When you make purchases for your business it is a good idea to file your business receipts properly right away. You could scan your receipt and save in the right folder online or your computer or you could file the paper receipt.
9 steps to file a paper receipt for a depreciable item that you would take a depreciation deduction for:
- Make a copy of the receipt: unless you claim section 179 or a special depreciation to expense the cost of the item in the year of purchase, you deduct depreciable items over several years. Receipts might fade by then. In case you need information on the receipt, it is recommended to make a copy of the receipt.
- Staple the original receipt at the back of the paper copy.
- Write down the item purchased at the bottom on the paper copy. Some items are hard to identify on a receipt unless you look up the UPC online. If the item is discontinued, you may not be able to find it online either. Therefore, it is good to use your own word to write the title or name the item for your own reference later.
- Create a folder and label it “Depreciable Current Year”
- File your paper receipt in the folder
- Create a second folder and label it :Depreciable Prior Years”
- At the end of the current year, grab all the receipts from “depreciable current year” folder add a blank paper and staple all together. On the blank paper write “Depreciable Items for Year 2020” for instance. File the bundle stapled receipts in the folder named “Depreciable Prior Years”. By doing it this way, you only have 2 folders in that category to file these type of receipts and the folder prior years is easy to review as you staple receipts by year. If you don’t have a lot of receipts it is a good way to file your depreciable items.
- Put these 2 folders in an expandable folder labeled “Depreciation” to locate easily.
- Once a month pull the current year folder out and record any purchases in your journal or add it to your depreciable items list to later calculate depreciation on them.
Filing your business receipts properly make it easy to file your business taxes whether you file them yourself or hire a professional to file on your behalf.
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