Keeping track of receipts and expenses for side business

[Hardatit]

Just wondering how everyone keeps up with expense receipts. Mostly online purchase digital receipts and some paper receipts.

I started selling on Ebay and Amazon in 2015 so I'm getting all my tax info together now. I use godaddy bookeeping which is linked to my accounts. It does a great job of keeping up with income/expenses. I just go in once a month and make sure everything is in the correct category. It usually does a good job with sorting but sometimes it'll put an expense in the wrong category. Overall it's a great program. I started thinking if I were to get audited, I'm sure the IRS is going to want receipts for everything showing in godaddy.

99% of my purchases for office supplies, inventory and all other business expenses are made online and the receipt is emailed to me. The way I'm tracking it now, is I have labels in Gmail labeled office expenses, inventory, advertising and so on. Each time I make a purchase, I just drag the email receipt in the corresponding label in Gmail. If I do purchase something locally, I keep the paper receipt in an accordion file labeled expenses.

I use the same label system in Gmail to track inventory along with and Excel spreadsheet. I have 20 items that I have listed for sale, each item has a label in Gmail. Each time an item sells, I get an email from either Ebay or Amazon. I drag that email to the corresponding label and at the end of the month, I count up how many and what items sold and I add it manually to my excel spreadsheet. It seems like alot but I'm in the habit of it now and it flows well.

This year 2016, I plan on buying and selling vehicles, fourwheelers, and boats locally to earn extra money in addition to my online sales. I'll claim this income in 2017 and will need to track receipts as well. Like my online business, parts that I buy to repair vehicles are 99% online and the receipt is emailed to me.

This is where I'm getting stuck. Should I keep and modify the FREE Gmail label system to account for expenses of buying and selling, or should I seek another option, which from what I see, most cost money?

Basically I would have to a master label in Gmail named Buying/Sellling 2016, then make three labels under that named Vehicles, Boats and Fourwheelers. Then lets say I bought a 99 Ford Ranger, I would go in and add a sub label under vehicles named 99 Ford Ranger. Each time I bought a part to repair the Ranger, I would drag the receipt from online to the 99 Ford Ranger label. I would have to do this with each vehicle I bought. If I purchased a part locally, I would keep have to keep track of the paper receipt somewhere or I thought of taking a picture of it and emailing it to myself.

What I'm doing not works and it's free but are there any other options that are painless? How does everyone else keep track of these things? I'm just thinking if I ever expanded to 40 parts and sold 20 vehicles in a year I would have quite the amount of labels in Gmail. I like simple and easy.

I feel like I spend alot of time keeping track of receipts, expenses, etc than I do actually enjoying buying and selling.

 

[ArkTinkerer]

I married a librarian. Best investment I ever made. Fringe benefits are awesome too!

 

[Big_Hitter]

I married a librarian. Best investment I ever made. Fringe benefits are awesome too!

man, what's that like? DW doesn't keep track of squat. I have no idea how much we spend and on what.

 

[Sunset]

OP - for your business, you will want to take pictures of reciepts that are not electronic and save the photos, as all those paper receipts stores give you fade to a blank piece of paper over a short time.

I use a spreadsheet, imputing the number from the receipts, so I can split the numbers out on the classification (tax-wise) of the expense.

 

[samclem]

This is where I'm getting stuck. Should I keep and modify the FREE Gmail label system to account for expenses of buying and selling, or should I seek another option, which from what I see, most cost money?

My solution would not work for you--I was 100% paper. Most of my expenses were while I was on the road, and I just collected the paper receipts and put them in a folder corresponding to whatever contract I was working under. I put printouts of my online expenses in that same folder. Maybe 125 receipts total for the year. Once a year I added them all up by IRS category in a spreadsheet (travel food, travel other, office supplies--I didn't even make an entry for what each was, I just totaled up the amount. If I ever needed to explain it, I had the paper copy still in the folder). It worked great, took me less than an hour per year to tally up and was dirt simple, which was super. The complexity of your present method might be warranted by the number of receipts or a need to keep track of expenses on a continuing basis, but those didn't apply to my situation.

 

[Sunset]

man, what's that like? DW doesn't keep track of squat. I have no idea how much we spend and on what.

Not sure it's her responsibility.
We don't track either, we are both cheap or should I say frugal, so it just seems to be a waste of time. I tried and failed to keep doing it.

What I do, is at the end of the year, I add up all the different investments, bank accounts, etc in a spreadsheet, and see if we are going up/down.

I also export from my bank account (all my spending $$ comes from this) the yearly amount, and see how much I really spent.

My DW doesn't bother either.

