Keeping Up With Receipts: Keep Your Tax Accountant Happy

retrochick.JPGIvy says:

I come from a very long line of accountants. In addition, I have a close family friend that is an IRS auditor. (Yes, he does have a pocket protector and calculator at his side all the time. No, he doesn’t have a sense of humor that he is aware of.) Because of that, I was schooled very early in my adulthood about storing receipts for tax purposes. The bane of the tax accountant and IRS agent is the shoebox storage method:*

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Now, most people will take what is called “the standard deduction” and won’t need receipts. However, many of us who work freelance or have their own (very, very small in my case) small businesses need these receipts like cats need to sit in your windowsill. If you’re one of those people who needs receipts, read on.

how to keep up with receipts

Many people throw their receipts in a shoebox and at the end of the year, they have a tangled mess to either hand to their tax accountant or go through themselves when they’re doing their own taxes. This method not only wastes time, but potentially can waste money OR get you in trouble with the IRS by either deducting too little or too much. You can’t deduct that plasma screen television because you need to “research” the latest television shows**, kids.

So, what’s the easiest way to organize your tax receipts? By using a folder filing system. Now, I know you’re thinking, “But Ivy, how is a folder better than a shoebox? Isn’t that just a flatter version of a shoebox?” Sure it is, if you’re just throwing receipts in there. But you’re not. You’re going to make your receipts look something like this:img_0144.jpg

Staple (or tape) the receipt  to a piece of paper, preferably one you have recycled from work or someplace so you’re not wasting paper. If the receipt only contains certain items that are deductible, circle those items on the receipt and add it together so you have the amount on the piece of paper. Also, make sure to write down what the receipt is for. This is especially helpful in the case of an audit- that way you can say, “Yes, sir, that widgety-woo was for the Home-Ec 101 giveaway we did back in April, 2002.”

Make sure to keep a special place in your wallet for receipts you may use for tax purposes. I usually check the receipt pocket on Fridays and then staple and label. Don’t let receipts languish in your wallet too long, you may lose one or forget what the heck it was you bought that was tax  deductible.

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Just keep the file folders handy and make sure you keep up with them, and it’ll save you tons of headaches when it’s time to do your taxes.

*No, I don’t really store my receipts that way, I had to dig into my purse to find random receipts I’ve tossed in there. That’s not exactly good either, but those aren’t my receipts for tax purposes.

**Well, maybe not, I don’t know for sure because I am not a tax professional.

Send your domestic questions to helpme@home-ec101.com.



12 Comments

  1. Isaac on November 30, 2010 at 2:33 am

    This is a great article on what to do with receipts. More graduating college students need to learn these methods as they're out in the real world for the first time and dealing with the IRS themselves. Granted, some Accounting graduates have an edge, but even they need some help sometimes.

  2. Jim From Accountants Blog on February 17, 2008 at 6:26 pm

    We speak to a lot of accountants and the bane of their existence is the ‘all the receipts in a plastic bag’ brigade that always seem to appear 3 days before tax deadline day.

    I can’t believe people would suggest that accountants don’t have a sense of humour. Anyone who has ever received an invoice from their accountants will know that they are a bunch of jokers !

  3. noodle on February 17, 2008 at 3:12 am

    My husband and I use three-ring binders rather than folders. It’s saved us time and trouble more times than I can remember!

    http://frommynoodle.blogspot.com/2007/03/works-for-me-wednesday-filing-paperwork.html

  4. Etienne on February 11, 2008 at 6:20 pm

    Hi everyone.

    Another way to make sure you have all your receipts organized come tax time is to start using a service I work for and personally use called Shoeboxed (www.shoeboxed.com). With Shoeboxed you receive an @shoeboxed.com email address that you use for all online shopping purposes. All your online receipts and paper receipts can then be organized neatly in your personal secure account on Shoeboxed.com.

    A new program called Shoeboxed Mail-In acts like a Netflix for receipts, through which you can mail Shoeboxed all your paper receipts for us to professionally scan onto your account. We then mail you back all the receipts for you to dispose of.

    We have also developed a new feature through which all the receipts organized on Shoeboxed can be exported to Quicken, if you happen to use that software program. This allows you to save LOTS of time since you avoid sifting through a box of receipts and just export all your receipt and transaction information in a few minutes.

    Check out Shoeboxed.com and sign up to organize your receipts and finances in a new and innovative way.

    Best,
    Etienne Coulon

  5. links for 2008-02-10 | The Eye on February 10, 2008 at 6:17 pm

    […] Keeping Up With Receipts: Keep Your Tax Accountant Happy Anything to make it easier at tax-time, and hopefully, cheaper. […]

  6. Stan on February 9, 2008 at 5:36 pm

    I solved my problems with an accordian folder for my business expenses. I solved my business mileage log problem by purchasing an Automatic Mileage Logger from http://www.mileagelogger.com. It logs every mile for me using GPS and sits tucked away in my center console. My accountant loves me more now cause of this.

  7. Badbadivy on February 9, 2008 at 1:16 pm

    Doug! That was mainly directed at my IRS agent friend and not so much regular tax accountants. My dad’s an accountant and he’s pretty funny. He does have a pocket protector though, ha.

  8. Doug on February 9, 2008 at 8:02 am

    Great article that should be sent to all tax preparers so they can forward to their clients. I’m a CPA who plans to refer this article to many of my “box-filling” clients.

    I have one objection. Some of us pocket-protector- wearing individuals THINK we have a sense of humor. This accountant stereotyping must be stopped.

    Now, I’ve got to get back to preparing tax returns…next box please…

  9. Sarah on February 9, 2008 at 4:43 am

    Actually, you CAN deduct cable and movie rentals for research purposes IF you are an animator or film person like my husband. Not sure about the plasma tv, though! I’m thinking no. 🙂

  10. Christy on February 9, 2008 at 2:47 am

    THANK YOU. I am trying to organize my files for my first tax filing as a small business owner, and I really appreciate this post. More, please. 🙂

  11. Kathy T. on February 8, 2008 at 8:03 pm

    Make that 103,211 uses for duct tape.

  12. Mike Harmon on February 8, 2008 at 5:52 pm

    I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.

    Mike Harmon

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