subject: How to Organize Receipts in Your Home Office [print this page] How to Organize Receipts in Your Home Office
Receipts come in many sizes, from small cash register receipts to large invoices. Most people stash their receipts in a shoebox throughout the year and deal with them near tax time or before the deadline their accountant gives them. The inconvenience comes when it's time to sort through the receipts and prepare your tax return. Instead of spending time on your business, you have to take a day or a week to divide your receipts, to make sure they are properly recorded, and to total them.
Whether you own your own business or are a corporate employee in a home office, you will need to pay taxes. Keeping track of your receipts will ensure that you get all of the deductions to which you are entitled. If you are a corporate employee, you will be reimbursed for the amount of money you spend on company expenses.
Natalie, a computer programmer who attended one of my seminars, was transferred from a corporate office to her home. After two years of working at home, she added up all of the money she had spent on office supplies and discovered that her receipts totaled $450. Realizing that this represented serious money, she belatedly turned in her receipts-and was refused reimbursement because she'd had them for so long. If she had been in control of her receipts sooner, she would have been $450 richer. If you're an entrepreneur, you will want to do the following:
Keep track of all of your expenses in order to document how company money was spent.
Use most of your receipts at the end of the year in preparing your tax return.
Maintain receipts so you can produce the ones you claimed as deductions if you are audited.
If you're a corporate employee, you will want to do the following:
Keep track of your expenses so that you can be reimbursed by your employer.
Use only a few receipts at the end of the year in preparing your tax return, depending upon how many were reimbursed.
Be able to obtain reimbursement and expense records from the corporate office were you to be audited.
Keep one credit card for business expenses and one for personal expenses. This way there will be no question about whether an item was a business or personal expense.
Doing your taxes should not be a long, drawn out process. If you take the time to organize your receipts during the year, you'll see at least three benefits.
1. You'll shorten the amount of time you spend preparing your taxes.
2. If you use an accountant, you'll significantly reduce your bill, as he will spend less time sorting through your receipts. If your accountant has to look through hundreds of receipts, your bill will be tremendous.
3. You'll be able to see throughout the year how much money you're spending.
During the day, keep an envelope with you at all times to hold receipts from business expenses you incur. On meal receipts, be sure to write the name of the person, company, title, type of meal, and reason for the meeting. Then, at least once a week, process these receipts by recording their amounts and filing them away. It's unrealistic to think that you will be able to record your receipts daily. Instead, keep them in a folder labeled Receipts to Enter.
After you've recorded your expenses, there are a few ways you can store receipts to prevent them from becoming a major nuisance and to minimize the time it takes to organize them for tax purposes. Whatever method you choose, the key is to keep your receipts under control by keeping them in a specific place so that you'll be able to organize them at tax time with the least amount of time and effort. It's important to choose a receipt filing system with which you are comfortable, and to keep it as simple as possible. The more difficult it is to use, the less likely you will be to use it.
If handling finances is not your strength, hire a bookkeeper to track your finances and manage your receipts. The amount of money you spend on a bookkeeper will be considerably less than the amount of time you would waste trying to handle your own records.
