Why Receipts Still Matter: The IRS Audit Tale of Bob and Sammie

Introduction:

Receipts may seem old-fashioned in our digital world, but when it comes to IRS audits, they can be your strongest defense. In this blog post, Jon Markee, your Builder CPA, shares a cautionary tale about two builders—Bob the Bad Builder and Sammie the Star—and how their approach to receipts led to very different outcomes during an audit.

Bob’s Assumption: Bank Statements Are Enough

Bob the Bad Builder ran his business under the assumption that bank statements were sufficient proof of his expenses. He didn’t bother keeping receipts, thinking it was just an unnecessary hassle. But when Bob received an IRS audit notice, he quickly realized the flaw in his thinking.

The auditor questioned purchases from places like Amazon and Walmart. Without receipts, there was no way to prove whether those charges were for business expenses or personal items. Bob was left scrambling—calling vendors, digging through emails, and hoping someone could resend old receipts from months or even years ago.

Sammie’s Smart System: Organized and Audit-Ready

Sammie the Star took a different approach. She used a simple online tool to upload and store all her receipts in QuickBooks Online. Every business transaction was backed by a detailed receipt, categorized and linked directly to the appropriate expense.

When Sammie received an audit notice, she simply forwarded her records. No stress, no delays. Her receipts showed exactly what was purchased and proved that each item was for business use.

Why Receipts Matter—Even If Not Legally Required

While the IRS doesn’t technically require receipts for every purchase, having them makes the audit process much smoother. Bank statements only show the where and how much—not the what. That distinction matters when the IRS needs to confirm whether you bought office supplies or groceries.

Stores like Amazon and Walmart sell everything under the sun, so receipts are essential in distinguishing between business and personal use. Sammie avoided penalties and hours of wasted time because she had everything organized in advance.

A Simple Habit That Saves You Big

Sammie’s routine isn’t complicated. She scans her receipts as soon as she gets them using a mobile app. The tool does the rest—categorizing and attaching each receipt to the right transaction. She even avoids the problem of heat-sensitive paper fading over time.

Bob, however, paid the price for skipping this simple habit. He faced tax penalties and countless hours chasing down old receipts—all because he thought it wasn’t worth the effort.

Final Thoughts

Bob’s experience is a cautionary tale: while you may not be legally required to keep receipts, doing so makes audits faster, easier, and far less stressful. Sammie proves that a few minutes each week can save you from major headaches later.

Be like Sammie—prepare today to protect your business tomorrow.

For more insights like this, stay tuned with Jon Markee, your Builder CPA.