If you’re like me, the thought of organizing your tax receipts probably doesn’t sound like much fun. Ideally, staying organized throughout the year is the best advice for tax preparation, but sometimes that just doesn’t happen. If you have trouble even getting your receipts into a shoebox, this article is for you.
- Part one is for people who waited until the last minute to get organized.
- Part two is for everyone who wants to keep up with their taxes next year.
Part One: Drowning in Receipts – Where to Start!
Hopefully you’ve at least kept your major receipts for the year. If you don’t even have the receipts for your business, home, or medical expenses, look to your cancelled checks or even credit card log. According to IRS publication 463, you may not need to show receipts for expenses under a certain dollar amount, but the best policy is to keep your records! Also, if you just can’t find a receipt, you can still claim a deduction if you have a credible evidence. Do your best to find all your receipts and records and let’s set up a system.
Set up a Quick and Dirty Sorting System
Ok, you’ve gathered all the receipts and records you can find. Thumb through the receipts to get an idea of the major categories and jot them down. For a complete list of business expenses, check out the IRS publication 334 ‘Tax Guide for Small Business.’
At a minimum, start by creating these major piles for your receipts:
Once you have these major categories, you can dive deeper and break them down into personal or business expenses.
Simply categorizing your expenses will make your life so much easier when you file your taxes. If you plan to file your taxes online with TurboTax, they’ll give you a roadmap to input your personal and business expenses. You might have to pay a little if you plan on using the business version, but there are TurboTax discount codes that can save you up to 20%.
Part Two: Staying Organized For Next year
The last thing you want is to scramble to get organized at the end of the year again. Setting up a system is going to reduce your stress and headaches for next tax season.
Create a Simple Filing System
The system for filing your receipts doesn’t need to be fancy – it just needs to be something! Remember those categories we put together for the pile of receipts? Use this as a framework for your new receipts.
If paper is a problem for you, consider taking a picture of your receipts with your phone when you get them. Save them in a folder or add them to an app like Genius Scan. This app lets you crop your images and save them into a single PDF which makes it simple for saving and sending your receipts to yourself or an accountant.
Set a reminder on your calendar to review your receipt folders. It sounds simple, but even taking 30 minutes every 3 months to review and organize your receipts can save you time and money next April!
Hire an Accountant
Let’s be real, if your receipts are getting out of control for your small business or personal expenses, you probably need to work with an accountant. Whether you have an accountant or not, staying organized is the best tax tip for this year.
Do you have any organization tips for tax time?