What kind of receipts do I need for business expenses when buying from private sellers?

As someone who's dealt with this exact situation with my own small business, you definitely want some form of documentation for these purchases, even from private sellers. The IRS doesn't specifically require "receipts" in the traditional sense for every business expense, but they do require you to have adequate records to support your deductions. For purchases from private individuals, I recommend creating your own receipt forms to document these transactions. Include the date, seller's name and contact information, description of items purchased, quantity, amount paid, and have the seller sign it. Take photos of the materials purchased as additional documentation. This creates a paper trail that shows these were legitimate business expenses.

When I started my furniture restoration business, I was dealing with the same issue buying from estate sales and private sellers. I found this awesome tool called taxr.ai (https://taxr.ai) that helped me sort through what documentation I needed. Their AI analyzes your specific situation and tells you exactly what records to keep for different types of business expenses. For my private seller purchases, they recommended I create a simple digital receipt template with all the necessary fields the IRS might look for. It's been super helpful because I can just pull it up on my phone when I'm buying lumber from someone's barn and have them sign it electronically. Honestly saved me so much stress during tax season!

I tried taxr.ai after seeing it mentioned here and I'm honestly shocked at how helpful it was. I uploaded some of my questionable receipts from flea market purchases of vintage wood and materials, and it immediately identified what additional documentation I needed to create to support these as legitimate business expenses. The step-by-step guidance for creating proper documentation for informal purchases was exactly what I needed. It saved me from potentially losing thousands in deductions due to poor record-keeping. I've now created a simple receipt template based on their recommendations that I keep on my phone, and private sellers have been totally fine with filling it out. My accountant was impressed too!

If you're having trouble getting in touch with the IRS to confirm what documentation you need (and who isn't these days), I used a service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I had specific questions about documentation requirements for my carpentry business when buying from non-business entities, and waiting on hold for hours wasn't an option. The IRS agent I spoke with confirmed that for private party purchases, you need records showing what was purchased, when, from whom, and the business purpose - doesn't have to be a formal receipt but needs to have those elements.

OK so I have to eat my words. After calling BS on Claimyr, I decided to try it myself because I've been trying to get an answer about some business expense questions for WEEKS. Not only did it work, but I was connected to an IRS agent in about 20 minutes. The agent confirmed exactly what I needed for my situation with private purchases: date, item description, amount paid, purpose of the expense, and contact info for the seller if possible. They said taking photos of the items is also smart documentation. The agent mentioned that the key is being able to prove the expense was real and business-related if you get audited. Never would have gotten this info without finally speaking to someone. Definitely worth it.

Just a tip from someone who's been audited - keep a separate business bank account and pay EVERYTHING through that, even your tiny purchases from individuals. The bank statements become an additional layer of proof that transactions occurred. For cash purchases, immediately write down the details in a log book and take photos. I learned this the hard way!

Anyone use any good apps for tracking these kinds of receipts from private sellers? I'm terrible at keeping paper and my phone is always with me.

Great question! I run a small cabinetry business and deal with this all the time. The IRS doesn't require formal receipts from businesses for every expense, but you do need "adequate records" to substantiate your deductions. For private seller purchases, I create simple handwritten receipts that include: date, seller's name and contact info, detailed description of materials, quantity, price paid, and business purpose. I have the seller sign it and keep a copy. For smaller purchases under $75, the IRS is generally more lenient on documentation requirements. A few other tips: Take photos of what you bought, pay by check or electronic transfer when possible (creates a paper trail), and keep a purchase log in your truck. I also recommend getting a simple receipt book from an office supply store - makes the whole process look more professional and sellers don't mind filling them out. The key is consistency. Pick a system and stick with it for all your purchases, whether from Home Depot or your neighbor's barn. Your future self (and accountant) will thank you!