8 Simple Practices For Small Businesses To Organize Receipts Efficiently

Keeping a record of your business transactions is considered a top priority for a self-employed or small business owner. Keeping your records properly saves you from being audited by the IRS. Plus, staying organized will save you time during tax season. 

However, we understand that keeping track of all your receipts and records can be tedious and time-consuming. That’s why in this article, we’ve outlined eight best practices to help you organize receipts and records efficiently. 

1. Use a business account and credit card instead of cash

As the IRS will continue to enforce its audit rules, keeping a better set of bookkeeping and receipts for all of your expenses will help you save time and hustle. This simple yet important tip can help you cope with it. Avoid using cash — it’s easy to spend, hard to track, and nearly impossible to match up cash spent with receipts. 

On the other hand, a credit card or debit card will provide you with monthly statements, enabling you to cross-check details with your paper receipts. It’s also a good idea to have a separate business account and credit card, so you don’t mix business expenses with your personal spending. 

2. Save your receipts

Don’t just rely on bank statements, credit card statements, or canceled checks! The IRS won’t accept your bank or credit card statements to justify deductible expenses. You will need an itemized receipt that corresponds with the transaction. 

Hang on those itemized receipts, which are also called “source documents,” for at least six years after your last Notice of Assessment since the IRS will ask to see them in the event of an audit. You can keep a physical or digital version of receipts. 

3. Choose email receipts instead of paper receipts

Nowadays, many merchants offer this service to their customers. You can choose to receive your receipts via emails, label and categorize them in a specific order. Email receipts are convenient and friendly to the environment as they go straight to your inbox and clear your desk and drawers from piles of paper receipts. You can always find them easily, create expense reports, and do so much more. 

4. Review your receipts once a month

Spending some time reviewing, categorizing, and organizing receipts for 30 minutes every month can make a huge difference! It keeps things manageable as the year progresses and helps you keep track of your spending so that you won’t miss out on any tax deductions. 

You can purchase an accordion folder every year to store all business receipts and make sure each folder contains all receipts for the year. These folders are inexpensive and easy to obtain. They allow you to organize receipts by category and year, making it easier than ever to find any receipt even years later. 

5. Make notes on the back of receipts

This is an especially great idea to keep track of dining and entertainment expenses. It’s easy to recall why you bought a printer, but it can be difficult to suddenly remember who you went to dinner with and what the business purpose was in 2015. By starting this simple habit, you will rest assured that you will not miss any dining and entertainment expense deductions for business purposes.

6. Create a spreadsheet for work-from-home expenses

Whether you have always been working from home, or you are working remotely due to the Covid-19 pandemic, there will always be some noticeably deductible business expenses. These expenses include a portion of cleaning materials, utilities, home insurances, office supplies, along with part of your property taxes, mortgage interest, and capital cost allowance.

To claim these expenses, you need to calculate the percentage of your home used for business and apply that percentage to the tax deduction. Create a spreadsheet including your receipts for home office expenses throughout the year. By making it a habit to update the spreadsheet once a month, you’ll save yourself the headache of scrambling to input and tally up all your work-from-home expenses at the end of the tax year.

7. Back up your receipts

Since paper receipts tend to fade with time, keeping a digital copy of each receipt can save you from getting in trouble with the IRS. The simplest practice is to snap a picture of each receipt on your phone, then upload it to a central location later and keep it for at least six years. The IRS allows digitally stored receipts, however, don’t forget to back up stored receipts (on the cloud or a memory device) in case your hard drive crashes and deletes all your important information by accident. 

8. Scan and store your receipts digitally

Storing receipts digitally has been proven to improve business efficiency. It provides several benefits including time and cost-saving, easy to store and access, tax-ready, reduces clutter,  lessens the risk of data loss, increases security, and so much more. 

There are plenty of receipt scanning apps that you can use to scan and store your receipt digitally. Each offers special features for particular purposes, so anyone can choose the most suitable one and benefit from it. 

