How long do you have to keep business receipts? In most cases, three years. The IRS ties record retention to the period of limitations on your return, and its general instruction is to keep records for 3 years from the date you filed. That window stretches to 6 years if you omitted gross income of more than 25 percent of what you reported, 7 years if you claim a loss from a bad debt or worthless securities, and forever if you filed a fraudulent return or never filed at all. Employment tax records have their own clock: at least 4 years.
That is the short answer. The longer answer matters, because most advice on this topic is wrong in specific, expensive ways, and because the rule that actually catches people out is not the retention period at all. It is what counts as an adequate record in the first place.
This article covers US federal rules and is general information, not tax advice. Confirm your situation with your CPA.
How long to keep business receipts: the IRS periods
The IRS frames the whole question around one idea, in its own words: "Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out." Retention is not a filing habit. It is the length of time the IRS can still come back and ask.
| Situation | How long to keep records |
|---|---|
| The normal case | 3 years |
| You file a claim for credit or refund after filing your return | The later of 3 years from filing, or 2 years from the date you paid the tax |
| You omitted gross income of more than 25% of what you reported | 6 years |
| You claim a loss from worthless securities or a bad debt deduction | 7 years |
| You did not file a return | Indefinitely |
| You filed a fraudulent return | Indefinitely |
| Employment tax records | At least 4 years after the tax becomes due or is paid, whichever is later |
Two of these get misquoted constantly, so it is worth being precise.
The 6-year rule is not about understating your tax. It is triggered by omitting gross income that exceeds 25 percent of the gross income shown on your return. A large deduction error does not extend the window. A large amount of unreported revenue does. The same 6-year assessment window also applies if you omitted more than $5,000 of income from foreign financial assets.
The 7-year rule is not a general retention period, despite being repeated as one everywhere. It attaches specifically to filing a claim for a loss from worthless securities or a bad debt deduction. "Keep everything for seven years" is a conservative habit, not an IRS instruction, and it is fine to follow it as a habit as long as you understand it is you being cautious rather than the IRS being demanding.
One timing detail that quietly costs people a year: a return filed before the due date is treated as filed on the due date. If you file in February, your three-year clock still starts in April.
Records for property and assets last much longer
Receipts for equipment, vehicles, property and anything else you depreciate do not follow the three-year rule. The IRS says to keep records relating to property "until the period of limitations expires for the year in which you dispose of the property in a taxable disposition." You need them to compute depreciation and to establish your basis when you eventually sell. In practice that means a receipt for a machine you bought in 2020 and sell in 2032 is live until roughly 2036. Purchase records for long-lived assets belong in a separate, permanent pile.
Does the IRS accept digital receipts?
Yes. The IRS has permitted businesses to keep records electronically, and to destroy the paper originals, since Revenue Procedure 97-22 in 1997. Its position is that "all requirements that apply to hard copy books and records also apply to electronic storage systems," and it explicitly allows destroying the originals once your electronic system has been tested and you have procedures in place to keep it compliant.
The catch is what "electronic storage system" means. It is not a folder of phone photos. Rev. Proc. 97-22 requires the system to index, store, preserve, retrieve and reproduce records in legible form, with reasonable controls to ensure integrity and accuracy and to prevent unauthorized alteration or deletion, plus a quality assurance program and the ability to produce legible hard copies. The IRS defines legibility strictly: an observer must be able to identify every letter and numeral "positively and quickly."
So a shoebox of blurry snapshots is not compliant, and neither is a shared drive nobody can search. What makes digital records defensible is that each one is readable, indexed, retrievable on request, and traceable back to the transaction in your ledger. That is precisely the job an expense system should be doing for you: reading the receipt, coding it to the right account, and keeping it attached to the transaction it belongs to. If you are still reconstructing the year from a stack of paper and a bank feed, it helps to turn those PDF statements into a clean spreadsheet first, then match receipts against it rather than working from memory.
Do I need a receipt for expenses under $75?
This is the most misunderstood rule in business recordkeeping, and getting it wrong is a good way to lose a deduction.
