Keeping tax receipts and financial documents organized would be a great relief at the time of tax audits. It is one of the best ways to evaluate the annual expenditure and also to improve your chances of refund from the IRS. An effective way to keep all the tax receipts well-organized at the time of tax auditing is to have a suitable financial document management system. Following some tips such as the following will help you manage your tax receipts and related documents.
- Keep the Receipts in Digital Format: The chance for paper receipts to get lost or misplaced is quite high. It should be converted to digital format, following IRS guidelines on electronic storage system. With scanned receipts, it’s possible to create an efficient document management system by entering category, date, item, notes, store or company, and sub-total for each month/year.
- Maintain all Receipts: Keeping your receipts organized helps to assess the annual spending accurately. It is easy to file taxes and face audit from the IRS. Refunds from IRS will be given only if the documents are submitted in the right format.
- Avoid Relying on Credit Card Statements and Canceled Checks: Credit-card statements and canceled checks primarily serve bookkeeping purposes. They are inadequate without receipts and act in a supporting role, when it comes to IRS audit.
- Track Transactions on a Daily Business Journal: Keeping a record of the receipts in a daily business journal is good. It can be accomplished by keeping a good calendar in your Outlook or Google Calendar. Keeping such a report is not only useful for auditing, but also for any legal issues, if they arise.
- Use Credit Card/Debit Card for Transactions: Using cash for expenses may increase the complexity of good bookkeeping records and audit documentation. Instead, make use of debit and credit cards for transactions to better track the expenses and merge with receipts.
- Keep a Photo of the Receipt: Today, technology has advanced a lot and keeping a photo of the receipt with iPhone and Android is possible. Images of receipts in mobile phones are transferable and can be converted to the required format via document conversion process.
Irrespective of the size of the business, it’s important to manage tax receipts and other financial documents. A professional document management company can help in this regard, mostly offering their services at affordable rates.