 

[Big_Hitter]

Not sure it's her responsibility.

sure it is - she's been retired almost 20 years now


and....it's absolutely mandatory that we get a handle on this before I pull the chute - you can't plan without half of the data

 

[Willers]

OP - for your business, you will want to take pictures of receipts that are not electronic and save the photos, as all those paper receipts stores give you fade to a blank piece of paper over a short time.

I use a spreadsheet, imputing the number from the receipts, so I can split the numbers out on the classification (tax-wise) of the expense.

+1, this is great advice. You'd be surprised how quickly some hard-copy receipts fade. I scan everything and store electronically.

I also save off the email or account receipts just to have them all in the same place. I prefer not to count on them not getting deleted from email by mistake.

 

[Hardatit]

OP - for your business, you will want to take pictures of reciepts that are not electronic and save the photos, as all those paper receipts stores give you fade to a blank piece of paper over a short time.

I use a spreadsheet, imputing the number from the receipts, so I can split the numbers out on the classification (tax-wise) of the expense.

I assume the IRS would accept a picture of a reciept as proof?

My solution would not work for you--I was 100% paper. Most of my expenses were while I was on the road, and I just collected the paper receipts and put them in a folder corresponding to whatever contract I was working under. I put printouts of my online expenses in that same folder. Maybe 125 receipts total for the year. Once a year I added them all up by IRS category in a spreadsheet (travel food, travel other, office supplies--I didn't even make an entry for what each was, I just totaled up the amount. If I ever needed to explain it, I had the paper copy still in the folder). It worked great, took me less than an hour per year to tally up and was dirt simple, which was super. The complexity of your present method might be warranted by the number of receipts or a need to keep track of expenses on a continuing basis, but those didn't apply to my situation.

Sounds super easy and that's what I like. The majority of my recurring expenses for my Ebay and Amazon are tallied automatically by my online bookeeping system so that's pretty simple, but non recurring purchases probably around 50--75 a year have to be classified manually.

Expenses related to buying and selling vehicles would probably amount to 150 or so mostly online receipts a year. Then there is mileage which is a whole other hassle to try and keep up with.

Like I said this is my first year to file, I just want to make sure I'm doing things the simplest way possible and still be ok if for some reason I ever was audited. I'm really trying to stay away from another pay per month program just to keep track of my small business expenses.

I do my inventory with an excel sheet and it's fairly straightforward. Takes an hour or less a month. I know keeping up with expense receipts and mileage is a mandatory task to be able to file for the deduction but whew it seems like alot of work sometimes for the small chance of getting audited. Does anyone else ever feel that way?

 

[samclem]

I know keeping up with expense receipts and mileage is a mandatory task to be able to file for the deduction but whew it seems like alot of work sometimes for the small chance of getting audited. Does anyone else ever feel that way?

Yes, I do. For some things (e.g. on my personal taxes, state "use tax" on internet purchases), I don't make an effort to track it all, I just make a good-faith estimate. If I ever get audited, I'd have to go back and reconstruct our online purchases (a giant PITA), but it seems worth the very small risk. I'm not cheating, and I'm sure I'm doing a better job of complying with these onerous requirements than 90% of taxpayers. As "insurance," I don't cut things too close in other areas, especially ones with a sharp "cliff," disallowance of other deductions, paperwork nightmares, etc. E.g. If I get audited and wind up paying $50 in extra taxes due to inadvertent under-reporting of something, I don't want to cause $10 of an IRA contribution fall into the "nondeductible IRA category with all the paperwork hassle (for years) that would cause.

 

[Hardatit]

Yes, I do. For some things (e.g. on my personal taxes, state "use tax" on internet purchases), I don't make an effort to track it all, I just make a good-faith estimate. If I ever get audited, I'd have to go back and reconstruct our online purchases (a giant PITA), but it seems worth the very small risk. I'm not cheating, and I'm sure I'm doing a better job of complying with these onerous requirements than 90% of taxpayers. As "insurance," I don't cut things too close in other areas, especially ones with a sharp "cliff," disallowance of other deductions, paperwork nightmares, etc. E.g. If I get audited and wind up paying $50 in extra taxes due to inadvertent under-reporting of something, I don't want to cause $10 of an IRA contribution fall into the "nondeductible IRA category with all the paperwork hassle (for years) that would cause.

Yeah I was thinking that way too. I know other people with a small business like mine and they never seem to care or bother putting too much time into tracking this and that themselves. Seems they just bring a folder of paperwork to their accountant at the end of the year and go on with life.

Doesn't sound that bad actually, this year I'm feeling like I'm doing the work of an accountant and in April I'll be taking what I've done to an accountant. Like you said though even if I miss something small, I'm probably doing more than 90% of others.

