Expense Account Documentation Made Easier

In a rare case of good news from the Internal Revenue Service, the nation’s tax collector has decided to lighten up on expense accounts.

From now on, receipts are required only on expense account items over $75, up from $25.

“This change is part of our ongoing efforts to make government work better and cost less,” said IRS Commissioner Margaret Milner Richard. “We are working hard to update our regulations whenever possible.”

The little-known change in IRS regulations took place Oct. 1. It covers expenses such as traveling, entertainment and gifts done in the course of business. The expenses are tax-deductible, and documentation is a major concern for everyone from traveling salespeople to corporate attorneys.

The IRS’ $25 rule was implemented in 1962, when that was enough to pick up lunch for a party of five. In recent years, some critics say, documenting every expenditure over $25 required attaching receipts for everything from filling the gas tank to replacing your printer’s ink cartridge.

The new $75 limit should help streamline the process.

“It’s a substantial paperwork reduction and timesaver for most companies,” said Ken Strauss, a partner in a Miami accounting firm. “What this will do is allow a lot of documentation to be eliminated. It’s long overdue.”

Whether the new rule will alter behavior - and perhaps produce a rash of $74 lunches on expense reports - is uncertain.

On one issue, there is agreement: Most white-collar workers favor anything that involves reducing the need to collect receipts.

However, Howard Rosenbloom, a Miami tax accountant, is advising clients to keep meticulous records despite the rule change. The reason: When the IRS does an audit, it wants to see proof of every expenditure - even those that don’t require receipts.