In order to protect your deduction in the event of an IRS audit examination you should be able to 'substantiate' your expenses. Otherwise, even if the expense was for a business purpose and otherwise eligible for deduction on your tax return the IRS can disallow the expense if they decide to pin you with regulations.
Here are four classes of expenses requiring substantiation:
1. Travel expenses (including mileage, meals and lodging while away from home)
2. Entertainment, amusement, or recreation expenses in nature
3. Business gifts (limited to $25 per client, unfortunately)
4. Listed property expenses defined in Section 280F(d) (like luxury cars)
So what do I have to document?
At a minimum, you have to document amounts, time and place, business purpose, and note the affiliation with the vendor. Furthermore, the character of these expenses must be evidenced. Was the character of the expense for business or personal use? Are these expenses “ordinary and necessary” under Section 162? For gifts, meals, and entertainment you are also required to record the attendees names.
So how should I save my receipts?
We find that just doing it as you go or when you regularly clean out your bill fold helps prevent year end stress (not to mention giving your strong "contemporaneous" records).
We use the quickbooks online mobile app to take pictures of things like receipts (or our clients being entertained) as a mobile and 'contemporaneous' way to create and keep records together and paperless. You can even document your business purpose in the memo line!
Real World TIP: Try not to whip out your phone and snap pictures of receipts while your client is watching, you are supposed to be entertaining them with good stories and bad karaoke.
If you spend cash from your personal account or drive your personal car, you can use an app like Expensify to generate an expense report that you can submit to your corporation for things like mileage or out of pocket 'cash only' entertainment venues.
Bottom line is, especially for anything that could be argued to be personal or luxurious, taking the time to record and save a few details could save you bunches in the event of an audit.