Come tax time, if you cannot find the paperwork, then it is hard to claim it. You can, but if you get audited, they are going to want to see the paper to back up your claim. For this reason, it is a good idea to keep organized through the year so when the tax season sneaks up, you are ready for it.
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Envelopes/Folders – You can organize your direct sales paperwork in a variety of ways. For me, I have found that having a large brown envelope is a great way to do it. I have one envelope per month for sales and have it organized as such – party summary (from my company’s backoffice) and receipts relating to the party attached. I also write the order number on the receipt just in case they get disconnected. As I do not have a lot of expenses beyond what I purchase from my direct sales company, I have just one envelope for expenses. I could easily itemize these out by month or by type.
Electronic Files – Just like my paper files, I have a folder on my computer for all my electronic invoices. I have them sorted out by type of invoice (party, supplies, long distance, credit card) and sort them into those folders and make sure each file is labeled by date. A few clicks and I am able to find anything that I need.
Excel Spreadsheet – I do all my accounting via Excel spreadsheet as I find it easier than using software. But, software definitely has its advantages such as being able to prepare a report for you at yearend to use for your taxes. That said, if you are not comfortable with either option, a spreadsheet with a list of various expenses is a good idea to prepare for your tax accountant. I recommend a few columns though: Item, Purpose, Date, Amount less tax, Tax. This will help your accountant classify the expenses and record them in the correct spot.
One of the best things you can do for yourself is keep on top of your paperwork and have it sorted out. This creates less stress later on and you will likely find it helpful throughout the year.