There’s something that accountants stereotypically really appreciate, and you might think we’re being just a bit OCD, but please please please save your receipts.
Yeah, it can be a hassle, and they take up space, but they are actually pretty important, especially if you ever get audited. They’re step three in proving a qualified deduction:
- Make a qualified transaction
- Keep or create a record of the transaction
- Save the record of the transaction
If you know a few accountants, you’ll probably have heard this from all of them, and that’s because it’s drilled into us through school, and then after school whenever we interact with the IRS on behalf of our clients.
It’s so much easier for us when you actually have your receipts, even if they weren’t perfectly filed. And just in case, here are some of the ones that aren’t quite as obvious but that you really should be saving:
- Charitable donations of goods. If you make a donation to Goodwill or Salvation Army, or some other charitable organization that runs a thrift store or even your church, you need a written acknowledgement listing the specific items and their condition, the date, and the value. That’s especially true if you’re donating more than $250 worth of goods in a year. We here at Tardy & Co., PC also highly recommend taking pictures of whatever you donate before you turn it over.
- Cash donations. If you make any cash donations of any size, you should also get one of these letters that contains the language “No goods or services were received in return for this gift,” or a breakdown of what the value provided in return was, and the deductible value.
- Investment purchases. Yeah, you get a tax form at the end for the year that has some of your tax information on it, but you really should save the forms from when you buy into investments as well. What something costs when you buy it, basis, is really important to determining what your eventual taxes will be on the investment. When you get them, look at them to catch obvious errors, which you might not be able to correct before you sell them.
- Divorce decrees, alimony, and child support agreements. You’d think this would be moderately obvious, but there are often conflicts between taxpayers that are trying to take the same child as a deduction. Keep the documentation, including child care receipts, to make sure that you can support whatever position you’re going to take on your taxes, no matter what your former partner says.
- Major financial transactions. Did you buy a house? A car? Did you invest in the next Google and it’s starting to take off? Keep copies of documentation from any financial transaction that is a big deal. They’ll also help us accountants figure out things like mortgage insurance, property taxes, and maybe even sales taxes that can affect your taxes.
- Mileage records. It’s getting easier to keep track of your business mileage with apps like MileIQ (which is what we use), but you have to make sure that you actually keep the data from those reports, and mark business mileage in the app when it happens.
It’s a lot easier these days to keep records. If nothing else you can take a picture of something with your phone and then throwing it into a folder on your computer. This is a great thing to do if you’ve got a receipt that you’re not quite sure about, because then at least you have it later if you need it.