when you pay for hosting, software, or any business expense, the vendor usually gives you two documents: an invoice and a receipt. they look almost identical. do you need both? what does the IRS actually want?
what the IRS requires
the IRS doesn't specify "you must keep invoices" or "you must keep receipts." they care about five things per expense:
- who you paid (the vendor)
- how much you paid
- when you paid
- what you paid for (business purpose)
- proof that you actually paid
any document that covers all five is valid. a single receipt from PlanetScale showing "$25.11 paid on Nov 30 for Database products via Mastercard" covers all five. so does an invoice marked as paid.
the IRS calls these "supporting documents" and says you should keep them for at least 3 years from the filing date. some accountants recommend 7 years.
source: IRS - What Kind of Records Should I Keep
do you need both?
for most solo founders: no. one document per transaction is fine.
if you have to pick one, the receipt is the better choice. it's usually a superset of the invoice - same line items, same amounts, but adds payment confirmation (method, date paid). the invoice says "you owe this." the receipt says "you paid this." proof of payment is the part the IRS actually cares about for expense deductions.
the invoice adds value only if you need:
- detailed line items the receipt doesn't show (rare - most receipts include them)
- pre-payment terms and conditions
- purchase order matching (mostly relevant for larger companies)
what about bank statements?
a bank or credit card statement alone is not enough. it shows you paid $25.11 to PlanetScale, but not what you paid for. you need the receipt or invoice to show the business purpose and line items.
that said, your bank statement + the vendor's invoice/receipt together make a solid pair. the statement proves the money left your account, the document proves what it was for.
mercury and receipt@mercury.com
Mercury lets you attach documents to transactions by forwarding them to receipt@mercury.com. despite the name, you can send invoices too - it just attaches the document to the matching transaction. send whichever document you have. one per transaction is enough.
practical advice
- keep one document per expense (receipt preferred)
- store digitally - the IRS accepts electronic records
- your bank feed (Mercury) handles the "proof of payment" part, so even an invoice is fine as the attachment since Mercury already records the payment details
- don't stress about having both unless your accountant specifically asks for it
- set up a system once (forward to Mercury, save to a folder) and stick with it
related
- invoices and receipts reference - what data each document contains
- schedule c - how expenses map to your tax return
- counterparties - setting up vendor tracking