Small Business Tips

Receipt Management: Five Major Cons of Paper Receipts

It’s not new to businesses, accountants, and even individuals who want to keep track of their expenses that receipts are extremely important. In the business world, paper receipts, though dominant, are losing popularity due to an alternative, digital receipts.

A digital receipt can solve all the pitfalls of a physical one, thus proving itself a superior solution. But where exactly do traditional methods fail?

This article lists three major disadvantages of paper receipts. Also, you’ll find suggestions for finding the right receipt management software for your business.

Why is receipt management important?

A receipt is a document that acknowledges something has been transferred, in other words, a transaction between one party to another. Ownership is changed as a result of receipts. Typically, a receipt includes the following information:

The date and time the transaction happens
The number of items purchased or the service performed and the price
The time and location of each party
VAT charged, if any
The method of payment

All the necessary information within a transaction is present on a receipt. Therefore, this creates a transparent transaction and should prevent any misunderstandings and disputes between parties. You may have noticed that a receipt is a precedent if you want a refund or exchange.

Regarding tax payments, receipts are even more important as they serve as proof of expenses. Countries vary in their tax reporting, but most require some document to prove how much you have paid. In the US, the IRS requires receipts for certain expenses when filing taxes.

There are several types of important receipts, see also if you are interested:

How are businesses doing receipt management?

There are five receipt management systems that individuals and businesses normally use to handle their receipts: paper receipts, photo/scan solutions, apps with receipt capture technology, apps with auto-match, and direct receipts. According to a study, the time spent on receipt management with each method is as follows:

Paper receipt: 13.9 second
Photo/scan solution: 9.2 second
App with receipt management technology: 4.9 second
App with auto-match: 2.8 second
Direct receipt: 1.3 second

Except for the first one, all of the other methods are digital. The norm now is that many businesses are digitizing their receipt management, which saves them a potential amount of time.

Cons of holding onto a physical receipt

A physical receipt may be practical and simple, something we have been too familiar with. And old habits die hard. Every store provides its customers with paper receipts, so why bother changing to digital receipts? Plus, a person may be more likely to look at and examine a paper receipt, double-checking if anything goes wrong with the transaction.

But resorting to paper receipts brings more troubles than benefits.

1. Take up much physical space

One receipt might sit well in your pocket. But five receipts do not, let alone a hundred receipts.

Eventually, with hundreds of thousands of receipts that businesses, even small ones, come into every year, it is indeed very space-consuming.

With too many in one place, they are more prone to getting lost. One receipt is too small for us to immediately acknowledge that it is gone, too little for anyone to come across it to remember. Going digital, you need only one device to keep all the receipts.

2. Deteriorate over time

Receipts are made of thermal paper, with some layers of special coating. Still, they fade away with time, like many other kinds of paper. There are several tips on storing them correctly, thus, preventing them from fading.

But resorting to paper receipts brings more troubles than benefits.

3. Take up much physical space

One receipt might sit well in your pocket. But five receipts do not, let alone a hundred receipts.

Eventually, with hundreds of thousands of receipts that businesses, even small ones, come into every year, it is indeed very space-consuming.

4. Deteriorate over time

These tips can only delay the fading process, storing the receipts for a few more years. Thermal paper deteriorates anyway. Going digital, you do not have to do anything special, and receipts are still there after years.

5. Difficult to find a specific receipt

It’s hard to find the right piece of paper in a pile containing thousands of others. Even in the most organized workplace, it can still puzzle anyone searching for things, slowing them down.

A digital document archive with a powerful search function will greatly improve one’s productivity. Receipt management software helps you cut off lots of time finding documents, thus staying focused and engaged in more important tasks.

Finding the right digital receipt management for your business!

There are many digital receipt management software on the market to choose from, Shoeboxed, Expensify, and Zoho Expense, to name a few. With several choices, you may wonder what software is the right one for your business. The answer doesn’t lie only in the software features but also in your business model and needs.

The receipt management software developed by Shoeboxed is an ideal tool for small business owners and managers.

Shoeboxed is a receipt management application that turns your receipts and business documents into a digital format in just one click by taking a picture straight from your smartphone or scanning a pdf. It automatically extracts, categorizes, and human-verifies important data from your receipts so that you can go over and check your records anytime with ease. Shoeboxed ensures you will always have your receipts securely stored and ready for tax purposes.

Access your Shoeboxed account from your web browser or smartphone app. Stay audit-ready with Shoeboxed for FREE now!

You might also be interested in: Top 5 Receipt Scanner and Organizer Apps for Small Businesses in 2021

The bottom line

Space-consuming, susceptible to deterioration, and difficult to access are paper receipts’ three most visible cons. Now that you know the disadvantages of physical receipts, it is now the time that you switch to digital solutions. This may be the best solution that you make for yourself and your business.

