Do I Really Need to Save all My Paper Receipts?
The electronic era we live in has it’s good sides and it’s bad–but this time, I can report happily, that you can put 3/4 of your filing cabinets on Craig’s List and use the proceeds to invest in a good-quality scanner (like this one that I use) and be done with all that paper clutter.
What about the IRS?? Read this excerpt from Tom Copeland’s article below for some great info:
Tom Copeland’s Taking Care of Business
Are Receipts Obsolete if You Use a Scanner?
It’s a family child care provider’s worst nightmare: You are in an IRS audit and the auditor asks to see your business receipts. As you pull out your receipts, you discover that the ink on all them has faded and the pages are blank!The auditor is not amused. Is your situation hopeless?
Not if you had scanned your receipts into a scanner and can display your records on a computer or print them out. Child care providers are required to save their tax records for at least three years after filing their tax return (employment records must be saved for four years). Some states require you to save your records for longer than three years. I previously wrote an article (“The Case of the Fading Receipt“) discussing ways to preserve receipts when they don’t last three years.
A growing number of child care providers are using a scanner to save and organize their records. A scanner allows you to scan your receipts into your computer, by saving the image of your receipts. You can then sort these records on your computer by putting them into different business categories (parent payments, toys, supplies, utilities, etc.). Using a scanner will not allow you to divide one receipt into two categories, so it’s not a perfect way to organize your records.
If you scan your receipts, do you still need to save the hard copy for three years? No.
IRS Revenue Procedure 97-22 says you can throw away records after you have scanned them into your computer. You will need to be able to produce your scanned records at an audit. I recommend saving your scanned records on a flash drive and storing your flash drive in a safe place (such as a safe deposit box).
If you use a scanner, be careful not to throw away receipts until you are positive that they are properly scanned and saved on your computer. Note: some states may not accept scanned records, so check with your state department of revenue before throwing away the hard copies your records.