How Long Do I Need To Keep Receipts?

Receipts are proof of a sales transactions and it is important that you hang on to these receipts just in case you need to provide proof to the IRS, retailers, or other entities. Here are a few common reasons why you should keep your receipts:

1. Proof of Purchase

Keep records for: 90 days

Receipts serve as proof that you have made a purchase, which can be essential when you need to return or exchange items, especially for higher-value goods. This piece of paper or digital record serves as tangible evidence of the transaction between you and the seller. For retailers, receipts help prevent fraud, streamline the process by allowing quick verification, and, in the context of warranties, serve as a prerequisite for accessing repair or replacement services. Without receipts, you might face challenges in prooving your purchase, making these little pieces of paper invaluable when it comes to protecting your consumer rights and ensuring fair transactions.

2. IRS Audits

Keep records for: 3-7 years

If you are an independent contractor or own a small business, the IRS may decide to audit your finances. It is likely that you will be required to provide proof of any suspect transactions. The requirements of the IRS may vary depending on where you are located and local tax laws. However, it is a good idea to keep the signed receipts for at least three years. In some cases, the IRS suggests keeping certain receipts for 7 years:

  • Keep records for 3 years if situations 4, 5, and 6 below do not apply to you.
  • Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
  • Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
  • Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
  • Keep records indefinitely if you do not file a return.
  • Keep records indefinitely if you file a fraudulent return.
  • Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

Imagine that you have been audited, but there aren't any receipts. It becomes very difficult to justify income from certain transactions and any information they have, as well as the tax return. You are dealing with tax fraud in the worst-case scenario.

3. Addressing Chargeback Disputes

Keep records for: about 18 months

Customers can request chargebacks from banks. Merchants should also be aware that chargebacks can take place between 60 and 540 days, depending on the credit card company or issuing bank.

The signed receipts will prove that the customer has agreed to purchase in such a dispute. The receipt is proof that you were given the card with which you entered the customer's personal information at the POS terminals. The funds were then transferred to the merchant account. The bank can match the signatures on the receipt to those on file for customers. It serves as proof that the cardholder knew the purchase was being made.

These facts result in false chargeback requests being denied, ending the dispute.

4. Warranty and Insurance Claims

digital receipt scanner

Keep records for: varies by retailer

Receipts are super important because they prove you bought something and help you if it breaks or gets damaged. When you buy stuff, especially things with a warranty, the company might ask for the receipt if you need to fix or replace it. Without that little piece of paper, you might miss out on getting your item repaired for free, which could cost you a lot if it breaks. Also, if something like your phone gets stolen or your laptop gets wrecked, the receipt shows the insurance company that you really owned it. They use receipts to figure out how much money you should get back, making sure you're treated fairly.

5. Budgeting and Tracking Expenses

Keep records for: 1 year

Receipts are handy tools for managing your money. They let you keep an eye on what you're spending, making it easier to budget. By holding onto receipts, you can see where your money is going, spot areas where you might be spending too much, and then tweak your budget accordingly. It's like having a roadmap for your spending, helping you stay on track and make smart financial choices.

6. Reimbursement

Keep records for: 30 to 90 days

When your job or other activities involve expenses that your employer or organization covers, having receipts is key. They act as evidence for the money you've spent, making sure you get reimbursed. These receipts show what you've paid for and how much, ensuring you're accurately compensated for your out-of-pocket expenses.

7. Legal Reasons

Having a receipt can provide legal protection in certain cases. For instance, if you lend money and receive it back in cash, having a receipt signed by the other person can prevent disagreements about whether the loan was repaid. It serves as solid proof, avoiding potential disputes and ensuring clarity about the financial transaction. Essentially, the receipt can act as a legal safeguard, settling any doubts and maintaining a clear record of the repayment.

What Should I Do with the Receipts?

Receipts can contain financial and personal information. It's important to keep them in a secure location.

hwo to store receipts digitally

Physical

Receipts can be difficult to store due to their fragile nature. The receipts should be locked in a safe place such as a filing cabinet. These records can only be accessed by authorized personnel. You must also ensure that your credit card receipts are not damaged by fire, water, or other causes.

Digital

When it comes to digital receipts, businesses need to make sure they're kept safe. This means encrypting them for storage online. Just like with physical receipts, access to these digital files should be limited to authorized people only. There are handy apps like Balance Pro designed specifically for securely storing digital receipts. These apps are great because they can store receipts for many years, keeping them safe and easily accessible.

This post is for informational uses only and is not legal, business, or tax advice. Please consult with an attorney, business advisor, or accountant with concepts and ideas referenced in this post. Balance Pro assumes no liability for actions taken in reliance upon the information contained in this article.

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