Have you ever had that experience where you need to return an item, and you’re frantically searching for the receipt and you just can’t find it?
Eventually you call off the search and take it back hoping for store credit, and of course now the item’s on sale so you don’t get all your money back. Ugh, so frustrating.
While most of us probably don’t do a great job of keeping our personal receipts, hopefully we’re doing a better job with our business receipts. Cause there’s definitely more on the line than getting the full amount back on a return.
Why should you care about business receipts? And why should you do more than just stuff them in a shoebox (to resurface right around tax time of course)?
Support
Business receipts support accurate record keeping and tax preparation which are extremely important for your business. Not only do you need to know how your business is doing (so you can make better business decisions), you need to be able to support your tax deductions if the IRS comes knocking.
What To Keep
According to the IRS you should keep every receipt greater than $75 (unless it’s lodging: https://www.irs.gov/publications/p463/ch05.html).
But for the purpose of record keeping I suggest you keep all of your receipts, even the small ones. This ensures you’re keeping full and accurate records, and likely means you can take a larger tax deduction.
Not to mention it’ll be a lot harder for the IRS to argue with the amounts you’ve calculated if you’ve got receipts for back up. You may not be required to keep a receipt if the amount is under $75, but it’s worth the extra effort of holding on to it.
Storage Made Easy
I know keeping EVERYTHING can sound daunting, but it doesn’t have to be. There are plenty of apps that can store images of receipts and a whole lot more. Check out Expensify, Shoeboxed, Hubdoc, or the app for your bookkeeping software. An app or program will help you organize these receipts so they’re easy to search.
These images can also be integrated and attached to transactions in your accounting software, making storage quick and easy, and enabling you to defend any deduction in a snap.
Digital storage will take up less space and is easily searchable. If you’re using an app or accounting software that automatically backs up your images you can toss that paper receipt with confidence.
If you prefer to keep your own digital copies, or just enjoy physical receipts (watch out, receipt ink fades fast) you’ll need to hold on to those receipts for 3 years after the filing date on which you claimed the expenses. See IRS guidance here.
Make sure you back up those digital copies, computer crashes happen, and good luck trying to use that excuse with an IRS agent.
Bookkeeping, taxes, and receipt management definitely don’t fall under the category of fun business activities, but if you take the steps to organize your receipts now you’ll save yourself a bunch of time and stress at tax time.
Leave a comment below and tell us your favorite receipt keeping app or ask a question about the app you’re considering. I’ll answer it personally.
