Do I Need to Provide Receipts for My Tax Return?

When filing a tax return, many taxpayers wonder if they need to include receipts and other supporting documents. The Internal Revenue Service (IRS) generally does not require you to physically attach these records to your tax return when you submit it. However, keeping accurate and comprehensive records is crucial for substantiating the information reported on your return.

General Requirement for Submission

When taxpayers file their annual tax returns, they typically report summary figures for various categories of income, deductions, and credits. Forms like the 1040, Schedule A for itemized deductions, or Schedule C for business income and expenses, only require the aggregate amounts. The IRS’s system is designed to process millions of returns efficiently, and requiring physical receipts from every taxpayer would create an unmanageable volume of paperwork. Therefore, the standard procedure does not involve sending in receipts, invoices, or other documentation with your tax return. This approach streamlines the initial filing process for both taxpayers and the tax authority.

Keeping Supporting Documentation

Retaining supporting documentation is essential for every taxpayer. The IRS operates under a “burden of proof” rule, meaning it is the taxpayer’s responsibility to substantiate all income, deductions, and credits claimed on their return. If these claims are questioned, the taxpayer must be able to provide evidence to support them. Receipts, canceled checks, invoices, and other records serve as crucial evidence for the figures you report. Maintaining these records in an organized manner prepares you for potential future inquiries or audits from the IRS.

Types of Records to Retain

A variety of financial records should be kept to support the information reported on your tax return.

Income Records

For income, this includes documents such as W-2 forms from employers, 1099 forms for interest, dividends, or independent contractor income, and K-1 statements from partnerships or S corporations. These documents verify the amounts of income received.

Expense Records

Regarding expenses, it is important to keep receipts for any deductible costs, such as medical expenses, charitable contributions, or business-related expenditures. For each receipt, ensure it clearly shows the date, the amount paid, the vendor’s name, and a description of the goods or services purchased. Bank and credit card statements also serve as valuable corroborating evidence.

Asset Records

For asset-related transactions, retain purchase and sale documents for property, stocks, and other investments. These records are necessary to determine your cost basis, which is crucial for calculating any gain or loss when the asset is sold. Records related to your home, such as for improvements or mortgage interest statements, should also be kept.

Retention Periods for Records

The length of time you should keep tax records varies depending on the type of document and the transaction it supports. Generally, the IRS can audit a tax return for up to three years from the date it was filed or the due date, whichever is later.

However, there are exceptions to this general rule. If you substantially underreport your gross income by more than 25% on your return, the IRS has six years to assess additional tax. For fraudulent returns or if no return was filed, there is no statute of limitations, meaning records should be kept indefinitely. Records related to the basis of property, such as a home or investments, should be retained for at least three years after you sell the property and report any gain or loss. Employment tax records must be kept for at least four years after the tax becomes due or is paid, whichever is later.

Responding to an IRS Request

The IRS may request receipts during an audit or examination. This request typically arrives as an official letter, known as an Information Document Request (IDR), outlining the specific documents the IRS wishes to review. It is important to respond to these requests promptly and thoroughly.

Upon receiving an IDR, you should organize all the requested documents, making copies for your records before submitting them to the IRS. Ensure that your response is complete and accurate, addressing each item specified in the request. Failing to provide adequate documentation or responding in a timely manner can result in the disallowance of deductions or credits, which could lead to additional tax owed and potential penalties.