Shoeboxed is a painless receipt scanning and organizing solution for freelancers and small businesses owners. This versatile app serves many purposes: scan, store and organize receipts, manage business expenses, store business cards and even track mileage for business travelers. 

Shoeboxed’s OCR engine and human data verification features ensure that your receipts are legibly scanned, clearly categorized, and accepted by both the Internal Revenue Service and the Canada Revenue Service in the event of an audit. What’s more, Shoeboxed enables you to create clear and comprehensive expense reports that include images of your receipts. You can then export, share or print all of the information you need for easy tax preparation or reimbursement… within a few clicks. 

Shoeboxed is now available on iOS and Android. Get your free trial before choosing the perfect plan

Conclusion

Organizing your receipts can keep you proactive and productive, which saves you lots of time, stress, and even money in the long run. Going digital helps you organize receipts and keep track of your expenses easier than ever. As everything is digitally stored and accessible through a cloud-based system, you will be able to work with them anytime, from anywhere, with any device, within a few clicks. 

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4 End of Year Tax Tips for Freelancers

We’re just over 9 weeks away from the new year. And while there are many enjoyable holiday traditions to look forward to, there are also some not so fun ones—like end of the year taxes. We know what you’re thinking…But taxes aren’t due until April 15th! And while you’d be right in thinking it, you’d be sorely misguided if you didn’t consider the end of the year as an important time for taxes.

Image from FlexJobs.com.

We’re just over 9 weeks away from the new year. And while there are many enjoyable holiday traditions to look forward to, there are also some not so fun ones—like end of the year taxes.

We know what you’re thinking…But taxes aren’t due until April 15th! And while you’d be right in thinking it, you’d be sorely misguided if you didn’t consider the end of the year as an important time for taxes. Dec. 31st is the deadline for most tax breaks and it’s a crucial time to increase deductions so you can decrease your taxes. If you wait until the new year, it will already be too late to capitalize on big deductions!

Here are 4 end of the year tax tips to help freelancers start off 2016 with a bang:

Invest in Your Skill Set Before the End of the Year
Want to improve your business skills? Need a programmer but can’t afford one? Now’s the time to go to that web developer boot camp or that small business conference in Vegas. These business related courses will be tax deductible so long as you do them before 2016. Not only will you be turning yourself into an entrepreneurial ninja, you’ll be saving money while doing it.

Invest in Your Business
Now that you know the benefits of investing in yourself, it’s time to consider investing in your business. In the next few weeks, consider boosting your marketing presence and increasing your ad space. These things will allow you to increase deductions while growing your business.

Invest in Assets
Investing in assets is a great way to increase productivity while (yup, you guessed it) decreasing taxes. By making smart investments you can turn those assets into a profitable ROI. Assets might include things like new computers, office furniture, and equipment. And so long as your business is profitable—you can write off 100% of those assets.

Side Note: As the law stands, assets can be deducted up to $25,000. Be aware however, that last year Congress waited until Dec. 14th to pass Section 179 of the Federal Tax Code. Section 179 retroactively changed the amounts of deductible assets to $500,000. It’s entirely possible that the process repeats itself this December.

Pay Your Quarterly Estimated Taxes
Paying your quarterly estimated taxes might seem straightforward, but with the April 15th being the seminal date for taxes—business owners often forget about keeping up with their quarterly estimated taxes.

The final day to pay estimated taxes is January 1st, so make sure you pay them on time to avoid penalties. Most freelancers are cash basis taxpayers which simply means they report income and deductions in the same year that they receive them. If possible, you should try and get your clients to pay out in January. By being paid in January rather than December, you won’t have to declare that income on your taxes for another year.

Austin Miller is the Content Marketing Ninja at Bookly, an online bookkeeping service designed for small business owners. Bookly pairs you with a dedicated bookkeeper and software so you spend more time doing what you love.

