How To Organize Receipts: Electronically
Our favorite method to store and organize receipts for taxes, electronic records allow you to easily move your files around and make for quick access at your fingertips, wherever you are.
You can certainly scan and file your receipts, but we like the convenience of snapping a picture on our phone or tablet and filing the image accordingly. You have the option of setting up a storage system on your own, or using an app like Everlance.
The benefits of using an app like Everlance are numerous: the program allows you to automate your mileage and expense tracking and lets you track any expense at a momentâs notice. Simply photograph your receipts within the app, and the program will allow you to categorize it accordingly and make any appropriate notes.
Apps like Everlance also allow you to store receipts securely for years, both on your device and through an encrypted cloud backup. The app will organize and store receipts and tally your expenses, taking the guesswork out of calculating your deductions.
Scanned Receipts And Invoices: Hmrc Requirements
With the explosion of technology we often get asked whether HMRC will accept scanned receipts and invoices.
Well, the goods new is that yes, subject to certain rules, HMRC are more than happy to accept scanned and digital copies of paperwork – including scanned receipts and invoices.
So what do you need to be aware of if you’re thinking of switching to a more environmentally friendly way of running your business.
Getting All Of The Receipts
Whenever you make a purchase or pay a business-related bill, get a receipt for it. IRS deductions paid cash with no receipt will not sit well with the U.S. government if your business is audited. IRS receipt requirements are $75, meaning you do not have to necessarily produce receipts for the smallest expenses. Whenever possible, do not make business and personal purchases in the same transaction.
For example, if you order office supplies but also need some boxes for a personal storage at home, put these orders in separate transactions so you have a receipt that shows only your business expenses. If a receipt does not clearly show what you purchased or how it will be used for your business, note that on the receipt. For example, if you save the receipt for a business lunch, write down the name of the client and the purpose of the meeting.
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The Myth Of Paper Receipts For Taxes
Justin is an IRS Enrolled Agent, allowing him to represent taxpayers before the IRS. He loves helping freelancers and small business owners save on taxes. He is also an attorney and works part-time with the Keeper Tax team.
Across America, 1099 contractors and freelancers everywhere continue to stuff their wallets and glove compartments with paper receipts.
Keeping track of paper receipts is stressful. They’re easy to misplace, tear, or smudge. And by tax time, the ink has likely rubbed off the paper â which might be little more than torn pocket lint by that point anyway.
Here’s the liberating truth about paper receipts: you don’t need them.
They contain all the critical information â what, when, and how much.
One Exception: Cash Purchases Of Over $75
Even cash purchases donât need receipts, as long as theyâre âreasonable and ordinary.â
We call this principle the âCohan rule,â established in the famous Cohan vs. Commissioner Circuit Court of Appeals case.
Rule of thumb: Keep your receipt if you spent more than $75 in cash.
If you took a dozen clients out for lunch at the best steakhouse in town and then paid with cash, you should probably hold onto that receipt.
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State Tax Paid For Previous Year
Did you owe tax when you filed your 2020 state income tax return earlier this year? Then, for goodness’ sake, remember to include that amount in your state-tax deduction on your 2021 federal return, along with state income taxes withheld from your paychecks or paid via quarterly estimated payments during the year.
Just remember, as we mentioned above, that the deduction for state and local taxes is limited to $10,000 a year . That limit may change soon if the Build Back Better Act is enacted into law, but for now the $10,000 cap still applies.
Deduction Of Medicare Premiums For The Self
Folks who continue to run their own businesses after qualifying for Medicare can deduct the premiums they pay for Medicare Part B and Part D, plus the cost of supplemental Medicare policies or the cost of a Medicare Advantage plan.
This deduction is available whether or not you itemize and is not subject to the 7.5% of AGI test that applies to itemized medical expenses. One caveat: You can’t claim this deduction for premiums paid for any month that you were eligible to be covered under an employer-subsidized health plan offered by either your employer or your spouse’s employer .
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Saving Receipts To Your Desktop
I make the majority of my online purchases on my desktop computer, and while I can usually retrieve receipts from either the retailers website or from an e-mail, I still save an additional copy on Google Drive. By having all of my receipts centralized in Google Drive, I wont have to search through e-mails or my order history on Amazon to find a certain one. I can simply go to my Google Drive and easily find what I need.
How to Save Your Receipts Using Your Desktop Chrome Browser
Two Tips on Organizing Your Receipts
After you get in the habit of saving of receipts, youll need a good system to keep your Google Drive files organized. Theres no right or wrong way to organize your receipts!
