by Guest Contributor Shannan Painter
In a society that is headed more and more towards being a paperless one, the business owner is left wondering, “What on earth am I supposed to do with all these receipts?” You might be tempted to grab an old shoebox and bury them – out of sight, out of mind – but before you inadvertently create a bunch of fire-starter, let’s see what the IRS has to say about keeping track of business expenses.
First of all, I think we can all agree that recordkeeping may not be our favorite task. The unfortunate truth is, business owners have little choice but to just DO IT! While tax law does not require businesses to keep records in any particular way, it does require you to keep a complete and accurate set of books for any business you operate.
So, what do receipts have to do with my record keeping?
Your books alone do not justify your business deductions. The IRS requires you to have supporting documentation such as receipts, order forms, invoices, carbon-copies of checks, time sheets, etc. In addition, any travel or entertainment expenses require you to keep even more detailed records: who you were with, what the purpose of the travel or entertainment was for, and how business was related.
Where should I keep these receipts?
One of the most important things to keep in mind with storing records is ensuring that they are in a safe place. Losing records due to lack of organization, or even a natural disaster could result in a major headache trying to piece information back together! Try using an accordion file to separate receipts by month in order to locate them quickly.
Can I keep electronic copies?
Absolutely. The IRS has recently allowed receipts to be kept electronically. This may be one of the most efficient and safe ways to keep track of receipts. Scanners can be purchased at a very low cost today, and will organize receipts by date or category.
How long do I have to keep my receipts?
Most records should be kept for a minimum of 3 years. After this time, the IRS’ ability to question your deductions runs out. Some records must be kept longer to support depreciation – in order to track the original cost of an item that you deduct over a longer period of time. This typically happens with large purchases such as equipment.
Shannan from Accounting for Photographers is giving away a Snapshot Spreadsheet to help you organize your finances!
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About the Author: I graduated Magna Cum Laude with an Accounting Degree from the University of Montana. Instead of pursuing a career in public accounting and being stuck behind a desk for 70 hours a week, I turned down jobs at big accounting firms to pursue a different love. I chose instead to work from home where I live with my husband, two boys and a puppy named Growler. I live a glamorous, exciting life working from my living room in my pajamas, cleaning crayon off the walls, driving kids to school, playing superheros and taking care of a little dog that likes to refinish furniture with his teeth. I get to work with fun, creative & artistic photographers and help them understand that numbers can be our friends!