You Always Keep Your Receipts or not?
In a world where we pay with plastic, sign for sales on iPads, and check out with Apple Pay, paper receipts seem archaic.
Still, you should always ask for one, says Manisha Thakor, a financial expert and Director of Wealth Strategies at Buckingham & The BAM Alliance in Santa Fe, New Mexico. It’s easier to catch transaction errors at the time of purchase, than trying to track down a receipt to dispute the price after the fact, she says.
But then what? Do you toss it or keep it?
You can throw away receipts for smaller purchases—like clothes, food, or recreational activities—once you’ve verified the payment is correct in the store or you’ve double-checked it on your debit or credit account at home or on your phone, says Thakor.
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And thanks to technology, there’s no need to keep utility or cell phone bills anymore either, she says. The itemized bills can usually be found on the company’s website, going back five to seven years.
But there are a few instances in which it pays to have the physical proof of purchase. We’ve listed three of them below, along with some tips for electronically maintaining receipts so you don’t have to remember where you put that pesky little paper.
Purchases with a Warranty
Warranties are extremely varied, with each vendor setting its own terms, Thakor says. But one thing is almost always the same: The business will require an actual receipt or the original paperwork to verify the warranty purchase.
To keep track of your warranties, the old-school way works: Place all warranty receipts in a folder, and stick it in a drawer or filing cabinet for safekeeping. Write the item—for example, refrigerator, television, car—at the top, as well as the warranty start date and end date. That way, if an item breaks, you can easily check to see if it’s still covered.
If paper isn’t your thing, Evernote Receipts can help you filter and store receipts electronically. To digitize them on the fly, Regina Leed, the co-author of One Year to an Organized Financial Life, suggests Genius Scan, an app that lets you scan documents from your iPhone or iPad.
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Make improvements to your home? Donate to a charity? Have a child in daycare? Self-employed with business-related expenses? You can take tax deductions for all of these situations—but you better keep your receipts.
If you claim an item as deductible and then get audited, the IRS might dispute it. Without a receipt, they will ‘disallow’ that loss, says Thakor.
And if that happens, you likely won’t go to jail, but you will be out some cash, she says.
“Any tax relief you would have been subject to is negated and there is the possibility that you may also pay penalties.” The exact numbers vary based on the nuances of the situation, she says.
As for what to keep and how to long to keep it for? Federal guidelines suggest hanging onto the original receipts for three years if you file as an individual and seven if you file as a corporation, says Leed. (If you’re not sure what’s tax deductible, you can find all of the permitted items here—or just ask your tax preparer.)
After that, shred the slips in a cross-cut shredder—the go-to disposal form of any document with your social security number or an active account number on it, she says.
But know that each state has a different time frame for how long you should keep receipts, Leed says. So make sure to check your state’s rules.
If you travel on official business or incur expenses while on the clock, you’ll need to keep track of your receipts. Which ones, however, depends entirely on your company’s policy. Some businesses require proof of purchase for everything, while others may only want receipts for expenses over $25.
“Increasingly, I’m noticing more and more business people using platforms like Concur, where you can take a photograph of your receipt on your phone and it’s uploaded and submitted automatically through an app,” says Thakor.
Work for yourself? Consider an actual scanning system like Neat, that allows you to capture and store slips so that your home doesn’t become a mountain of white slips.
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You might also want to look into a cloud-based backup system. Rather than storing information on your physical computer or hard drive, storing it on the cloud means transferring information to an online, off-site location that—if you lost your computer or your hard drive crashed—would allow you to still have access to your things. Thakor likes Mozy.