There’s more than meets the eye to those annoying little slips of paper. If you’re in the habit of snubbing receipts when offered, you might want to rethink it. As a small business owner or entrepreneur, keeping track of your receipts can have some big benefits—not to mention what it can help you avoid.
You “audit” save them all
Bad pun, sorry. But the fact is you really oughta save every receipt—even the small ones under $75. You may think you can skate by without them and just use credit card statements, but if the IRS audits you, you will have to meet their strict substantiation requirements—where credit card statements aren’t detailed enough. You don’t want to be left up that hassle creek without a paddle. What it would cost you in time and aggravation is best avoided simply by saving them all.
So, now that you’ve decided to be smart and keep all your receipts, what’s the easiest way to organize them? After all, you don’t need to add more aggravation to your daily routine, especially when this is supposed to make your life better.
- Keep a zipper pouch in the glove box
This is just a handy, easy place to toss receipts into immediately when you’re on the go—as opposed to cramming them into your purse or pocket or wallet where they could get torn or lost or end up on the floor of your car.
- Scribble a note
Before you stuff a receipt into the pouch, make a quick note directly on the receipt. Make sure you write what business purpose it was for, whether that is a client name or project name. Be a little more detailed than simply writing: business dinner, as that may not be enough to serve your memory when it comes time to do your taxes.
- Take a picture—it lasts longer
A lot of receipts today are printed with what seems to be invisible ink that fades away over time. You can avoid the problem of the disappearing ink by taking a quick photo of your receipt using your handy, all purpose smartphone. This is a way to ensure you’ll have what you need come tax time, as well as making it possible to go paperless in the long run.
- File a little while
At the end of each week, grab that pouch full of receipts and spend just a few minutes organizing and filing them into categories. Some common file categories you could use include:
Licenses and Dues
Your specific type of business may have other relevant categories, but these are the typical ones the IRS uses. If you will do this on a routine basis, it will take very little time now and save you HUGE headaches down the road. Tax time will be a breeze because you prepared so well. You’ll be patting yourself on the back and saying things like, “Take THAT, IRS!”*
*Remember, this is not legal advice. Please consult your tax adviser.
- Keep it up. Stay strong.
The best thing you can do to help yourself at tax time is to be consistent. Get in the habit of keeping, notating and organizing receipts using this system or something that works for you. Once it becomes second nature to organize your receipts, you’ll find that you will experience a Zenlike peace when April 15 rolls around. You can do this!