Keeping and organizing receipts is one of those things that every small business must do but doesn’t want to. But we tell ourselves that sitting down to scan receipts for hours on end or entering data into an endless spreadsheet is what we need to do in order to make taxes manageable. The IRS needs to see documentation about your spending and purchases, so keeping these records is extremely important, even if there are better ways to scan and organize receipts. Below is some advice straight from the IRS about receipts and recordkeeping for taxes:
You probably already keep records in your daily routine. This includes keeping receipts for purchases and recording information in your checkbook. Keeping these and other records will help you avoid headaches at tax time. Good recordkeeping will help you remember the various transactions you made during the year, which in turn may make filing your return a less taxing experience.
Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.
In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return:
- Credit card and other receipts
- Mileage logs
- Canceled, imaged or substitute checks or any other proof of payment
- Any other records to support deductions or credits you claim on your return
Good recordkeeping throughout the year saves you time and effort at tax time when organizing and completing your return. If you hire a paid professional to complete your return, the records you have kept will assist the preparer in quickly and accurately completing your return.