The last time I wrote about receipts was last year in “Making Sense of Receipts.” In that post, I talked about how to track and analyze your spending, as this was what my clients were saying was the reason why they were accumulating receipts.
Since then, I have continued to encounter stacks and stacks of receipts at my clients’ homes, some of them years old. These clients haven’t claimed they were saving them for tracking. They were saving them because they thought you were supposed to save them.
I believe that people are afraid to discard pieces of paper that refer to money. Bank statements and pay stubs also accumulate because people are afraid to throw them away.
Unlike those types of documents, receipts are small and tend to come home in pockets and purses. So they are usually scrunched up and wrinkled, which leads to some messy piles.
If you recognize yourself – and your receipt collection – in that description, then ask yourself why you are saving these receipts.
Some of the answers I hear are:
- In case the bank does not credit my deposit correctly, I’ll need to produce the receipt to straighten it out.
- In case the credit card company puts unfamiliar charges on my charge bill, I’ll need my correct receipts to be able to identify the unfamilar ones.
- In case I decide to deduct this expense on my taxes, I’ll need to use this receipt to figure out my deduction.
Do you notice that all these answers start with “in case”? A wise veteran organizer coined the phrase “Clutter is postponed decisions”. By coming up with these scenarios, people are postponing making a decision about the receipts.
If you seriously want to match up each ATM receipt with your monthly bank statement, then you need to keep the receipts in an envelope or a file, and then actually match the receipts to the statement each month! Holding on to the receipt in a messy pile of old papers will not help you out in the rare event the bank makes a mistake.
Similarly, if you want to check your credit card receipts against your monthly bill, then you’ve got to organize them and do your monthly reckoning when the statement arrives. And seriously, if you see a charge on your bill for $1,100 at Pit Number One in Atlantic City, do you really need your actual receipts to make that jump out at you? (This is a real charge that appeared on my MasterCard statement 30 years ago – my first fraudulent charge – and I’ve obviously never forgotten it).
If you truly aren’t going to do a monthly reckoning of your bank statements or charge bills, then throw those receipts out as soon as you get them!
If you suspect you might want to itemize your expenses on your next tax return, then you are wise to think about that every time you bring home a receipt, and then put each appropriate receipt with other tax records. Write at the top of each tax-deductible receipt what the expenditure was for (such as “Office supplies” or “Lunch with prospective client John Smith”). This will make your life so much easier at tax time. You don’t want to wait until the end of the year and then go through a big pile of bunched-up receipts and try to remember what they were for and if it is deductible.
Instead of having the knee-jerk reaction to save anything related to money, think about each receipt you bring home and make a decision.
Reducing the Pain of Tax Time | Organizing Goddess
[…] First, familiarize yourself with the categories of expenses that are deductible on a personal tax return. The IRS has a list here. As you bring home receipts, put aside those that fall into those categories, but first be sure to write on them what they were for. As I explained in Receipts, Receipts, Receipts: […]