Here are the two things you can do to help with your organization:
1. Keep a consistent naming scheme
Keeping a consistent naming template for your files will allow you to easily search and skim through your files. Here is how my scanned files are named:
YYYY.MM.DD Company Item Note
2016.05.11 Amazon Toshiba Chromebook i3 CPU
2015.03.15 Costco Sharp TV Model 70LE660U
Cloud Services To Organize Receipts Online
You can organize, store, and access receipts in the cloud using an online service as long as you have an internet connection.
Online apps that organize receipts enable you to create expense reports quickly, when and where you need them. These applications offer a variety of ways to capture your receipts, including email, SMS texting, and your smartphone’s camera. Some of these applications have built-in expense reporting tools and options for exporting to software such as Quicken, QuickBooks, FreshBooks, or Excel.
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It’s Better To Be Safe Than Sorry
Repeat after us: It’s better to be safe than sorry.
When debating whether or not you should keep a receipt, its always better to play it safe and err on the side of caution. There’s much less harm in keeping a receipt you don’t need than in tossing one you do.
If you plan on writing off an expense on your taxes, you better be prepared to provide documentation that you made that purchase for your business.
Proper receipts help demonstrate that an expense can be appropriately classified as a legitimate business expense. Should an expense come into question by the IRS, it is your responsibility as a business owner to prove its legitimacy. That burden falls on you and you alone.
In most cases, the IRS considers documentary evidencethat is a proper receiptas proof. But not just any receipt will do.
Fantastic App Highly Recommend
I am self-employed and have to track all of my expenses. This app is very customizable, incredibly easy to use, and for $10 a year a screaming hot deal. Sure there are a few little annoying bugs but the benefits dramatically outweigh those little issues. Tech support is very responsive and respond quickly. You really cant go wrong if you are looking for an easy, efficient app to track expenses.
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The Kodak Alaris: For The High
If youâve got a large or quickly-growing business with a lot of paperwork to deal with, you might consider investing in a dedicated business document scanner, like the Kodak Alaris.
These machines can process large numbers of documents at once. And they do more than just receipts: they can scan and digitize invoices, letters, legal documents, and anything else you might want to store away for later. The Alaris in particular can also take care of the filing process for you, saving you hours of work.
More About Receipt Scanning
- Get Xeros receipt scanner with the expenses add-on
Scan, track and organise receipts and more when you add the expenses add-on to your Xero subscription. Reimburse claims and manage spending using analytics. Pay for the add-on monthly, but only pay for employees who submit a claim within the month.
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Waiver Of Penalty For The Newly Retired
This isn’t a deduction or other tax break that you claim on your return, but it can save you money if it protects you from an IRS penalty. Because our tax system operates on a pay-as-you earn basis, taxpayers typically must pay 90% of what they owe during the year, or 100% of the previous year’s tax, via withholding or estimated tax payments. If you don’t and you owe more than $1,000 when you file your return, you can be hit with a penalty for underpayment of taxes. The penalty works like interest on a loan as though you borrowed from the IRS the money you didn’t pay.
There are several exceptions to the penalty, including a little-known one that can protect taxpayers age 62 and older in the year they retire and the following year. You can request a waiver of the penalty using IRS Form 2210 if you have “reasonable cause.”
Receipt Bank: If Youve Got Lots Of Receipts
Receipt Bank lets you digitize and store your receipts in pretty much any way imaginable. You can do it using a mobile app, via web browser, via email, or automatically by hooking your credit card up to the app. It also automatically imports receipts from PayPal and Dropbox, and lets you take photos of multiple receipts at a time.
Receipt Bank also integrates with most popular accounting software, including Xero, QuickBooks, FreshBooks and Sage One.
The only downside to Receipt Bank is that it wonât let you manually input receipt information, which can be a hassle if you donât have the receipt in front of you.
But if youâre looking for an app that can ingest a lot of receipts quickly, in every way imaginable, Receipt Bank is the app for you.
Platforms: Android, iOS
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Backing Up Electronic Files
You should make backup copies of all your business information that has been recorded on rewritable media, such as computer hard disks, floppy disks, CDs, DVDs, tapes, or cartridges. A back up copy allows you to access your information, if you accidentally lose, delete, or erase the originals.
You should store the media containing the information in an environment that is free from hazards that could affect the media. These hazards include magnetic fields, direct light, excessive moisture, and temperature extremes.
When you keep backup records in a different medium you should:
- follow the suggested procedures of the media manufacturer
- pay particular attention to the suggested shelf life of the medium
- ensure the file backup can be restored in a format that is usable and accessible by the CRA
If you contract an outside party to keep your electronic records, the records must still be available to CRA officials when they ask for them.
