Are digital receipts accepted by ATO/IRS and CRA?

audit

The answer is yes. When tax time rolls around, many taxpayers begin to scramble for their receipts. Yet, one of the advantages of streamlining expense reporting with digital receipts is that it offers you a chance to go paperless—saving trees and the cost of paper. They're also a convenient way to keep track of your business expenses. Every time you take a client out for a meal, need to expense a trip or be reimbursed for office supplies, digital receipts allow you to file and expense from your mobile device—in real time.

Keeping your records

There are many business software tools that will help keep your company's digital receipts organized. How often have you missed out on reimbursement because you couldn't find a receipt? Keeping track of your purchases can be as easy as taking a photo and uploading the receipt directly into the system of your choice with an app. E-receipts are a more efficient approach to your tax returns and have actually been accepted by the IRS since 1997. The large corporation audit rate has increased 8.6% since 2009. Follow these guidelines for keeping your e-receipts to help avoid an audit.

Australian Tax Office (ATO)

Electronic tax records and scanned receipts have been accepted for the ATO since 2005. It states that taxpayers should take steps to minimize the risks of:

  • Inadvertent destruction or corruption of electronic records;
  • Unauthorized tampering with electronic records; and
  • The possibility that electronic records and operating systems will become obsolete, due to constant upgrading or changing of computer systems.

Allreceipts must include the vendors name, address, date of transaction and the amount paid. To stay on the safe side, make a note of the purpose of the business transaction to avoid facing an audit down the road.

Internal Revenue Agency (IRS)

Keeping regular and accurate data isn't just a good business practice—it's also required by the IRS. If you want to use online receipts, you'll want to begin backing up data online and keeping an on-site backup on a secure external drive. You should also make sure that you can print hard copies if required by an IRS agent. Once small business owners bring in more than $100,000 and up to $1 million in gross revenue, their odds of landing in the hot seat increase by 3.6%.

Canada Revenue Agency (CRA)

The CRA will consider you to have acceptable digital receipts if you create, process, maintain and store your information in an electronic format. You are required to keep your electronic records in an electronically readable and accessible format, even if you have paper printouts of the electronic records. If any of your source documents are initially created, transmitted or received electronically, they must be retained in an electronic format. Scanned images of paper documents, records or books of account that are maintained in electronic format are acceptable if proper imaging practices are followed and documented. Your records:

  • must be kept in Canada unless CRA permission is granted to keep them elsewhere;
  • must be made available to CRA representatives upon request; and
  • include electronic records that are created and maintained by computerized record-keeping system.

If your small business is thinking of going paperless, contact us today for more information on the advantages of digital receipts and solutions to get you started on saving.