How to Organize Receipts for Taxes
As tax season approaches many of us are probably trying to organize receipts for deductions like medical costs, charitable donations, or business expenses.
But are scanned receipts acceptable documentation for the IRS?
Not many people know this but the IRS has accepted scanned receipts since 1997. The applicable rule is Rev. Proc. 97–22 and it basically says that your scanned or electronic receipts must be as accurate as your paper records. Additionally, you must be able to index, store, preserve, retrieve, and reproduce the records. In other words, you need to have your records organized and be able to produce them in a hard copy form if needed.
Tax attorneys also recommend writing down the purpose of a business meal or other purchase before scanning the receipt or notating the business purpose elsewhere.
If you have full confidence in your electronic system, there’s no reason to keep your physical receipts. From a legal perspective, the integrity of the system is on you, and the failure of the system is not a valid excuse for not having accurate records. So you want to make sure the system you choose is reliable.
There are several companies that offer apps for saving your receipts electronically. Here are some of more popular ones:
1. Lemon.com. Using the Lemon.com website or free apps for iPhone, Android, BlackBerry, or Windows Phone, users track expenses, create summary reports, and assign categories such as health or business expenses. Scanned receipts are converted into searchable, taggable data using OCR (optical character recognition). Users can also add email receipts by forwarding to a special @lemon.com email address or having ecommerce emails bypass the regular inbox and sent directly to Lemon. The basic plan is free.
2. Expensify.com. Expensify accounts include 10 receipt SmartScans per month, unlimited receipt uploads and expense imports, and Evernote syncing. SmartScan technology uses OCR and, if necessary, scans can be flagged for review by one of the site’s human technicians. Users who need their expenses reports in a specific format can add expense rules to help automate the process. Expensify also integrates with Freshbooks and Quickbooks, but those features are only available with paid accounts. Users pay 20 cents for each additional SmartScan beyond the 10 allotted each month or earn bonus SmartScans by inviting others to join. Expensify also allows users to import a bank account or credit card to get an even more detailed look at their finances. Expensify’s free mobile apps are available for iPhone, Android, BlackBerry, and Windows Phone.
3. Shoeboxed.com. You can even just send them a box of receipts and they’ll scan them all for you. In addition to scanning and digitizing receipts and invoices, Shoeboxed.com organizes scanned business cards and allows users in the United States and Australia to mail in documents for scanning using prepaid envelopes. Shoeboxed uses a combination of OCR and human data verification to ensure accuracy. Users pay $49.95 per month for a business plan (which includes a back-up CD), $29.95 for the classic plan, or $9.95 per month for the “Lite” plan. There’s also a free DIY plan that allows users to enter data for up to five documents per month themselves rather than mailing documents. All plans include an online shopping email address. Shoeboxed offers free iPhone and Androids apps.
4. Doxo.com. Doxo syncs accounts with insurance providers, banks, mortgage lenders, and other companies so users can store statements and pay bills digitally, reducing the need for paper statements. If a provider isn’t already on the site, users can scan statements or take a photo on a smartphone and upload the image. However, details like the amount or company name need to be entered manually, as doxo doesn’t automatically extract that information from the receipt. The site can also store notes on calls with customer services or confirmation numbers. Currently, this free tool offers Web-based features and an iPhone app, but an Android app is in the works. In addition to receipts and bank statements, users can store warranties, passports, and other important documents in the cloud.
