These Are the Receipts To Keep for Doing Your Taxes

Kameleon007 / Getty Images/iStockphoto

Gathering and saving receipts and tax documents is an important part of filing taxes and receiving your refund quickly. Whether you take the standard deduction or itemize deductions, most people filing their 2019 taxes in 2020 will be happy they took the time to prepare when the IRS deadline rolls around.

Be Prepared: All the New Numbers You Need To Know for Planning Ahead on Taxes

Review which receipts to keep for taxes — the information below will help to make tax preparation less painful and ensure you take all of your eligible deductions.

What Receipts Should I Keep for Taxes?

In the event that you’re not sure how to file receipts for taxes, consider seeking the help of a tax professional. They can not only tell you what receipts to keep for taxes, but they can also assist taxpayers with complex financial situations and can help with calculating all types of taxes. Concerning the money you receive back, this could also help protect any tax refund. It might even give you a large refund to spend. But rather than focusing on how to spend or what not to do with a refund, a tax expert can use receipts to help you avoid needing a refund in the first place.

Save for Your Future

Whichever route you take, make sure you know how to save and organize receipts for taxes — the last thing you want is to not have the documents you need to defend yourself during an IRS audit.

Learn: Only 18% of Americans Believe Their Tax Dollars Are Being Spent the Right Way

Small-Business Owner Receipts

Self-employed individuals should consider using QuickBooks or similar accounting software, according to Bonnie Lee, an enrolled agent and owner of Taxpertise in Sonoma, California.

“The scope of an audit of a small business is reduced considerably when the auditor discovers that adequate books and records, checkbook reconciliation and all other bookkeeping tasks are being performed on professional software by a professional accountant,” said Lee.

A small business owner wondering what receipts to keep for taxes should make sure to save these documents:

Keep your gross receipts because they show the income for your business, which you must include when you file your taxes. Gross receipts to save for taxes can include:

Save for Your Future

Don’t forget to save your receipts for business purchases, which are classified as the things you buy and resell to consumers. Save these purchase documents and receipts:

Discover: Tax Loopholes That Could Save You Thousands

Business Expense Receipts

Your expenses are the costs of running your business, other than your purchases. Take some expert advice on what receipts to keep for business taxes.

Sometimes canceled checks are not enough to support a deduction, according to Lee. “A check made out to Costco is not proof of a business expense because you could be buying groceries and other personal items. Credit card charges for a business trip to Maui will smell like a vacation unless you can provide other documentation to support the business purpose. So be sure to keep the receipts, business conference flyers, etc. to defend business usage,” said Lee.

Keep these expense receipts for taxes:

Save for Your Future

Keep all of your credit card receipts and statements, invoices and cash register receipts. You’ll need them to maximize your tax deductions for eligible transportation, gift and travel expenses.

When you sell any business assets — such as the real estate, furniture or machinery you use — you’ll need to keep the purchase and sales agreements as well as your receipts. You’ll also need the purchase receipts if you use depreciation on your business assets as tax write-offs.

Also See: A Tiny Tax Refund Could Be the Best Thing To Happen to Your Finances

Tax Receipts To Keep

When asking yourself, “What receipts I should keep for taxes?” you should know that business owners and sole proprietors aren’t the only ones who should be keeping receipts. Many taxpayers qualify for common eligible deductions that could require proof in the form of a receipt.

Keep these documents as well:

Save for Your Future

Learn: When Will You Get Your Tax Refund? Here’s When To Expect That Check

How To Organize Receipts for Taxes

Whether you expect to pay taxes or get a refund, keeping receipts for taxes doesn’t need to become a complicated process for managing taxable income. Nor should it affect the number of tax loopholes utilized. The key is knowing how to save receipts for taxes and filing them in an orderly fashion.

Maintain paperless records by scanning receipts and records, or use an app like Expensify to photograph receipts with your smartphone and categorize them. Doing this will simplify the process of listing your itemized deductions when you fill out your income tax return. Alternatively, save your receipts in boxes or files if you prefer a more traditional route.

You can also find a ready-made receipt organizer or even use your tech savvy to operate a receipt scanner. No matter which tax receipt organization style suits you, arrange your documents by year and category.

Don’t Miss: Most Popular Things To Do With Your Tax Refund — and How To Do It Smarter

Save for Your Future

How Long To Keep Tax Records and Receipts

You should save general tax records for at least three years, according to Josh Zimmelman, owner of Westwood Tax & Consulting LLC in Rockville Centre, N.Y. “The IRS has three years to ask for an audit,” said Zimmelman. “But they can ask for records up to six years after filing if you failed to report 25 percent or more of your gross income.”

Another expert, Deltrease Hart-Anderson, an enrolled agent in West Columbia, S.C., gave an alternative perspective. “I tell both business and individual clients to save receipts for at least 10 years, but I add a disclaimer: If you have room, save them forever,” said Hart-Anderson. The IRS can audit an indefinite number of years of your tax returns if feels that you’ve filed a fraudulent tax return.

Receipts can help you maximize your refund, or at least minimize your tax burden. But when it comes to collecting and keeping tax records and receipts, the guidance of a tax professional or financial advisor remains the safest bet. Not only will you receive advice best suited for your tax situation, but you can also stay focused on the arduous but profitable task of receipt record maintenance.

More From GOBankingRates

Will Healy contributed to the reporting for this article.

Last updated: Jan. 25, 2021