7 Documents Every Independent Contractor Should Keep

Freelancers and contractors are projected to make up more than 40 percent of the US workforce by the year 2020, likely leading to more scrutinized employment laws. Protect yourself by keeping important documents securely stored and easily accessible.

Keeping track of business documents seems like an obvious obligation for an independent contractor, but the “what”, “why” and “when” of this obligation remains a gray area for many. With Uber’s recent legal challenges concerning the worker classification of independent contractors, the documented proof is the only sure-fire way to defend against fees and legal claims from the IRS.

But do you know exactly what to keep, and how long to should keep it for? Leaving a paper trail to prove independent contracting work is more important now than ever before, and Shoeboxed wants to make sure you understand the benefits of keeping the following documents safe, secure and accessible:

Invoices (7 years)

Key business ledgers like invoices should be kept for a minimum of seven years, and for good reason. It’s the best way to protect your contracted accounts against a conflict with a client project. Invoice statements also verify that you are subject to profits and losses, which is one of the factors in the Twenty Factor Test for an independent contractor. In the event of an IRS audit, this will help prove your status as a contractor.

Travel Mileage Logs (3 years)

Like any good expense reporting habit, keeping travel mileage logs ensures protection against tax audits and business disputes. They can also be used for travel deductions, earning you up to 57.5 cents for every mile you claim. There are plenty of travel miles that qualify, including business travel to and from airports and hotels, errands and supply runs, travel to client offices, and to and from business meals. Don’t miss out on those valuable deductions!

Business Cards (Forever)

Being a successful contractor requires agile networking skills. At any given moment, there’s a chance that you will stumble across your next great project, partner or client. Unfortunately, contractors collect dozens of business cards every month that are habitually trashed or misplaced. Keeping business cards can help secure resourceful relationships; you never know when one of those contacts will come in handy. Working for multiple clients is also part the IRS’s Twenty Factor Test, and business cards may provide evidence that you are not controlled by a single employer.

Service Advertisements and Listings (Forever)

Keeping copies of past service advertisements and listings is yet another easy way to formally and legally prove a contractor-client relationship. The IRS says that making services available to the general public on a regular and consistent basis demonstrates autonomy in the nature of the work. It also confirms your intent of work in the event that a client wants to claim you as an employee rather than a contractor.

Project Records (7 years)

Contractors are required to fill out form 1099-MISC, a detailed document that asks what you made for each individual job. Project documents, including the contract, change orders, correspondence, logs, monthly reports and schedules provide the specifications and technicalities needed not only to fill out a 1099, but they also provide detailed insight of your contract work to the IRS if your worker classification ever comes into question.

Tax Returns  (3 years)

Due to the IRS statute of limitations, three years from the date of your tax return (or from the date of filing, whichever is later) is typically the standard time to keep business tax returns for tax-related business documents. The statute states that you have three years to file a claim for a refund, and the IRS has three years to appraise a tax if your income was not accurately reported. Even if these two situations don’t apply to you, keeping recent tax records protects you from any doubts that may be raised against your tax filings in the future. (Source)

Professional Licenses and Insurance Certificates (Forever, or until expiration)

Many jobs require contractors to be professionally certified in a given field of work in order to complete a client project. Though the regulations vary state-by-state and city-by-city, having these documents on hand and ready to present to a potential employer streamlines the hiring process, increases the probability of getting hired for the job, and may even increase your potential pay. Clients want to know they are legally protected and are hiring the right person for the job — it pays off to gain their trust from the get-go. (Source)

Lastly


Freelancers and contractors are projected to make up more than 40 percent of the US workforce by the year 2020. Make sure you’re protected against new contract work laws and save your documents for secure and easy access. Shoeboxed offers mail-in services with premium plans, allowing contractors to send in their important documents and never have to worry about being able to find and provide legal supporting documents for their contract work. Focus on working for yourself and doing what you love – we’ll handle the paperwork.

Try Shoeboxed today!