, and accessible if you need them.
The most useful system is the one you will actually maintain. Create a routine for forwarding email receipts, saving vendor invoices, and photographing paper receipts before they disappear into a drawer. When an image or PDF is attached to the related QuickBooks transaction, the payment record and supporting document stay together, making future review much easier.
How Long Should You Keep Business Receipts?
The IRS generally says records supporting deductions should be retained for three years from the date the applicable tax return is filed, although longer periods apply in some circumstances. The IRS record-retention guidance explains the periods that may apply, including special rules for property records.
Real estate investors should therefore be especially careful with documentation relating to:
- Property purchases and closing costs
- Major improvements
- Depreciable assets
- Refinancing
- Property sales
These records may eventually be necessary to establish depreciation, adjusted basis, and gain or loss.
Your Bookkeeper Can’t Recreate a Missing Receipt
Your bookkeeper can categorize transactions, reconcile your accounts, correct errors, and produce accurate financial statements. But there is something we cannot manufacture after the fact: the documentation showing what you actually purchased and why it was a business expense.
That is ultimately the business owner’s responsibility. Good bookkeeping works best when the accounting records and supporting documentation work together.
This is especially important during a cleanup. A bookkeeper can organize historical transactions and identify questions, but cannot reliably reconstruct the purpose of an unfamiliar charge from a bank feed alone. Supplying receipts, invoices, property details, and brief notes as questions arise helps turn a cleanup into books you can rely on, rather than a report built on guesses.
A Simple Rule for Business Expenses
Whenever you incur a business expense:
- Keep the receipt.
- Record the business purpose.
- Identify the property or project where appropriate.
- Maintain your mileage records.
- Whenever practical, attach the documentation directly to the transaction in QuickBooks.
It takes seconds when you do it at the time. Reconstructing several years of expenses during an IRS examination is another matter entirely.
Consider making documentation part of the same routine as entering or reviewing transactions. At the end of each week or month, look for charges without supporting documents or a clear memo while the facts are still available. That small review can prevent a pile of unanswered questions at tax time, during a bookkeeping cleanup, or when you need to explain a transaction to a tax professional.
For property owners, reviewing transactions by property is particularly helpful. A clear description on each receipt or attachment makes it easier to distinguish recurring repairs from improvement work and to see which property incurred the cost.
The Bottom Line: “It’s in QuickBooks” May Not Be Enough
QuickBooks is an extremely useful accounting system. But it is not a substitute for proper supporting documentation. The recent Simmons v. Commissioner decision provides a timely reminder that simply recording an expense in QuickBooks does not necessarily substantiate the deduction.
Your accounting records tell the financial story. Your receipts, invoices, and supporting records provide the evidence behind that story.
So do not wait until tax season or an IRS examination to start looking for receipts. Keep them as you go. Because when the IRS asks what is behind the number on your Profit & Loss statement, “It’s in QuickBooks” may not be the answer they are looking for.
Your books should help you move forward, but the documentation behind them helps protect the deductions you have claimed.
This article is for general informational purposes and is not tax or legal advice. Consult a qualified tax professional about your specific circumstances.