When you say, "If I get audited and wind up paying $50 in extra taxes due to inadvertent under-reporting of something, I don't want to cause $10 of an IRA contribution fall into the "nondeductible IRA category with all the paperwork hassle (for years) that would cause."

Is this relating to a SEP IRA or other retirement account that you have made contributions to from your small business income?

 

[Done]

I have to keep track of income and expenses related to rental properties, and it's important to have the category and property correct. I use Quicken to track everything and have created custom categories so I can easily run reports to prepare my tax return. Quicken imports the transactions from my credit card and bank accounts, and then I categorize each, add a description and save (and copy or scan) the paper receipts. When doing taxes, I verify that I have a receipt for each transaction. Mint.com was not good enough for categorizing and reporting detail.

Quicken or accounting software is good if you need to know the type of each expense, or if you need to tag each transaction to a particular vehicle/property/item.


Sent from my iPad using Early Retirement Forum

 

[samclem]

When you say, "If I get audited and wind up paying $50 in extra taxes due to inadvertent under-reporting of something, I don't want to cause $10 of an IRA contribution fall into the "nondeductible IRA category with all the paperwork hassle (for years) that would cause."

Is this relating to a SEP IRA or other retirement account that you have made contributions to from your small business income?

It was primarily a "for instance"--the deductability of my spouse's "spousal IRA" could be affected if my business income had been too high. My own retirement savings from my SE income go into a solo 401k (which has been a great tool).

 

[Hardatit]

Oh ok I understand that. Done, I may have to take a look at quicken if my email sorting/labeling method does not work out. I just want things as simple as possible.

 

[big-papa]

For the last two years I kept paper receipts. Reconciled them with the bank statements and credit cards. Starting this year, only keeping receipts for items we may wish to return and the occasional large item bought with cash. I use 2 credit cards: Visa from my credit union that we use to pay for most things (paid off each month) and an AMEX card for Costco. Will drop AMEX in a couple of months when Costco switches over to Visa. I can download monthly credit card expenses into a spreadsheet and sort by category, making adjustments for my own category definitions in a few places. Then cut and paste into my master spreadsheet. Other items (utilities, mainly) are paid out of the checking account and are also a simple download from my credit union.

 

[Rickt]

Probability of getting audited by your State "Dept of Revenue" is higher than you getting audited by IRS IMO. Your state will look at your purchases and try to determine:

1. If you are collecting the sales taxes and paying the sales taxes collected properly & in a timely manner to the state.

2. If you are paying "use tax" on purchases made online that the seller did not collect sales tax on (viz. from Amazon/ebay etc.). In the state of Missouri online purchases upto $2000/year are exempt from use taxes but if you purchase online goods for more than $2,000 in a calendar year you owe "Use taxe" on all the purchases including the initial $2,000. "Tax exempt purchases" made for "resale" are exempt but proper record keeping/inventory is important.

Chances of getting audited are higher if your business gets BIG or bigger faster.
Wish you Good Luck!

 

[38Chevy454]

I use combination of paper and electronic. 99% of my sales are through Paypal, and I use the same paypal account to pay for postage, small office supplies, or other misc expenses when i can. That is a great record of the money side. Paypal has monthly statements that I print out and also save electronically. I do keep paper receipts for all the pre-printed shipping, and the emailed receipts for small purchases. For my home office, I just keep an Excel spreadsheet of the utilities and other expenses paid. I really do not have one consolidated place I put all of the accounting, until I fill out my taxes and put the values in the appropriate boxes.

 

[Hardatit]

For the last two years I kept paper receipts. Reconciled them with the bank statements and credit cards. Starting this year, only keeping receipts for items we may wish to return and the occasional large item bought with cash. I use 2 credit cards: Visa from my credit union that we use to pay for most things (paid off each month) and an AMEX card for Costco. Will drop AMEX in a couple of months when Costco switches over to Visa. I can download monthly credit card expenses into a spreadsheet and sort by category, making adjustments for my own category definitions in a few places. Then cut and paste into my master spreadsheet. Other items (utilities, mainly) are paid out of the checking account and are also a simple download from my credit union.

Is this for small business purposes or just personal tracking purposes? That sounds fairly simple, but for example if you make a business purchase at Walmart, your credit card statement will likely just say Walmart, how will you know what you actually bought or how to distinguish personal purchases from business?

Probability of getting audited by your State "Dept of Revenue" is higher than you getting audited by IRS IMO. Your state will look at your purchases and try to determine:

1. If you are collecting the sales taxes and paying the sales taxes collected properly & in a timely manner to the state.