For more information on ensuring the availability and reliability of backup data, see Information Circular IC05-1R1, Electronic Record Keeping, and GST/HST Memorandum 15.2, Computerized Records.
How To Organize Receipts Tip : Where To Keep Them
This is the unsexy essence of receipt management. If you go with file folders, subdivide and conquer. Dealing with a yearâs worth of jumbled receipts is even less fun than it sounds â separate receipts by month or category to help you make sense of them down the road. If you donât trust yourself to do any work, go with the box method. Itâs just what it sounds like â toss your receipts in a box. The best method is a small notebook. Itâs uncluttered and captures relevant details along the way. Simply tape in one receipt per page and jot down relevant information alongside.
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Financial Data Can Be Processed Immediately
Normally, you would take your receipts and store them all in one place, setting aside a certain day on which to go through them.
With automatic receipt scanning, you can take a photo of each receipt as soon as you get it, meaning you donât need to worry about receipts and invoices piling up.
This way, you wonât ever have to deal with an unmanageably large mountain of receipts.
Imaging A Paper Supporting Document
When producing an image of a paper document, you must make sure:
- it is an accurate reproduction with the intention of it taking the place of the paper document
- it gives the same information as the paper document
- the significant details of the image are not obscured because of limitations in resolution, tonality, or hue.
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Do I Need To Save The Original Receipt For Tax Purposes Or Will A Scanned Document Suffice
Electronic storage can simplify your recordkeeping.
Keeping receipts for your taxes is not only necessary to deducting the correct amount, but also ensures your deduction holds up under examination. The U.S. tax system works largely on the honor system, but the Internal Revenue Service conducts audits of tax returns every year to keep people honest. Fortunately, as long as you meet certain requirements, you can clear out the shoeboxes full of receipts by scanning and storing them electronically.
Can I Scan Or Take Pictures Of My Tax Receipts
Absolutely! Please do. In fact, the majority of my clients submit everything to me electronically, so I encourage them to scan receipts in order to have an electronic copy onhand. Most people find this method easier to organize as well. However, there are two things you should definitely keep in mind when digitizing your bills and receipts:
- Make sure you back up your files somewhere.
- Double-check that the scan or photo clearly shows the information on the receipt.
There are so many different ways to keep your receipts and paperwork organized for your small business, but Neat is the #1 top tool that I love recommending to my clients.
Neat lets you use your phone to scan in receipts or mail in paper copies using their magic envelopes. They use their scanning technology to grab information from your receipts and catalog them in their software. Neat also works with the most popular bookkeeping softwares to make the organizing process so much easier.
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Why Should I Download One
Digitizing your receipts removes a lot of the hassle involved in your recordkeeping operation. Regularly scanning and storing your receipts means that:
- When tax time comes, you wonât spend hours sorting through a pile of crumpled receipts wondering whether that $13 parking charge was for a client meeting or a date.
- You wonât miss any valuable tax write-offs.
- Youâll know exactly where your money is going every monthâso you can cut spending where itâs getting out of hand.
Due to the Period of Limitations, the IRS also technically requires you to hold on to receipts for significant expenses for at least three years.
Digitizing your records is also a great way to avoid accidentally tossing them in a move or an overzealous fit of spring cleaning. Plus, letâs not forget that paper records can fade, and are susceptible to damage. Telling the IRS that âthe dog ate my tax recordsâ simply wonât fly.
Child And Dependent Care Credit
Affording childcare can be one of the more difficult challenges parents face. That’s where the child and dependent care credit comes in especially this year, because the credit was improved for 2021 to help families struggling during the pandemic.
For previous years, if your children were younger than 13, you were eligible for a 20% to 35% non-refundable credit for up to $3,000 in childcare expenses for one child or $6,000 for two or more. The percentage decreased as income exceeded $15,000. However, for the 2021 tax year, the maximum credit percentage jumps from 35% to 50%, up to $8,000 in expenses for one child and $16,000 for multiple children qualify for the credit, the phase-out doesn’t start until income hits $125,000, and the credit is fully refundable.
The credit can also help pay for the costs of caring for other dependents, too. For example, expenses related to care for an elderly parent living with an adult child qualify for the credit if the parent is claimed as a dependent on the child’s tax return.
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What Should I Do With All Of My Receipts
You dont have to keep every receipt, unless its something that is tax deductible or something that youre going to take back, says financial expert, Kelley Keehn.
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