Bookkeeping Nightmare #1! Its April. Do you know where your receipts are?
Here’s How to Make Sure You Do
Receipts are your audit protection. They must be taken seriously. Dropping a bag of unorganized receipts on the IRS agent’s desk is not going to win their favor.
The key is to be organized, or at least look like you are. Your income may be easy for the IRS to track, but you’re responsible for keeping good records and proving your expenses are legitimate.
The following are time-honored record-keeping methods that carry the IRS stamp of approval:
1. Make notes on your receipts detailing what they are for, who your lunch guest was, and the exact business purpose it went towards. In a perfect world, you’ll back up your deductions with the bill, including a detailed breakdown of costs, and proof of payment, which shows that you actually paid the bill.
2. Create a well-organized place to keep your business receipts. For example, keep a manila envelope in your car and do a “receipt check” each time you get in it. Vow to be faithful. (And don’t let your car get stolen!)
3. Take a photo of your receipts, scan and store them in Dropbox, or in any cloud-based program. If you scan them, they must be readable, or the IRS will not allow the deduction. Or, sort them by month in envelopes or a file folder in your office.
4. Stay away from using cash. If you use it, you’re more susceptible to having deductions denied due to no paper trail.
5. Don’t co-mingle business and personal expenses. Keep them separate by using a dedicated business credit card.
6. Keep all receipts (paper or scanned) related to your business for at least 6 years.
7. Or, get an App for that! Apps are the best and easiest method to use because they allow you to photograph receipts immediately on your phone, and categorize them at any time. You might try;
- One Receipt
- Mobile Receipt
Not taking the time to set up a receipt-keeping system that works for you is a mistake you can’t afford to make!
HR Business Solutions offers QuickBooks and HR support for small to medium size businesses. For more information, please contact Lynn Talbott at 423-668-6020 or visit www.hrbizsolutions.net