2. If you are paying "use tax" on purchases made online that the seller did not collect sales tax on (viz. from Amazon/ebay etc.). In the state of Missouri online purchases upto $2000/year are exempt from use taxes but if you purchase online goods for more than $2,000 in a calendar year you owe "Use taxe" on all the purchases including the initial $2,000. "Tax exempt purchases" made for "resale" are exempt but proper record keeping/inventory is important.

Chances of getting audited are higher if your business gets BIG or bigger faster.
Wish you Good Luck!

As far as I know, there is no use tax for my state. Less than 1% of my sales are actually in my state, most are sold to out of state customers, which I'm thinking correctly, I don't have to collect tax on. After checking, I actually didn't sell any items in state this year. Sales tax is something I will have to look into soon, especially if I start selling more within my state. I believe Ebay can be set up to collect sales tax on certain purchases.

I use combination of paper and electronic. 99% of my sales are through Paypal, and I use the same paypal account to pay for postage, small office supplies, or other misc expenses when i can. That is a great record of the money side. Paypal has monthly statements that I print out and also save electronically. I do keep paper receipts for all the pre-printed shipping, and the emailed receipts for small purchases. For my home office, I just keep an Excel spreadsheet of the utilities and other expenses paid. I really do not have one consolidated place I put all of the accounting, until I fill out my taxes and put the values in the appropriate boxes.

I'm in the same boat, most all of my sales are through paypal. Do you actually keep an inventory of all your parts and categorize your expenses monthly? Or do you just figure your inventory at the end of the year?

 

[Sarah in SC]

I bought DH one of these. He's a non record-keeper sort of person, and let's just say the forensics on 2015 for his little side business are going to be the death of me, him, or some random household furniture. All the time I thought he was keeping records....yeah, not so much.

Amazon.com : Bookkeeping Record Book Weekly 128 Pages 9 x11 Inches, Brown : Office Products

 

[Senator]

I use Quicken.

Each receipt is logged in Quicken, and each receipt is filed in a folder. One folder per month. At the end of the year, the receipts get boxed up and put in the closet for 7+ years.

I have had several warranty items over the years. Even if a purchase was made 5+ years ago, I can find it.

 

[Hardatit]

I use Quicken.

Each receipt is logged in Quicken, and each receipt is filed in a folder. One folder per month. At the end of the year, the receipts get boxed up and put in the closet for 7+ years.

I have had several warranty items over the years. Even if a purchase was made 5+ years ago, I can find it.

I've been looking at quicken for a while now. What quicken version would you recommend?


I see that the deluxe version is most popular according to Amazon and the Home and Business version has less than stellar review but it does separate business and personal transactions. Seems this would be a must have feature for small businesses. Any thoughts?


How much manual work is actually involved in quicken once all of your accounts are linked to it?

 

[Senator]

I've been looking at quicken for a while now. What quicken version would you recommend?

How much manual work is actually involved in quicken once all of your accounts are linked to it?

I use Quicken Rental property Manager, but I only use the features of home and business I suspect. I need the ability to create invoices and track payments.

There is not too much manual work. About once a week I enter all my receipts into my Credit Card account. I manually reconcile the statement every month. I probably have 100+ receipts per month with the rental receipts.

If it's just for your`personal use, you can use a notepad. If you want to actually track expenses, you need something like Quicken.

 

[38Chevy454]

I'm in the same boat, most all of my sales are through paypal. Do you actually keep an inventory of all your parts and categorize your expenses monthly? Or do you just figure your inventory at the end of the year?

I just do a year-end inventory. While I could do monthly for inventory, no real need since a final year-end is easy enough and meets reqts. Same for monthly expenses and income, no need for this level of details. I just total it all up at year-end for the tax form. My volume and amount of money is close enough I can have a rough idea in my head, and since this is completely not any money I use for living, I just don't need an exact value - except for taxes

 

[Hardatit]

I use Quicken Rental property Manager, but I only use the features of home and business I suspect. I need the ability to create invoices and track payments.

There is not too much manual work. About once a week I enter all my receipts into my Credit Card account. I manually reconcile the statement every month. I probably have 100+ receipts per month with the rental receipts.

If it's just for your`personal use, you can use a notepad. If you want to actually track expenses, you need something like Quicken.

That doesn't sound too bad, I shouldn't have near that many receipts.

I just do a year-end inventory. While I could do monthly for inventory, no real need since a final year-end is easy enough and meets reqts. Same for monthly expenses and income, no need for this level of details. I just total it all up at year-end for the tax form. My volume and amount of money is close enough I can have a rough idea in my head, and since this is completely not any money I use for living, I just don't need an exact value - except for taxes

That makes sense. My side gigs are for extra spending and investing money now but in about 6 years I will partly depend on them for living along with my pension. I figured the earlier I start developing good habits to keep track of them the better.