With tax season gearing up, you might be kicking yourself for letting another year go by without a simple organizing system in place. This can be extra stressful if you find that you are missing out on deductions due to not keeping proper records. Fortunately, it’s not too late to get organized when it comes to filing your taxes this year. With a little bit of effort, you can keep this system running smoothly and make every following year less stressful at tax time.
Reminding yourself to keep all receipts is your first step. You need a system in place to make sure that you are keeping good records. Store every receipt that you receive, and make a note on it if the purchase was used for business (dining receipts count, too). You should plan on keeping these receipts for at least six years. To help with storage, you can scan them and keep them electronically, or take pictures with your phone using an expense tracking app. Just make sure you back them up.
Avoid using cash for business expenses when you can—it’s harder to track and provide documentation for cash purchase. And while it’s good to keep card statements, you shouldn’t rely on these to tell you what was a business expense and what was personal. This is where receipts really come in handy. In case of an audit by the IRS, having detailed receipts that back up your credit card statements is crucial.
Keep a Journal
A business journal can serve many purposes, such as providing a written record of appointments and other scheduled items. It’s also a great way to make sure that you don’t forget anything. If you think of something you need to track down or ask your financial specialist about, it’s best to have all of the information in one place so that nothing slips through the cracks.
File With Labels
You’ll receive employee financial reports and summaries from your payroll company (if you use one) and should already have copies of all of this documentation if you handle payroll yourself. Keep all of this information with your tax forms for each year. Set up a filing system—paper or digital—that sorts tax information by year so that you can easily find it later. When you get a statement or receipt during the year that you know you’ll need for tax time, you can slip it into the file and find later that everything is already in one place when you need it.