With Tax Season approaching it is very important to know which receipts you will need when filing. If you are like many of our Clients, you dread this part of taxes because you don’t know which receipts to keep and which ones to throw away. There is also a lot of conflicting information on the Web regarding whether or not you should keep them at all.
So….. What is our take?
To be very honest with you, we don’t recommend throwing any receipts away. It is good record keeping practice to retain documents for your Business. This helps cover you if you are ever questioned or audited by the IRS because you have sufficient documentation. If you do not, the IRS could likely deny deductions and raise your Tax Liability and no one wants that to happen.
What receipts should I keep?
Based upon the IRS if you plan to use an expense towards tax credits or deductions, then you’ll need to have “documentary evidence.”
Examples of documentary evidence are:
- Mortgage bills or rent receipts
- Utility bills (for home offices)
- Childcare bills
- Office expenses and Business receipts
- Self-employment insurance receipts
- Medical bills
- Prescription receipts
- Traveling and transportation receipts related to any medical appointments or treatments
- Weight-loss program bills
- Smoking cessation program bill
- Sales Tax receipts
- Mileage logs
- Gas receipts
- Student Loans
- Tuition bills
Overwhelmed much? I’m sure. But knowing this and being proactive is the key to being organized and successful.
If you’re a fan of keeping paper receipts, store them in a secure and safe place for at least 3 years after filing your taxes.
If you’re not a fan of paper records (ETS is not 🙂 , go electronic instead. Making sure to include the amount, date, place, of the expense on your devices or in the cloud for safekeeping. Some great options are Dropbox or Google Drive.