Scrambling through stacks of paper to find receipts can be a frustrating and time-consuming endeavor. In order to properly support your deductions on your income tax return, it’s important to gather all needed receipts.
For most of us, finding the right receipt at the right time can be next to impossible. With a little preparation and a lot of determination, you can organize your receipts in a sensible, easy-to-find manner.
Start at the beginning of the month. On a notepad, make a list of receipt categories that apply to your circumstances, such as utilities, telephone/cell phone, groceries, car repair, fuel, clothing, entertainment, medical, home improvements, travel, business expenses, charitable donations, loans, insurance, mortgage payments, large purchases (i.e. computer system, appliances, etc.), and internet services. Now, this list is by no means exhaustive. Your particular categories will most certainly differ. But this is the general idea.
You can start by organizing the receipts you already have. This is the most tedious part of the process and requires a good deal of time and patience. So, plan on spending some time here. Gather all your loose receipts. Don’t forget to check your purse, wallet, and other obscure places you might stash a receipt. At your workspace, you should have 12 manila envelopes, a large stack of business size envelopes, and a pen or marker.
Label the 12 manila envelopes by month for the current year. Now, go through each receipt in your pile, one at a time, separating them by category. If you have a lot, it may be helpful to label your table with strips of masking tape marked with the name for each category, so you can more easily keep track of the sections where you are placing your receipts. Once you have the receipts separated by category, you’ll then separate each category by month.
Working one month at a time, place the receipts for each category in separate business envelopes. The business envelopes should each be marked with the appropriate category (i.e. “Medical Receipts,” “Utilities,” “Car Repairs,” and so on). Then place the business envelopes into the larger manila envelope for that PARTICULAR MONTH.
For instance, start with January. Take all the Utility receipts for January, place them in a business envelope, mark the business envelope “Utilities” and stick the business envelope into the Manila folder labeled for January. Take all the Medical receipts for January, place them in a business envelope, mark the envelope “Medical Expenses,” and place it in the Manila envelope for January, and so on. Then, move onto the next month. Repeat for each month, so that at the end of this process each month’s manila envelope will have receipts inside pertaining to that month neatly divided by category.
The good thing about this is that you only have to do it once. Now you have an organized system!