Paper receipts, electronic receipts, no receipts

[treppenwitz]

This is my first post. I'm organizing myself as a freelancer, and have zero experience in business, so bear . I'm so green it hurts. But I can't seem to find a decent answer about this.

I've been meticulous about saving all my paper receipts. But many of my expenses are paid online, or are paid as an auto-payment directly from my bank and have no real "receipt". If I'm to "take my receipts to my accountant", does this mean printing out every electronic receipt (e.g. PayPal)? Photocopying all my utility or other records from my bank's auto-payment system for business expenses? How do you collect everything in one place? I assume an accountant or the IRS will want a hard copy of my expense records. Is this correct?

Thanks for the help!

[Wozcreative]

This depends on how your business is setup.

I recommend printing out all your receipts in any case. You will have to tell your accountant how much you spent on each category. IF the IRS has questions about it, you will need to provide receipts and clear details. For things like food and entertainment, you must keep track of who you wined and dined and what you talked about. Same goes for travel expensive, you must write down who it was with and what was the purpose of the meeting.

On other expenses you will just have to keep the receipts themselves and file them. And as mentioned, tell your accountant the amount for each category applicable to your business.

Another option is having a business account (which is usually standard), and have all your recurring billing coming from there, that way you have everything all in one place.

You will definitely need an accountant to explain all of this to you as you cannot claim some things, and some things you can.. it is tricky if you've never done it before. (IE, i can't claim business clothes expenses as a graphic designer, but a fashion designer can).

[Freelancier]

IRS wants you to keep receipts for years and years. Get them on paper, file them away. When they decide to audit you -- a rare occurrence these days, but it happens -- you need to show paper, electronic receipts just slow the process.

[treppenwitz]

Thank you both for weighing in. I hate wasting paper in the digital age, but it seems there is no way around it at the moment. Is it okay to print multiple receipts on one page if I organize them logically, or does that just complicate things?

I guess I need to look for an accountant to help me get setup with the relevant system for my line of work. This year will be a bit of a mess, but I hope to get off on the right foot for the new year. Any thoughts on finding an accountant? I'm checking my LinkedIn connections to start. BTW, I'm a freelance composer for film and TV living in Los Angeles.

Thanks!

[Freelancier]

Multiple receipts on one page: I do it all the time when I travel... but then I also have a summary sheet indicating all the charges on the subsequent pages so that it's easier to find when I need it.

Remember: record keeping is about being able to justify something in your tax returns when you need it. Do the up-front work to keep it organized and you won't have to scramble later when the pressure is on you to produce your documentation.

[tallen]

No need to waste paper -- If you keep all your e-receipts in PDF files ready to print (and filed/organized well), then you don't need to print them until when and IF you actually need the paper copies.

[ArcSine]

+1 tallen.

e-receipts → PDF (or .jpg, .png) → to CD, USB stick → bank safe deposit box

Then email to accountant, to the extent s/he needs actual copies of the receipts. The accountant will likely need far fewer than you might think. When it's time to knock out the tax return your accountant doesn't want a shoebox of paper receipts, he wants a listing (in Excel, say) of all your expenditures, perhaps categorized by expense type.

The only reason (usually) your accountant might want to see the actual receipt is when your description of the expense on that Excel listing doesn't give enough details. And personally, before I'd ask for the receipts, I'd just bounce the list back to you with a little flag next to each item for which I needed more info.

[ProLectric]

We still use paper. I tried the scan and save, but we have a very limited staff here and it was just taking up too much time. Just remember, only touch a piece of paper once!

[tallen]

Yes, if the receipts are already on paper, leave them on paper -- don't scan them unless you need to. But for those receipts that are only in electronic form, just leave them in electronic form until and if you need them on paper. Either way (or both ways), you need a good filing system so that you can keep track of the receipts in case you ever do need them. But as ArcSine suggests, the receipts are just back-up to your book-keeping records. A simple register in Excel is generally quite adequate, or you could use a software program like QuickBooks -- talk to your accountant to see what might work best in terms of keeping the books for your business.

[mrrodosmith]

Has anyone used the a piece of software/an app called TaxBot? Looking to get input on it and how it's benefited others. I use it myself. But I'm just looking for other opinions.