Organizing Receipts for Taxes, Home Businesses or Corporate Expense Reports

FB Reminder: I am away on vacation right now. This post has been scheduled ahead of time.
I won’t be moderating comments until end of August 2009. Thanks for your patience!

I can’t recall if I’ve said this before.. but it bears repeating.

If you are keeping receipts for any reason — home business, personal taxes, corporate expensing … you should consider keeping the receipts sorted into SEPARATE envelopes instead of one big fat one.

So for example, for my home business, I sort my receipts into separate envelopes with names like:

• Office Supplies
• Travel Expenses (Flights, Rental Cars, Hotels) — Sorted by city & date
• Meals — Sorted by city & date

You get the idea… And on the front of envelope I quickly jot down the following, each time I put in a receipt:

• Date
• Where/What I spent it on (a shorthand note is okay)
• Amount spent

It saves me a HELL of a time at the end of the year when I do my taxes, to have everything properly sorted into these categories, along with a quick note of what I spent the money on, when & what the amount was.

Then, at tax time, I enter in the FINAL totals into an Excel file for simple access, once all the receipts stop jamming into the envelopes at the end of the year.

So for example, if I want to know how many meals I ate when I traveled to a city for business, I just pick up the two envelopes marked:

• Travel – NYC August – October 2008
• Meals – NYC August – October 2008

…and I tot up the numbers written on the envelope in an Excel file, sorted by category (Travel or Meals) and just sum up the numbers in Excel when I’m done, and enter it into my taxes as a single, well documented number.

WHY DO I NEED TO SORT MY TRAVEL & MEALS BY CITY AND DATE?

The reason why I have the travel & meals sorted by city & date is because you may travel to a city more than once, and you will not have an envelope big enough to write down EVERY SINGLE MEAL you’ve eaten in an entire year.

(Nope, not even the huge huge manila ones. I traveled a lot in 2008, and I had to keep a manila envelope PER trip made).

BUT I HATE PAPER!

So do I my friend. I even spent a lot of freaking time scanning in all those darn papers!!!

Alternatively, you can just track all of this into an Excel file.. but the problem with doing that is that you need to keep the physical receipts for tax time, or when your company asks you to pony up evidence that you ate that amount on a trip when they do their random audits.

So for this, I find the envelope system to be easier to handle than an Excel file because of the receipt filing involved (I tried.. trust me).