Digital receipts: Why they make tax time easier
A balanced budget is just as important as a balanced diet, and both help you sleep better at night. To find clarity in your finances, it's important to manage your spending habits on a daily basis. Yet when it comes to tax reporting obligations. and your money-management system consists of searching for misplaced cash, sorting through piles of receipts and being completely unaware of your spending habits, you may want to reconsider your approach and start organizing your finances with digital receipts. Here's why they make tax time easier. They're accessible 24/7
When it comes to tracking your personal expenses for tax purposes, technology has made money management even easier with transaction records that can't be crumpled up or accidentally thrown away. Because business expenses lower taxable income, the Internal Revenue Service (IRS) pays close attention to significant expenses and associated documentation. Physical receipts are subject to physical damage. Receipts can be damaged in a flood or fire, or they can fade, rendering the documentation useless. As of 1997, the IRS accepts scanned and digital receipts as valid records for tax purposes. Revenue Procedure 97-22 details the specific requirements: as long as your digital receipts are accurate and can be readily stored, preserved, retrieved and reproduced. E-Receipts and credit card statements are acceptable proof for a $50 business meeting expense. If the IRS decides to audit your records, it will ask you to produce documentation of your expenses. When you are claiming costs associated with fuel, travel, meals or entertainment, digitalreceipts can be produced at the click of a button. You can add tax information or assign tax categories on many of the personal expense tracking apps available, so when tax time comes, everything is prepared in a way you or your tax accountant can use. The IRS accepts the scanned digital receipts, so if they ever ask to review any of yours, you’ll be able to quickly find them.
They integrate into your current accounting systems
Some receipt scanner software systems can quickly create the reports you or your accountant will need to prepare for tax purposes and even allow you to export the reports into the accounting programs you use, such as Quicken®, QuickBooks®, TurboTax®, or Excel®. Having all your expenses documented will also ensure that you receive all of the tax deductions that you qualify for.
They streamline internal reports and organize business expenses
IRS rules regarding meals and entertainment expenses require you to list the names of everyone you treat to a business lunch or dinner. With digital receipts, you can streamline your internal reports and your potential audits when you capture your guests, employers and an agenda of the business you discussed during your trip or your meal.
Records of your transactions are important proof of your legitimate business expenses, and they are safer in your digital filing cabinet. Once they’re part of your digital system, they can be kept safe and confidential. For more information on how digital receipts can benefit you, join our community for valuable insights, and contact us today.