All You Need to Do for Stress-Free Corporate Tax Preparation

If you own a corporation or have formed an LLC, you’re required to file a corporate tax return every year. Understanding your business structure and determining the necessary documents can help you prepare your corporate tax return more easily and efficiently. This article will walk you through the most practical steps for stress-free corporate tax preparation.

Determine if your business is an S Corporation or a C Corporation

If you establish a corporation, your business will be automatically classified as a C corporation for federal income tax purposes. A C-corporation is a traditional corporation that pays corporate income tax on its profits and pays tax on its shareholders’ salaries and dividends.

This taxation on both the corporate and individual sides is sometimes known as “double taxation.”

Small businesses can avoid double taxation by requesting to be classified as S-corps because S corporations don’t have to pay any corporate tax. S corporations’ profits and losses are passed through to their shareholders’ individual tax returns, and those profits are taxed at their individual income tax rates.

To be qualified as an S-corp, a corporation must meet specific requirements, including:

Having fewer than 100 shareholders
Having only one type of stock
Not having corporations, partnerships, or non-resident aliens as stockholders
Being a domestic corporation

Prepare essential information

The necessary information for corporate tax preparation includes the company name, address, employer’s ID number, date of incorporation, and total assets. The corporate financial officer will also need to provide detailed information about the corporation’s income, including:

Gross revenue
Cost of goods sold
Dividends
Royalties
Interests
Rental costs
Capital gains

Claim tax-deductible expenses

Corporations are able to claim many tax-deductible expenses against income, including employee salaries, bonuses, the cost of employee health insurance, and retirement programs.

Understanding and making the best use of these deductions will help you maximize your tax savings. To claim these expenses, the corporation’s financial officers should track these details throughout the year and be able to provide complete documentation in the event of an audit. The most common tax-deductible expenses are the following:

Employees’ compensation, allowance, bonuses, and other salaries
Employees’ benefit packages
Repairs and maintenance fees
Rents
Taxes and licenses
Interests
Contributions to charity
Depreciation costs
Advertising costs
Pensions and profit-sharing plans
Domestic production activities

Submit essential forms for corporate tax preparation

Form 1040

If you formed an LLC or hired yourself as an employee of your corporation and gave yourself a salary, you must list that personal income on your Form 1040. Some corporations can be considered “pass-through” entities, which means a legal business entity that passes any income it makes straight to its owners, shareholders, or investors. The company’s members or owners must then list the income, profit, and losses on their individual income tax returns.

Form 1120

Form 1120 is the tax form that C corporations (and LLCs filing as corporations) use to file their income taxes. This form also includes Schedule C. This form requires basic information about the corporation, including your employer identification number, the date you incorporated, total income, a list of deductions, and employees’ compensation. Form 1120 also includes other schedules that may or may not apply to your business, such as Schedule A (containing the cost of goods sold,) and Schedule K (listing your corporation’s information, e.g., your business type).

Schedule C

Schedule C records deductions, dividends, and any profit or losses that your business incurred. On this form, you can also record essential expenses to run your business (e.g., the mileage to and from business meetings or business meal expenses). Schedule C is not a stand-alone document and is usually supported by your Form 1040 or Form 1120.

Form 1065

If you have income through a partnership, such as a limited liability partnership, you may need to file Form 1065. According to the IRS, partnerships do not pay taxes on their income. On the other hand, their profit and loss are passed on to the partners’ individual tax returns.

Other tax forms

If you hire employees or independent contractors, you need to submit other necessary forms as well. For example, if you withhold Social Security and Medicare from your employees, you must send W-2s and W-3s to the Social Security Administration. You must also file Form 944 electronically for federal unemployment taxes. If you paid more than $600 for each independent contractor for their work or services, you must submit Form 1099-MISC. You may also need to issue Form 1099-MISC if you paid more than $10 in royalties or broker compensation.

File your federal tax return

The type of federal tax return you file for your corporation depends on whether you’re an S-corp or a C-corp.

S-corp owners need to file the following forms:

Form 1120-S: This form contains your corporation’s income, expenses, and losses.
Form K-1: This form lists your corporation’s shareholders and their share of the corporation’s income, deductions, and credits. You must also provide your shareholders with copies of their K-1 forms so they can report their share of the corporate income or loss on their individual income tax returns.

If your business is a C corporation, you’ll file a corporate tax return on Form 1120. The corporation’s dividends are then filed on the shareholder’s individual tax returns.

File your state tax returns

You’ll also have to file a state corporate income tax return based on your tax status and the state where your corporation was formed. The corporate tax rate is commonly a fixed percentage that varies by state. If your corporation and/or its owners are registered to run business in other states, they may also need to file other state tax returns.

Pay estimated corporate taxes

While C-corps must pay estimated corporate income tax, S-corps must make estimated tax payments for certain S corporation taxes. You need to submit these estimated tax payments on a quarterly basis throughout the year.

Corporations that fail to pay their estimated tax payments on time may face interest and underpayment penalties.

