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Conquering the Paper Pile: How I Organize Receipts

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Figuring out how to organize receipts can feel overwhelming. After my husband passed away, I found myself staring at piles of unsorted ones that had mounted up during his illness. So, I tried a popular system I saw on social media but it was so complicated the pile just grew.

Then, I developed my own method to organize receipts and store them. It separates things into categories that align with my taxes and insurance needs, and also my need for convenience. Once I set it up, piles became a thing of the past.

But keep in mind, I’m sharing only my method which is based on my personal situation. I am not providing tax or legal advice. The types of receipts to keep and for how long all relate to my own situation. You should ask your own advisors for advice on financial, tax, and legal matters. 

Step 1: Gathering.

Start by gathering up receipts everywhere around our home: wallet, purse, desk, car, and junk drawer. You won’t be keeping all the ones you find, so don’t let the pile overwhelm you. I used a laundry basket for this. Okay, two.

Step 2: Thinning.

The next step is to eliminate receipts you probably don’t need. Start by deciding a minimum cost threshold. If an item’s value falls below this, it’s not worth the time to pursue a refund or replacement so you can throw out that receipt. (Again, ask your advisor.)

For example, I chose $30 as my cutoff for in-person returns and $10 for Amazon since that’s just a drop-off on my way to the gym—I don’t have to find a receipt or a box.

Step 3: Organizing.

I typically keep receipts for four main reasons: taxes, insurance, and proof of purchase both long and short term. So, I started by sorting them into these groups.

Tax deductions

Tax laws change every year, and what’s deductible depends on a variety of things like self-employment or side hustles, job searches, marital status, etc. I sort my receipts based on the following deductions.

Personal deductions

  • Charitable donations: Receipts for money or goods donated to nonprofits and charitable organizations.
  • Medical and dental expenses: Receipts for services from doctors, therapists, physical or occupational therapy, dentists, orthodontists, and vision care, including prescriptions and medical devices.
  • Educational expenses: Receipts for tuition, books, and other educational materials when I or my son were eligible for education-related tax credits or deductions.
  • Childcare expenses: Receipts for childcare services back when I was eligible for the Child and Dependent Care Credit.
  • Home mortgage interest and property taxes: Interest on home mortgage and property taxes paid.
  • Home office expenses: (I’m self-employed) Receipts for utilities, office supplies, advertising, postage, office furniture, repairs to my office, and other costs of doing business.
  • Real estate and personal property taxes: Proof of taxes paid on other real estate if I had any and significant personal property items.

Business deductions

  • Vehicle expenses: Costs related to the business use of a vehicle.
  • Travel and entertainment expenses: Travel costs and entertainment expenses related to business.
  • Job search expenses: Proof of costs incurred while searching for a job in the same field (thanks, AI apocalypse).
  • Business expenses: Receipts for office supplies, equipment, advertising, and money paid to employees and independent contractors.

Investment and savings deductions

  • Investment-related expenses: Proof of fees charged and paid plus other expenses related to managing investments.
  • Retirement contributions: Records showing contributions to retirement accounts, which may be deductible.

Specialized deductions

  • State and local taxes: Proof of payments made for state and local income taxes and sometimes sales tax (in my state, that’s on big-ticket items).
  • Casualty and theft losses: Losses because of casualty or theft.

Insurance

I learned the hard way that if you need to file a claim or settle a dispute about insured items, having proof is key. So, for our cars, home, and everything in it, I hold onto purchase receipts, repair bills, appraisals, and tax records for at least three years after I’ve sold them.

And for insurance premium payments? I keep those receipts for three years past the policy’s end date. They’re a safeguard against any coverage disputes.

Other proofs of purchase

In the short term, I also keep proof of purchase for anything I or a gift recipient might want to return. Also receipts for items under warranty, but those usually fall into one of the categories above.

Step 4: Storing Receipts.

Once you’ve categorized your receipts in a way that suits your own tax and legal situation, the next step is finding a storage method. For this, it’s crucial the system doesn’t just make it easy for you to find things, but also to add new receipts so you don’t wind up with a huge pile again.

I have complex taxes and a picky accountant, so I use the file folder system for my receipts and most other paperwork. My son, who is just starting out and has simpler needs, opts for the dual-envelope method.

The two envelope approach

This straightforward method is perfect if you don’t need to track a lot of receipt categories. Here’s how to do it: 

  1. Stick two large manila envelopes somewhere handy, like inside your closet door or a cabinet. Mark one as temporary, write the year on the other. 
  2. When you come home, drop your receipts in the temporary envelope. 
  3. Once a month, go through the temporary one and thin out the receipts you don’t need to keep.
  4. Add the keepers to the second envelope and make a note on the front. 
  5. At the end of the year, replace that with a fresh envelope. Store your filled annual envelopes together in a dedicated box. 

Need to find a receipt later? Just check the lists on the envelopes from that time period. Easy peasy!

The classic file method

I use the classic approach which involves hanging files in folders. 

  1. I have a folder for each of the categories above, plus an extra marked “Temporary.”
  2. As they come in, tax-related, big-ticket, and warranty-covered item receipts go into their respective folders. 
  3. Everything else? I pop them into “Temporary.”
  4. When bank or credit card statements arrive, I check the charges against the receipts in my temporary folder, toss the ones I don’t need to keep, and file the rest. 

Step 5: Routine Purging.

Once a year—ideally at tax time—sift through your files and clear out things not related to tax deductions, insurance claims or payments, or which are still under warranty.

For tax-deductible receipts, the IRS can go ask to see records up to seven years back, and indefinitely if there’s a suspicion of fraud. So, unless you have a tax pro to consult, play it safe and keep those receipts for the full seven years.

Step 6: Safety Backup.

There are two kinds receipts you absolutely do not want to risk losing.

  1. Filed taxes and proof of payments you’ve made to the government.
  2. Printed copies of your insurance policy and all amendments, plus receipts for all related payments.

We live in “Tornado Alley,” so I keep ours in a safe deposit box with birth certificates, military papers, and the like. A fireproof, waterproof home safe or document bag can also work.

As I learned once I finally conquered my paperwork pile, knowing where your most important documents are—and that they’re protected—is worth every second spent taking the time to organize your receipts.

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