How To Organize Business Receipts for Taxes 2023

How to Organize Receipts for Small Business 



As a business owner, you have probably heard this statement over and over again: 

KEEP YOUR RECEIPTS FOR TAXES! 

 Although this STATEMENT is TRUE, you should also KEEP the IRS in mind so that those RECEIPTS will count if an audit is required.

Here are a few suggestions on how to KEEP THE IRS in mind when COLLECTING, STORING, AND PRESENTING those BUSINESS RECEIPTS.

WHICH RECEIPTS ARE DEDUCTIBLE FOR MY BUSINESS?

Owning, operating, and maintaining a business COSTS MONEY. But, when you buy things for the BUSINESS, they must be legally deductible.

  • EXPENSES must be an ORDINARY AND NECESSARY EXPENSE for your specific industry to be able to legally deduct it on your taxes.
  • The WAY that you STORE, ORGANIZE and PRESENT the receipts for business purchases as the PROOF will also be a consideration by the IRS to allow the deduction or not.

 STORING and ORGANIZING RECEIPTS to MAKE YOUR CLAIM

If you keep the receipts that you collect in a BOX or in your POCKET, and try to give the BOX or those wadded up and faded receipts to the IRS to support your claim, THE IRS WILL NOT ACCEPT THEM AS PROOF OF TAX DEDUCTIONS! 

You will need to ORGANIZE and  PRESENT the receipts in a FORMAT that the IRS will accept. 

Here are some suggestions:



    • TAKE PICTURES to preserve the receipts while the ink is still on the paper. Make sure that the date and the type of expense are clearly shown. 
    • You can store the photographed copies to serve as the PROOF of the EXPENSE in lieu of the paper copies on JUMP DRIVE or an APP.
    • UNFOLD and GROUP the receipts by TYPE OF EXPENSE. Group all receipts for Office supplies together, Fuel together, Insurance together, Repairs/maintenance together, etc. and  store them in a FIREPROOF BOX in their groups -OR- by pictures that you took in a JUMP DRIVE or APP from the file you made in your computer or phone to store them
    • RECORD the receipts by their GROUP together in a LEDGER -OR- an ACCOUNTING software program so that each GROUP is TOTALED. By doing this, you can provide totals that will actually be supported by the receipts that the IRS can easily locate and associate as a legitimate expense for you to claim.

PRESENTING RECEIPTS/EXPENSES TO THE IRS



As mentioned previously, if/when dealing with the IRS or anyone else who wants to verify your claims for the purchases of your business, DON'T PRESENT THE BOX of receipts as your PROOF.

  • Use a LEDGER, SPREADSHEET, SHEET OF NOTEBOOK PAPER to LIST OUT THE TYPE OF EXPENSE with the TOTALS
  • MAKE SURE THAT THE TOTALS on the ledger MATCH UP to the TOTALED RECEIPTS for each item claimed.

BE CAREFUL WHEN DEDUCTING MEALS FOR BUSINESS



Claiming meals as a business owner is NOT JUSTIFIED when you buy lunch while driving to a client's place of business or by writing "BUSINESS MEETING" on the meal receipt. 

When collecting to claim an ordinary meal like LUNCH or a BUSINESS MEETING, keep a couple of things in mind:

  • ORDINARY MEALS DURING TRAVEL-To be able to deduct a meal, you must travel OVERNIGHT AND AWAY FROM HOME for over 24 hours for your business to be able to claim the MEAL or PER DIEM deduction and  YOU MUST PROVE that you were actually AWAY FROM HOME FOR BUSINESS.
  • MEALS for BUSINESS MEETINGS- When meeting with clients or employees and having a meal, your receipt must include THE NAMES OF THE INDIVIDUALS ATTENDING THE MEETING and THE BUSINESS PURPOSE of the meeting to stand up to the IRS.

 EQUIPMENT that COSTS over $100



When purchasing ELECTRONICS, CARS, TRUCKS,  ACCESSORIES, or anything else that WILL LAST OVER 1 YEAR or IMPROVES A DEVICE and COSTS more than $100: 

  • GATHER and KEEP those RECEIPTS separately as ASSETS. Each of these must be individually added to your tax return as ASSETS TO YOUR BUSINESS and are required to follow the rules for depreciation.
  • STORE and RECORD these receipts as BUSINESS ASSETS in your ledger or accounting software.

If you don't have time to do this for you and your business, FIND A GOOD BOOKKEEPER to do this for you so you can be AUDIT READY at all times.

I have worked with business owners and truckers for over 30 years and would be happy to answer any questions you may have and help you organize your business for success.

Be prepared and organized and your business will thrive.

Bonnie Dorsey

www.Dorseytaxplace.com

972-672-8850

 

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