Corporate tax preparation can be confusing, so it would be a good idea to consult with a tax professional or a certified accountant. By that, you can understand the consequences of C-corps or S-corps taxation, identify the deadlines for paying different corporate taxes, maximize your business tax deductions, and file your tax return easily.

Explore more about tax and tax deduction articles on the Sho e boxed blog:

Access your Shoeboxed account from your web browser or smartphone app. Stay audit-ready with Shoeboxed for FREE now!

How to File for Tax Return Delays if You Can’t Meet the IRS Deadline

Picture this—you have less than three weeks to file and submit your tax return, but you’re too busy to find the time to do it. Your anxiety and stress levels increase as the tax deadline gets closer. What should you do?

First, relax and know that you are not the only one experiencing this problem. More importantly, remember that there are ways to deal with late tax filings!

Now that you’ve calmed down, let’s tackle this together. Below, we’ve gathered the most practical solutions and tips on tax return delays so that you can prevent yourself from paying a lot of money for penalties.

File for a tax return delay (tax extension)

If you know for sure that you won’t be able to make it by the due date, immediately file for a tax extension to avoid any possible penalties. All you need to do is fill in and submit Form 4868 to the IRS either by paper or electronically.

However, there’s a catch. Filing an extension for tax return delays only allows you more time to file, not more time to pay your tax. In other words, if you owe money to the IRS, you have to estimate and pay at least 90% of your tax liability with your Form 4868. Otherwise, you could face a late-payment penalty.

When is the deadline to file a tax return delay?

The deadline to file a tax extension is the same date to file a tax return, which is April 18, 2022. An extension will delay your filing deadline to October 17, 2022.

What happens if I don’t file a tax return delay?

This depends on whether you owe money to the IRS or the IRS owes you money.

If you have taxes to pay:

You’ll be fined 4.5-5% per month of the tax amount owed plus interest. The maximum penalty can be up to 25%.

It’s important to remember that the penalties for failing to file a tax return or requesting a tax extension are more severe than the penalties for not paying your taxes on time (0.5%/month of the tax amount owed plus interest.)

If you have a refund:

You won’t suffer from penalties for not filing your tax return by the deadline, even if you don’t submit an extension. However, it might be different for state taxes.

That being said, you still should get your taxes filed and dealt with on time. This is mainly because you must file a tax return to get your money back.

How can I know if my tax extension is approved?

Normally, you will receive an email from the IRS confirming within a day after you e-filed Form 4686. If you sent the tax extension request by post, you won’t receive a confirmation email and will have to call the IRS to check. Otherwise, you can just wait and see — silence means no issues most of the time. The IRS only contacts you if there’s something wrong with your extension.

Why might my request for tax return delays be rejected?

Though this situation doesn’t happen too often, there’s still a possibility if you don’t file Form 4686 carefully. For example, if you made spelling mistakes or provided information that doesn’t match IRS records, your request might be turned down. In this case, the IRS will normally give you a few days to correct the errors and resubmit the form.

Another thing that could lead to rejection is unrealistic tax liability estimates. Not only will you not get an extension, but you might even be fined.

Can I request a tax payment delay?

Technically, yes. However, the requirements are very strict. Below is what you need to do in order to have some extra time to pay your income tax:

File Form 1127 and submit it to the IRS on or before the date that the tax is due
Provide a complete statement of all your assets and liabilities as of the end of the last month, plus an itemized list of money you received and spent in the three months preceding submitting your request for an extension to pay.
Show that paying the tax by the original deadline would cause you extreme hardship (e.g., if you show it only causes inconvenience to you, there’s little chance your request will be accepted)
Prove that paying the tax on time would result in a significant financial loss and that you don’t have the money or can’t raise it by selling property or borrowing.

Generally, you will get a six-month extension if your request is approved. Furthermore, the IRS requires some acceptable security before issuing a payment extension. Depending on your circumstance, the security could be in the form of a bond, a notice of lien, or even a mortgage.

Extensions are sometimes granted, particularly in the event of federally declared disasters.

Additional relief information is available on the IRS Disaster Relief page.

The bottom line

Filing tax isn’t fun, but there are ways to make the process easier.

Always try to file your tax return as soon as possible. In case you can’t, try to make a request for tax return delays. Remember that it will only give you more time to file your tax return, not more time to pay your taxes.

Tax season can be very complex if you’re a business owner. Since most business-related expenses are deductible, you should go over your bookkeeping carefully to make sure you can lower your taxable income as much as possible. Having your receipts available and ready to check will put you at a significant advantage in this case.

Shoeboxed can help you with that.

Shoeboxed is an online application that helps you clear your piles of documents and digitize them in just a click. This app automatically extracts and categorizes important data from your receipts, which then get approved by a team of data experts. You can scan your business receipts, manage expenses, store business cards, and track business mileage easily, helping you boost productivity and bring in more revenue.

Quick, reliable, and trustworthy, Shoeboxed guarantees to organize your receipts in the best way possible!
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