How to Keep Receipts Organized for Pain Free Bookkeeping
It’s not often that you hear of a small business owner turning down a receipt. Not because they enjoy spending hours organizing them and getting them to their accountant, but because without them their tax return could be in peril. Receipts are audit protection, and these little pieces of paper can make a big difference when it comes to taxes. You may be entitled to certain deductions, but you could lose out if you don’t have the receipts to prove it. Here are some tips on how to keep your receipts organized to get maximum deductions and make bookkeeping easier.
Keep all receipts!
This point cannot be overstated! Many individuals rely on the idea that you do not need to keep receipts for expenses less than $75. But why fight with the IRS? Keeping every receipt can save you time and money in the long run. It is always better to have too many receipts that can come in handy when backing up your claims, instead of not having enough and missing out on valuable deductions or making mistakes in your bookkeeping.
Keep notes on your receipts.
Don’t be afraid to write on your receipts. Make a quick note on the receipt about its business purpose. It might be easy to remember why you bought a fax machine, but you will probably end up forgetting who you went to dinner with two years ago and what the business purpose was. Writing on your receipts will help keep them organized for bookkeeping purposes and can help you be more aware of where your money is going.
Scan your receipts and keep them for six years.
The IRS can ask for documentation and audit you for up to six years back in some cases. The thing about receipts is that the ink tends to fade over time. The IRS will allow taxpayers to scan receipts and keep them electronically, so why not make it easier on yourself? Make sure to keep a back-up, because telling the IRS your hard drive cashed won’t stop them from auditing you. Scanning your receipts can also make bookkeeping easier. Sending a digital file of your receipts to your bookkeeper will often save them time, meaning the less you will owe.
Keep a business journal.
We know, we know. A business owner never has enough hours in the day. We aren’t saying you need a notebook where you write a day to day journal entry of what happened with your business. This can be accomplished by keeping a detailed calendar on your desk or in your email. Did you go to an event with your employees? Make a note of it! Did you buy lunch for a client? Write that down, too! Even if you wait until the end of the day, taking notes of these things will always help you out. The more information you have to back up a claim, the better you are.
Don’t just rely on credit card statements.
Credit card statements are important, but can be insufficient without receipts. The IRS can see that you spent $724.89 at Staples…but what did you buy? You could have bought movies and useless technical gadgets instead of the paper and office supplies that you listed them under. These records are fantastic for bookkeeping purposes, but the details in the receipt will be what an IRS auditor asks for.
The best course of action for small business owners is to be as prepared as possible come tax time. The better your bookkeeping is, and the more receipts you have for your expenses, the more improved your tax experience will be.
Bookkeeping Help in Wilmington NC
BOSS is a growing firm of local business advisers who are committed to providing responsive service, strategic thinking, and competitive pricing to our clients. If you’d like help or to learn more about running a small business in Wilmington, NC give us a call at (910) 338-1198, stop by our new office located at 3901 Oleander Drive, Suite G in Wilmington, or click here to fill out our online contact form. We look forward to hearing from you!