Publication 463 says documentary evidence is not needed if "your expense, other than lodging, is less than $75." True, but read the qualifiers, because there are three and they all matter:
- Lodging always needs a receipt, at any dollar amount. The exception explicitly excludes it.
- It applies to travel, gifts and listed property, the categories governed by section 274(d). It is not a blanket "any business expense under $75 needs no paperwork" rule.
- The exception waives the receipt, not the record. You still have to substantiate the amount, date, place and business purpose, in an account book, diary, log or similar record. Documentary evidence is considered adequate when it shows "the amount, date, place, and essential character of the expense."
Worth knowing: the $75 threshold has not moved in three decades. It was raised from $25 in 1995 and it is still $75 today, which means inflation has quietly made it far less generous than it was.
The practical takeaway is that the threshold saves you almost nothing. You still need to record the expense, so the marginal effort of also capturing the receipt is close to zero once capture is automatic. Teams that keep every receipt do not do it because the IRS demands it under $75. They do it because a complete record is easier to defend than a partial one, and because arguing about which receipts you were allowed to skip is a worse use of an afternoon than just having them.
State rules can outlast the federal ones
The federal three-year window is not the whole story. California's Franchise Tax Board, for example, generally has 4 years from the due date or filing date to examine a return and propose an assessment, a full year longer than the IRS. For abusive tax avoidance transactions, that window runs to 12 years. If you operate in a state with a longer statute, the state clock is the one that binds you.
There are also non-tax reasons to hold records longer, and the IRS says so itself: check whether an insurance company or a creditor requires a longer retention period before you discard anything. Payroll records carry their own obligation under federal labor rules, generally three years for payroll records and two for supporting documents like time cards. Lenders and acquirers routinely ask for more history than the IRS ever will.
How long is an IRS audit actually likely?
Worth some perspective. In fiscal year 2025 the IRS closed 497,621 audits of tax returns, recommending $26.8 billion in additional tax. The examination coverage rate for individual returns was about 0.3 percent, though it rose to 6.6 percent for taxpayers with total positive income of $10 million or more.
The odds for a typical small business are low. That is not a reason to keep bad records, though. Audit risk is not the only thing receipts protect you from: they also protect the deduction itself. In an examination, an expense you cannot substantiate is simply disallowed, and the money you lose is the deduction, not a penalty for having lost the paper.
A retention system that does not depend on anybody remembering
The rules above are easy to satisfy and easy to fail, and the difference is almost never diligence. It is whether the capture happens at the moment of spend or gets deferred to a person who is busy.
- Capture at the point of purchase. A receipt photographed at the table is a record. A receipt in a jacket pocket is a maybe. The gap between those two is where most substantiation is lost.
- Attach the receipt to the transaction. A receipt that is not linked to the card charge it paid for is only half a record. The link is what turns a folder of images into an indexed, retrievable system.
- Code it once, correctly. Categorizing an expense at capture, rather than in a scramble at close, is what makes the record usable later. OCR receipt scanning handles the reading so nobody keys in a vendor name.
- Keep the asset receipts separate. Anything depreciable outlives the three-year rule by years. Give it its own home.
- Do not delete on a three-year timer. Check the state window, the asset rule and any lender or insurer requirement first.
This is the part software genuinely solves. Expenditure reads each receipt as it arrives, pulls the vendor, amount, date and tax, categorizes the expense to the right GL account, and keeps the image attached to the transaction, so what you end up with is an indexed, legible, retrievable record rather than an archive nobody wants to open. If your team is still chasing paper at close, a receipt scanner app is the smallest change with the largest effect, and better business expense tracking makes the whole retention question mostly take care of itself.
The short version
Keep business receipts for 3 years in the normal case, 6 if you may have omitted more than 25 percent of your gross income, 7 for bad debt and worthless securities claims, and indefinitely if a return was fraudulent or never filed. Keep employment tax records 4 years and property records until the limitations period runs out on the year you dispose of the asset. Digital copies are fine, and you can shred the paper, provided your system is legible, indexed and retrievable. And under $75 does not mean under the radar: you still have to record the expense, so you may as well keep the receipt too.