Saving receipts and tracking expenses is critical for all of us to give peace of mind and the ability to quickly reference purchases and budgets. This is especially important for those with a small business. You can maximize your tax savings by properly keeping track of expenses. By developing an organized system now, next tax season will be a joy instead of a burdensome month of trying make sense of a pile of receipts.
1. Create Your Initial Storage
Use a file folder system with labeled categories to temporarily store your receipts. Having a place to put every receipt you save is your first step to organizing. This physical holding place can be envelopes, expandable folders or any other folder, but the most critical part is to make sure you have an accessible and easy to remember place to put all receipts.
2. Take Notes
Make notes on the receipt to document what the expense was for. Equipment and office supplies can seem obvious, but in the case of a meals and entertainment expense the purpose is not always clear. In these situations, make a note on the back of the receipt stating who the meeting was with and what the reason for this meeting was. This simple step will save you many headaches in the event of an audit by the IRS.
3. Enter Receipts into Tracking Software
Weekly or monthly enter expenses into your tracking software or spreadsheet. This will allow for easily remembering what the purchase was used for and keeps you from having a backlog at the end of the year. Additionally, having your files stored in a spreadsheet file or accounting software saves you time and energy by automatically calculating the total for each category that you track and allowing you to stay on budget.
4. Long Term Storage
After entering the receipts into tracking software, you need to store the physical receipts for seven years for business records. Have a physical folder structure to match the categories in the tracking software. Or take the step of digital storage because the ink on many paper receipts quickly fade. Digital saving has become much easier with smart phones. Scan the receipts or take a photo with the camera on your phone and transfer these digital copies to a folder on your computer in a file labeled by year.
Categories for storing business records:
- Charitable Contributions
- Computer and Internet
- Continuing Education
- Dues & Subscriptions
- Meals & Entertainments
- Office Supplies
- Professional Fees
- Repairs & Maintenance
- Shipping Fees
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Visiting with your tax advisor will let you know exactly what expenses you currently have that are able to be itemized. Call your team of advisors at 218.847.5225 or email your us at email@example.com