It’s the new year, Yay! As soon as the new year rolls around I immediately start thinking about everyone’s favourite topic – TAXES.
Most of us wait until tax time is looming over us to get all of our receipts in order. Wouldn’t it make more sense, and be easier on our schedule & pocketbook, if we could break the work into smaller tasks that could be spread out throughout the year?
If you’re one of those people who present your accountant with a shoebox or shopping bag full of a year’s worth of receipts, you’re going to take a whopping hit to your budget while your accountant takes a few hours to sort through it all. But, if you tackle the job yourself you’ll be spending even more hours out of your valuable time trying to organize everything.
In order to speed the process up and make it go much more smoothly, try incorporating these four tips:
- Have one designated spot to keep all your receipts – the best choice is either an accordion file or a section of folders in your filing cabinet.
- Organize your receipts into groups or categories – find out what categories the accountants (and government) are looking for and create a folder for each one or label a section in your accordion file (we all know those darn accordion files never have the the labels we want so just ignore them and create the ones you need). Here in Canada you want to be looking for a form called T2124 – Statement of Business Activities. Once you check out this form you will figure out how your receipts should be grouped. I’ve discovered that organizing your receipts by month is actually completely useless when it comes to tax time – date-oriented information is only useful to you personally if you want to analyze your monthly spending patters – so stick to categories.
- File away your receipts as soon as you get them – this one seems to be the hardest step to master, but if you get yourself into the habit of sticking the receipt in the proper folder as soon as you have it you will save yourself LOADS of time at the end of the year. Believe me, it sucks when a few weeks after you’ve already sent in your taxes you discover a bunch of receipts at the bottom of your backpack or wallet that you could have used. And, it’s best to do the filing while you can still remember what each receipt was for.
- Write down what the receipt was for – even if you’re filing your receipts right away, it’s best to write directly on the receipt itself what it was for. This will help both you and your accountant at the end of the year instead of having to waste time looking at cryptic receipts and racking your brain trying to remember what the heck it was for!
Each of these four steps are quick and easy to execute, and should be done throughout the whole year. If you need help to create your filing system, SMac To The Rescue can set it up for you. If you find it easier, you can send us your receipts quarterly and we can maintain your files for you. We can even organize the whole shoebox/shopping bag full of receipts from the past year!
At the end of the year SMac To The Rescue can speed the process up even further, and save you hundreds of dollars, by entering all of your receipts into a spreadsheet with categorized totals that you can then give to your accountant for processing.
Here’s an example of my own system and how I use it: I bring home a receipt and put it on my desk. I then enter the receipt into my spreadsheet (I have all the categories set up in my spreadsheet so that I have to choose one of them; this keeps the categories consistent and easy to sort) and make sure to include a note saying what the receipt was for. I then take the receipt and file it in the accordion file in the proper category. At the end of the year all I have to do is sort my spreadsheet by category and voila! And if I feel like it, I can later sort it by date and see when I was spending the most. Quick and easy! It takes a minute at most to process each receipt, and then it’s all ready to go at the end of the year with practically no effort on my part.
So what are you waiting for? Take the time to either set up your tax receipt management system yourself, or get SMac To The Rescue to set it up for you, before this year’s tax receipts start to pile up.