If you run your own business, one of the things you must do is determine the best way to organize receipts for taxes. Keeping these organized helps you to see where your money is going and also helps to protect you against action from the IRS in the case of an audit.
If you complete numerous transactions throughout the year, keeping everything organized can get a little tricky. Below are a few tips to help you keep things in order.
These records serve a few purposes. One, it will make you reflect on the transactions you make. This allows you to look critically at your purchases, and the purchases others make from you. While you already know what you have bought and sold, seeing it on paper in front of you—as well as what motivated the transaction—can make a big difference. Two, in the case of an audit, it makes it easier for you to articulate what purpose the item served should you choose to use it as a write-off. This can be a lifesaver when you are trying to remember why an item should be considered a write off years after the fact.
Keeping a lot of papers around can task even the most organized individuals. Rather than keeping the receipt itself around, you can write your note on it and then take a photo or scan it. Use a cloud service to keep everything safe and secure so you can have all the data you need without taking up space in your home or on your hard drive.
Whether you are organizing your receipts physically or digitally, you should create folders based on category and organize them properly. While the types can vary based on your needs, some real, broad categories to consider are minor purchases, major purchases, property, and business expenses.