July 2007

Here's a tax tip from Tom Copeland:

Now is a good time to review your record keeping practices since we are in the middle of the year. Your goal is to have a receipt for every item you use in your business: supplies, cleaning supplies, toys, furniture, household items such as toilet paper, light bulbs, detergent, etc.

If you don’t have a receipt for all purchases, take a photograph of the item and write a note describing where you bought it and how much it cost. Estimate if you have to. Save any cancelled check or credit card statement as well. Make a note on the receipt as to whether the item was used 100% for your business or was used partly for business and partly for personal purposes.

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Your ability to sort out these two categories on your receipts will make a big difference come tax season because the more items you identify as 100% business instead of shared, the lower your taxes will be.

Remember that it's up to you to store your receipts securely and have them available in case of an audit. Create a reliable filing system and save receipts for three years after filing your tax return. (California residents should save receipts for four years.) Photocopy any receipts that tend to fade - a common complaint, especially for grocery store receipts. You'll be paying more tax if you get audited and can't find or can't read your receipts. [Alison adds: Some of my clients have purchased special scanners (such as NeatReceipts) which manage and store receipts digitally.]

Last updated: 17 September 2011

Posted on 2007-06-20 17:30:43