Everyone’s favorite thing to do! Keep & file receipts!
Just kidding… I know it’s a pain.
Let’s start with why you need to be keeping your receipts. Audits. That’s the big reason. The IRS (who) cares. If you were to get audited, the auditor doesn’t want to take your word for it that a trip to Best Buy was for new office equipment… what if you bought yourself a bangin new speaker for your house? They want to see the actual receipt and possibly match it to the item in your office.
What receipts do you keep? Anything over $75. This includes meals, office supplies, material & inventory purchases, equipment & machinery, advertising and basically anything that you’re wanting to write-off. Note that the IRS will still want an explanation – like date of purchase and it’s business purpose – for expenses under $75, but you don’t have to have they physical receipt for those.
Next is how long (when) to keep your receipts. The standard rule is 3 years from the date of the filed tax return (so let’s say 4 years from date of purchase to be safe). If it’s a large purchase (like a vehicle or equipment) or if you report a loss from worthless securities or bad debt, save the receipt for 7 years.
Now you’re thinking… great… I have to keep these stacks of shoeboxes for 4 years stuffed in a closet somewhere. You don’t! There are so many great apps to help save your receipts in the cloud, which means you can toss the physical one! This is the where. Some of my favorite apps to use are: Receipt Bank, Expensify, Quickbooks, Dropbox & Hubdoc. All have really cool features that make receipt saving so much easier. You can scan the receipt, file it away and boom! Done! Some of those apps even have technology that can read what’s on the receipt and file it for you.
First step is checking out the apps listed above. Sign up for one of them and give it a try. If you get stuck in an audit and you don’t have receipts to show for your purchases, the IRS may disallow those expenses. That means you’d have to pay money back for the deductions you took on your tax return. No thank you.
So, saving your receipts doesn't have to be too bad after all.
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