Keeping Your Receipts Organized for Tax Purposes

Do you have a system for keeping your receipts organized for tax purposes? As a freelancer or a small business owner, you will be able to benefit from certain tax allowances which can reduce the amount of tax you need to pay. You can cut down your taxes by claiming costs associated with running your business, such as the cost of travel to and from work, overnight accommodation and meals when working away from home, any computer software or hardware you use to do your job and membership fees to professional associations.

In order to claim these expenses, you will need to save all of the receipts from these purchases and keep them in an organized way so that you can present them to your accountant. If you are ever audited, you will need to be able to display the receipts to prove that you were accurate when you reported your expenses.

However, organizing your receipts can be a huge, overwhelming and time consuming job. If you have a huge box filled with strips of paper and statements staring back at you here are some tips that will help you get organized:

Stay on Top of It

Although you might be tempted to leave this task until the very end of the tax year, you will actually make things easier on yourself if you do a little bit of work each month to stay organized. However, you don’t have to take an entire day out of your schedule every month to organize your receipts and paperwork. Because you are doing it more frequently, you will usually only need to spend an hour or less every month.

Figure Out Where to Keep Them

Once you have gathered together all of your receipts you will need to come up with a place to store them. Some people use a filing cabinet with labelled file folders, other people use shoeboxes and some scan them into the computer and organize them electronically. It is up to you which storage method is the most convenient, but make sure that they are stored in a place where they will not be damaged or lost.

Group Them by Expense Type

The next step is to go through your receipts and organize them by the type of expenses. Examples of categories you might use are Office Expenses, Insurance, Car and Petrol Expenses, Advertising, Repairs and Maintenance and Travel, Meals and Entertainment. Create different clearly labelled files or shoeboxes for each category. If a receipt has become faded and is starting to be illegible, staple it to a piece of paper where you write the amount, location, date and other important information.

The first time you do this, it will likely take you quite a while. However, afterwards you will be doing it once per month so you will only have a few receipts to sort through and the task will be much shorter. You can even do it every day, simply emptying out the receipts in your wallet directly into the correct file folder as soon as you get home.

Receipt Organization Software

In order to make the process of organizing your receipts a bit easier, you might even want to look into receipt organization software, especially if sorting through tiny pieces of paper gives you a headache. There are some programs out there which will scan your receipts and organize them automatically within the software, which can save you time.

Keeping track of receipts for tax purposes can be a pain, but once you have established a system which works for you it will be a much easier process.

One of the most important parts of contractor accounting is to keep track of your receipts so that you can claim your business expenses. Here are some tips for staying organized.

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