Steps to Organize Receipts and How Long to Keep Them

The best way to file your receipts is the method that makes sense to you, so you can use and maintain it without frustration.

Pin

Receipts can easily take over your purse or wallet if you let them. Sometimes, there get to be so many that it’s tempting to throw them away. That’s usually the time something breaks or you want to return it and actually need proof of purchase after all.

Before You Begin

How long it will take to organize your existing receipts depends on how many you’re dealing with. If you have multiple “doom boxes” full of them, this could take an entire afternoon. If you only have a few—because you already tossed out the pile—it will take a few minutes to set up a system which makes it easy to file incoming receipts and find them again if needed.

Step 1. Gather Your Receipts

Start by gathering them from everywhere around your home. Check your wallet, purse, desk, car, and junk drawer. You will not need to keep all the receipts you find, so don’t let the number of them overwhelm you.

Step 2. What Receipts to Throw Away

Always keep proof of purchase for items you’ll claim on your taxes, such as unreimbursed business expenses or daycare receipts. For other items, discard receipts if you would never want a refund or replacement if it breaks or doesn’t work as promised. It can help to set a price that acts as your deciding factor—$30, for example—and discard slips for items that cost less than that. For all other purchases, like the coffee you bought on the way to work, get rid of the receipt as soon as you verify the charge to your credit or debit card is accurate.

Step 3. Sort the Receipts You’re Keeping

Keep receipts relating to tax-deductible items; big ticket purchases; recent purchases still covered by warranty; or new clothes or shoes you have not worn yet. Take that pile and sort it into categories.

• Medical & Prescription
• Home repair
• Car repair
• Big-ticket items
• Work expenses
• Charity
• Childcare
• Bank statements
• New Purchases

Step 4. How to File Them

The best receipt-filing system is the one that you’ll actually use because it’s convenient and easy to maintain. It also needs to fit in the space you have available and work the way your brain works, or it will be too difficult and frustrating to use. So, don’t rush out to buy a binder system just because you saw it on Instagram—it may not work for you. These two DIY filing systems let you simplify the process and sort receipts into categories that make sense to you.

The hanging envelope method

This method is for people who don’t itemize their taxes and rarely make big-ticket purchases.

1. Tape a large manilla envelope in a convenient spot. For example, inside the door of your kitchen cupboard or coat closet, or another space where you drop things off when you get home.
2. File receipts by tucking them into the envelope.
3. At the end of the year, or any time the envelope gets full, purge the receipts you don’t need to keep.
4. List the ones you’re keeping on the front of the envelope.
5. Close but don’t seal the envelope, then write the month and/or year on it the flap.
6. Over time, you’ll collect more of these envelopes, so file them chronologically in a box used strictly for this purpose.
7. If you ever need to find a particular receipt, go to the envelopes for the approximate time period and locate it using the list on the front of each.

The file folder method

This is the traditional system of hanging file folders. You can make it convenient to use by keeping them in a box in your coat closet or wherever you drop off things when you get home.

1. Label separate hanging file folders using the above categories.
2. Label one additional folder “temporary.”
3. As receipts come in, file those relating to tax deductions, big-ticket items, and items covered by a warranty in the relevant folders.
4. Put receipts you don’t need to keep long-term in the temporary folder.
5. When your bank or credit card statement arrives, go through the temporary folder and verify the charges are all accurate, then toss the receipts you don’t need to keep.

Pin

Step 5. Purge receipts Every 1, 3, or 7 Years

Once a year, go through your files and dispose of sales slips for items no longer covered by warranties. Hold on to pay stubs for a year, so you can compare the amount on your W-2 to the pay you received. For tax-deductible receipts, the IRS can demand proof for 3 years on some items and 7 on others. Unless you have a CPA or tax-preparer to ask, keep those for the full seven years.

Step 6. Keep Major Financial Receipts Forever

Two other types of receipts you should you keep forever are proof of payments to the government for anything, including taxes, and proof of payments for insurance policies. If you have a safe deposit box, store these receipts in it, otherwise a fireproof, waterproof document bag can keep them safe at home.