With Tax Day behind us, now is the time to learn how to organize receipts to make next year’s filing less time-consuming. The routine that will work best for you depends upon your tax situation. The self-employed need their old receipts more than those who take the standard deduction, and that means they’ll need more thorough organization, too.
Tax preparation isn’t the only reason you should keep your receipts organized, though. If you use your debit or credit cards to pay for purchases you really should compare your receipts against your monthly statements. This is particularly true when you’re adding a tip since honest mistakes can happen.
I recently found this out when a $10 tip on a $30 tab turned into a $60 overall bill because a tired server accidentally entered the food total as a tip when inputting their copy. Shifty employees can work even more considerable damage.
As Lifehack explains, you’ll also need those receipts if you want to exchange an item, have an issue covered by the warranty, or want reimbursement under an employee expense account. So try one of these methods to get those receipts under control in just seconds per day and rest easy you’ve got your assets covered.
How to Organize Receipts
1. The hanging envelope. If you’re not self-employed, don’t itemize, and rarely make big-ticket purchases this simple method can get you through the year. Just take a big manilla envelope, write “Receipts” and the year on the outside of it. Now tape it inside the door of your kitchen cupboard or coat closet — wherever you’ll be able to tuck receipts into it as soon as you walk into the house, then do just that. If you need to find them, you’ll know exactly where they are. At the end of the year, purge the unnecessary receipts and seal the envelope to store the rest.
2. There’s an app for that. Apps like Shoeboxed Receipt and Mileage Tracker or Digital Receipts let you use your smartphone or tablet to organize and file receipts. You don’t even have to wait until you get home: scan them at the store, or when you get in your car, and you’re done.
3. The milk crate method. I use this system, which takes just a few seconds when I walk in the door. For this, you’ll want a box of some kind and 12 hanging files. Label the hanging files with the months of the year. Now slip manila file folders into each month’s hanging file, labeling the manila folders with your receipt categories. When you walk in the door, transfer receipts to the appropriate manila folder for the month, and you’re done. When your bank statements arrive, compare them with the filed receipts to verify the amounts then toss the non-deductible ones. Some suggestions for folder categories:
- Medical & Prescription
- Home repair
- Car repair
- Big-ticket items
- Work expenses
- Misc. (Temporary)
- Bank statements
The important thing is that, once you decide on your favorite method of how to organize receipts, you implement it and stick with it. Be realistic about the amount of space you have for this — if you don’t have room for a milk crate near where you enter your home or apartment, you won’t use it. Either make room or go with an approach that fits your space.