There are many ways to accomplish the task of organizing your receipts, ranging from the simple to the more sophisticated.  On the low-tech end, simply designate a box, basket or folder to hold all your receipts.  If you have a lot of them, you might want to categorize them by account (Bank Account “A” or Credit Card “B”) or by category (Marketing, Legal, Repairs, etc.).  I personally organize my paper receipts by account in a small box like this one (inside there’s a #10 envelope labeled for each account).  Once the receipts are matched to my bank or credit card statements, I get rid of the majority– mainly personal receipts such as those for consumables like gas, groceries, restaurants, haircuts, etc.– and file the rest along with the statements.  Those receipts related to our rental properties or my business are kept indefinitely, whereas those for the household are shredded after a period of time has gone by.

Many of our purchases are online these days, with the original receipt received in an electronic format.  To eliminate paper clutter, consider saving these receipts in electronic form rather than printing them out.   For those receipts provided in PDF, just save directly to your computer.  For those received in an email or a web-based file, print the purchase confirmation to PDF using Adobe Acrobat or any number of free PDF converters.  Of course, you’ll need some sort of a system for organizing all these files you’re saving on your computer so that you can find them if needed!

But what if you just aren’t good at organizing things, have very limited time, or just don’t want the bother?  One great option is to use a service like Shoeboxed.  With their Receipt Mail-In plans, you can simply gather up all your receipts (business cards and other documents, too), stick them in one of the provided envelopes, and send them off.  In a few days, all of your receipts will be scanned and electronically organized.  What could be easier and less stressful than having someone else do all the work for you?

If you’d rather not commit to the mail-in plans just yet, Shoeboxed has a 30-day free trial as well as a  “Forever Free” account that doesn’t include the mailers.  Use your own scanner or smartphone to take pictures of your receipts, then just upload or email them to Shoeboxed.  From your online account, you can access your data anytime, print or download copies of receipts, email expense reports, or export your data to programs like Excel and QuickBooks.

Whether you choose a “low-tech” method or a service like Shoeboxed, it’s important to have a process in place to save and organize your receipts.  A little effort upfront to put your system in place now can help eliminate stress at tax-time and beyond.

If you live in the San Jose area, Trudy is available to work with you one-on-one to set up your own unique system of organizing your receipts.  If you live outside the area, phone consultations are available too.  Contact me to find out more!

One of my clients had undertaken a new business venture, and the other had several rental properties.  In both of these situations, the tax code allows generous deductions—but only if the expenses are documented!  Not having a system in place to track business or rental expenditures is a big mistake, not only because you can easily miss legitimate deductions, but because sloppy recordkeeping can put those deductions at risk in the event of an IRS audit.

The first thing that a new business owner or real estate investor should do is to treat your new venture like a “for profit” business and not a hobby.  Appearances are important!  If possible, open a separate bank account and/or use a separate credit card.  If it makes sense, you may want to incorporate or form an LLC.  For a business, you should have a basic business plan and a marketing plan.  If you use a vehicle, you should keep a mileage log.

But what I’d really like to focus on here is general recordkeeping.  All too often, I see that business or rental expenses have been paid out of personal funds, with no attempt at all to separate them until tax time.  Not only does this create a huge backlog of transactions to review at year end, but it also prevents you from seeing how your business or real estate rental is performing on an ongoing basis.  To keep things under control, I highly recommend using either Quicken Home & Business or QuickBooks.  With either program, you can download transactions directly from your bank and categorize them as you go.  This is really important since generally our memories fade with time. (At least mine sure does!)  If your tax return is on extension and you sit down in October to categorize transactions that occurred early in the PREVIOUS tax year, it is going to be very difficult to say the least.

If you have only one or two rental properties, or a small service business, Quicken H&B may be perfectly adequate for your needs.  It is especially appropriate if you use the same bank accounts and/or credit cards for your  business or rental as you do for personal use.

If your venture is set up as a separate entity, or if you are not, for the most part, mixing business/rental and personal expenses, then you may want to use QuickBooks.  This software can handle more complicated situations and lets you do true double-entry accounting.

Besides tracking your expenses with financial software, you’ll want to make sure that you have a system in place to save receipts for all of your deductible expenditures.  This can be either a paper or electronic based system, or both.  In the event of an audit, your self-maintained bookkeeping system may not be enough and you may be asked for the actual receipts or invoices generated by 3^rd party vendors.

Getting your recordkeeping in order for your small business or rental properties may not be the most glamorous task, but once you get a system in place and get caught up, it won’t take that much time to maintain.  Imagine how great it will be at tax time next year when you can simply run a Quicken or QuickBooks report to generate all the information needed to file your returns.  Eliminate those tax time headaches by taking the time to get your records up to date now!

If you see yourself in this article and would like some help in setting up your own recordkeeping system, please contact me for a complementary strategy session.

In weeks 1 and 2, I worked on making more space in a two-drawer filing cabinet that I use to store client files.  When I started this project, I was storing some of the files outside the cabinet because they just wouldn’t fit.  But by scanning and shredding many of the older documents, I was eventually able to fit all these files in the space allotted, with room to spare!

My next goal was as follows:

Week 3:  Purge my personal files to eliminate approximately one third of the paper stored there.

Here’s a photo of the file cabinet I’m talking about:

So how did I do?  Well, first of all I did not get this done in the third week, as planned.  Life got in the way, so I just decided to give myself another week.  After all, there’s no paper purging police or anything, so why not give myself a break?  Second, I wasn’t able to spend enough time to really purge one-third of the paper—I think tackling four file drawers in one week was a bit ambitious!

However, I did make some progress.  Here’s my stack of paper that is going to be shredded or recycled:

 It’s a pretty good size pile, so I’m really happy about that.

So, what are the take-away’s from this week?  What I learned is that it’s great to set ambitious goals, but you shouldn’t be too hard on yourself if it takes longer than you think, or if you aren’t able to complete them 100%.  I’ll simply keep this one on my list for a while, and hopefully it’ll eventually get done to my satisfaction. (Although with this type of thing, will it really ever be completed?  Probably not, unless I’m able to go completely paperless…)

Next, on to my goal for Week 4 which is… going through my teenagers’ school paperwork.  It’s already October, and I’m embarrassed to say that we still have a few piles of school papers that were cleaned out of their backpacks last May and June!  It’s time to get rid of those piles. Maybe I can even get my kids to help. (But I won’t count on it.)

What are you doing to reduce the amount of paper in your home or office?  If you’re tackling a similar type of project, please share.

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