Tracking your expenses could help you save money at tax time. But it's essential that you keep receipts and documentation to back up each expense and justify your deductions if necessary. Follow these tips to organizing receipts and expenses to make taxes easy.
Key Takeaways
- Buy color-coded folders to store receipts and documentation.
- Keep electronic and paper backups of receipts.
- Document expenses on the go with budgeting apps or software.
- Back up your information regularly to the cloud or an external thumb drive.
Check in Monthly
The best way to keep your receipts and expenses is to check in regularly. That means you'll avoid sitting down to do your taxes during tax season and realizing you need to track down months-old documentation. Buy color-coded folders to store your receipts and documentation, so you can easily find the documentation you need later. Those folders might include:
- Home and office expenses: receipts; electricity, gas, and water bills; home repairs, maintenance, and renovations; internet and phone bills.
- Vehicle expenses and mileage: gas and fuel costs; vehicle repairs and maintenance; receipts for registration and licensing; tires; rental or lease statements; personal and business miles driven.
- Education costs: tuition, student fees, textbooks and other required equipment.
- Child care expenses:pay stubs showing child care payments via a reimbursem*nt account at work; receipts for child care while you were doing charitable work.
- Medical expenses: health insurance premiums for you and your family; out-of-pocket expenses.
- Other expenses: moving costs; charitable donations; tax planning and investment expenses; work uniforms; laundry or dry cleaning for uniforms and other work-only attire; business supplies (pens, paper). This category of expenses (moving, unreimbursed employee, tax/investment planning expenses) can be deducted as an itemized deduction subject to 2 percent of your adjusted gross income through the 2017 tax year for federal taxes. For tax years beginning with 2018, these 2 percent deductions are no longer allowed unless they are a business expense. Some states, California for example, continue to provide the ability to deduct these expenses on your state tax return.
Organize any new receipts from the previous month into the correct folder (including checking for receipts “lost” in your wallet or bags) to ensure all your deductions are accounted for.
This system keeps your workload manageable so you can organize and store the documentation without feeling overwhelmed at tax time. It also gives you a chance to make relevant notes on your receipts—like which client you met at that soon-to-be-deducted power lunch—while the details are still fresh in your mind.
TurboTax Tip:
Make relevant notes on your receipts while the details are still fresh in your mind.
Keep Electronic and Paper Backups
While you'll want to hold onto paper receipts to document your expenses, a receipt can get lost or damaged, or even fade over time. Protect receipts and other documentation by keeping a digital copy of your expenses. This can be as simple as:
- Scanning your receipts to store as images or PDFs, or asking that they be emailed to you if that’s an option
- Keeping electronic rent receipts
- Saving PDFs of utility bills
Check in on the electronic documentation you have as part of your regular check-in process to make sure you have a digital backup of all your receipts before you put them into long-term storage.
Document Expenses on the Go
If an evening spent scanning receipts isn't your idea of fun, consider tracking your day-to-day expenses on the go. Take photos of your receipts to create a digital backup at the point of sale, then simply import and organize them during your monthly tax check-in.
Some budgeting apps include support to organize and store photo receipts, like Mint. If you use budgeting apps or software, take advantage of this feature to track your deductible expenses as well.
Back Up Your Information
Even the best-planned and carefully organized storage systems can fail through no fault of your own—a lost phone, crashed laptop, broken hard drive, or even a fire or flood can wipe out physical or digital documentation. Back up your digital receipts regularly to the cloud or an external thumb drive so you're covered in case of a hardware or software failure.
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FAQs
Key Takeaways. Buy color-coded folders to store receipts and documentation. Keep electronic and paper backups of receipts. Document expenses on the go with budgeting apps or software.
What is the IRS $75 receipt rule? ›
In addition to recording the information in your account book, etc., receipts are required for all expenses of $75 or more. Each receipt should include the date, place, person entertained, type of entertainment, business purpose, and business relationship.
How can I make my taxes easier? ›
Steps you can take now to make tax filing easier
- View your tax owed, payments, and payment plans.
- Make payments and apply for payment plans.
- Access your tax records.
- Sign power of attorney authorizations electronically from your tax professional.
- Manage your communication preferences from the IRS.
Documents for purchases include the following: Canceled checks or other documents reflecting proof of payment/electronic funds transferred. Cash register tape receipts. Credit card receipts and statements.
Is it worth saving receipts for a tax return? ›
Generally, taxpayers meet their burden of proof by having the information and receipts (where needed) for the expenses. You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement.
What is the $600 dollar IRS law? ›
The new ”$600 rule”
Under the new rules set forth by the IRS, if you got paid more than $600 for the transaction of goods and services through third-party payment platforms, you will receive a 1099-K for reporting the income.
What is the IRS 90% rule? ›
Generally, an underpayment penalty can be avoided if you use the safe harbor rule for payments described below. The IRS will not charge you an underpayment penalty if: You pay at least 90% of the tax you owe for the current year, or 100% of the tax you owed for the previous tax year, or.
How to keep track of receipts for taxes? ›
Key Takeaways
- Buy color-coded folders to store receipts and documentation.
- Keep electronic and paper backups of receipts.
- Document expenses on the go with budgeting apps or software.
- Back up your information regularly to the cloud or an external thumb drive.
4 ways to increase your tax refund come tax time
- Consider your filing status. Believe it or not, your filing status can significantly impact your tax liability. ...
- Explore tax credits. Tax credits are a valuable source of tax savings. ...
- Make use of tax deductions. ...
- Take year-end tax moves.
IRS Free File lets qualified taxpayers prepare and file federal income tax returns online using guided tax preparation software. It's safe, easy and no cost to you. Those who don't qualify can still use Free File Fillable Forms.
While grocery receipts are generally not deductible for personal use, they may become relevant for those who operate businesses that involve the sale or use of food items, such as restaurants or catering services.
Should you save your grocery receipts? ›
Keeping grocery receipts becomes crucial for providing evidence of costs in these scenarios. Preserving grocery receipts for tax purposes is generally unnecessary for individual taxpayers, as personal expenses like groceries are typically not tax-deductible.
Are pictures of receipts ok for taxes? ›
As far as the IRS is concerned, acceptable electronic documents include: Scanned or photographed images of physical receipts. Credit card receipts. Credit card statements, among others.
How far back can the IRS audit you? ›
Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don't go back more than the last six years. The IRS tries to audit tax returns as soon as possible after they are filed.
What deduction can I claim without receipts? ›
What does the IRS allow you to deduct (or “write off”) without receipts?
- Self-employment taxes. ...
- Home office expenses. ...
- Self-employed health insurance premiums. ...
- Self-employed retirement plan contributions. ...
- Vehicle expenses. ...
- Cell phone expenses.
Although receipts are not required under the $75 rule, keeping as much documentation as possible in case the IRS performs an audit or otherwise requires the documentation is always advisable. If your business follows the 2023 IRS expense reimbursem*nt guidelines, your expense reimbursem*nts should run smoothly.
Do I need a tax invoice for purchases under $75? ›
Businesses must provide a receipt
For anything under $75, the consumer can ask for a receipt, and the business must provide it within 7 days. A receipt can be a: GST tax invoice.
At what amount does IRS require receipts? ›
Additionally, the employer requires paper receipts and expense reports for any expense over $75 where the nature of the expense is not clear on the face of the electronic receipt, all lodging expenses for which the credit card company does not provide an electronic listing of expenses itemized by the merchant, and any ...
Are receipts mandatory for all lodging and expenses of $75 or more? ›
A receipt is always required for lodging, regardless of the amount. Receipts are also required for all other individual expenses of $75.00 or more.
