Separate Credit Cards: If you use a separate credit card for your business expenses, rental property repairs and unreimbursed employee business expenses (job-related) then you can simply jot down on the credit card statement the nature of the expense.
Financial Software: QuickBooks and Quicken do a great job of tracking your expenses, but keep in mind that only tracking your expenses will not be enough. This would only be the record part of the two-part requirement. For example, if you spent $300 on office supplies, you can keep an electronic record of the purchase in QuickBooks but you will also need to keep a receipt, credit card statement, etc.
Envelopes: This is an old fashioned, yet proven, way of maintaining records. Many taxpayers will label a handful of envelopes and toss receipts in each envelope depending on the purchase. For example, you could have Office Supplies, Charitable Donations, Job Supplies, Travel, etc. as your labels. Shoeboxes work well too. As you stuff your envelopes you should jot down the business purpose. This is especially true for meals and entertainment where the substantiation (business purpose) requirements from the IRS demand the person’s name, what was discussed and if any portion was personal or pleasure.
Receipt Scanner: A paper receipt or invoice is still the best way of proving your tax deduction, by far, but the new receipt scanners available make retaining receipts a breeze! In reading several Tax Court opinions and summaries, it is amazing how a receipt can say a thousand words. So, each time you make a purchase, or a contribution, jot down the business connection, if necessary, and then scan it and forget it.
As a side note, many receipt printers in department stores use heat to print the receipt…Just think back to the last time you left a receipt on the seat of your car during the summer. Unless you put your receipts in the freezer, the ink will fade over time.
PDF Printer: This allows you to print anything to a PDF file. For example, if you wanted to save an electronic copy of a web page that is dynamic (such as your banking dashboard or home page) you cannot just save the web page contents to your computer. But if you print the web page and choose your PDF printer, the information on your computer screen will now be saved as a PDF.
Backups: If you end up using an electronic archive you absolutely need to invest into Google docs, Carbonite or similar online backup services. It doesn’t do you any good if your computer crashes and all your tax information is gone. Scan your information to a folder, and have that folder selected as continuously backed-up.
Comments