Saving Your Receipts As A Freelancer: Why Is It Important?

A freelancer, like any other person in the world, would have many questions about taxes. You would want to know about how to file them in the first place and what all to add in it and whatnot. This raises questions about receipts. Should you save your receipts as a freelancer? And if yes, then for how long? 

There are a variety of reasons why you should be saving your receipts as a freelancer. More than that, it is important to know what receipts are more important than the others. Also, information about how to keep all the receipts and manage them is also very important. Here, we will answer all your questions and ensure you know about everything that surrounds the concept of saving receipts.

Why Saving Your Receipts is Important?

Receipts will help you to bring your taxable income down. Now while you’re filing your income tax returns, you have to disclose your total income. But with your receipts, you can bring your income that is liable to be taxed down. This is because the money that you’ve spent in the process of gaining your income can’t be counted as a part of your income. 

So even if you don’t have to reproduce your receipts while you’re filing your income tax returns, it is considered a healthy practice to ensure that you have the receipts with yourself as proof. So, even if something goes wrong like you have your income tax return audited, you’ll be on the safer side. This is why many people have started managing their receipts. 

How long should I Save My Receipts?

It is recommended that you save your receipts for a duration of about 3 years. This is because that’s the only time duration when you’ll feel the need for these receipts. After this, it would be safe to throw them in the trash.

What Receipts to Save?

If you think all receipts are equally important, you are gravely wrong. All receipts are not of equal importance. This is because some receipts have menial transactions ranging in a very low price range. These receipts generally are not very important. So as much as it is recommended to save all your receipts, you can throw away those that pertain to some smaller transactions. These can include a small lunch with the client, or receipts of such an order. 

However, if your receipts belong to a transaction that involves a large paycheck, it is important to have that. For example, if you bought a new laptop for your office, or if you spend money on getting a desk for your office, you have to store that slip for later use. It will be of great use for any future trouble. In general, it’s a good practice to organize your transactions over a period of time.

How to decide if a receipt should be deducted from taxable income?

If you are looking at a receipt, chaotic about whether you should deduct this amount from your taxable income, then all you have to do is think about if it aids you in any manner. The receipts that you can add for such purposes should only be those that help your productivity or are a part of your work itself. These include items like:

• General equipment of your work- This might include all the tools and supplies that you use for work. It can include your laptop or desktop, your car or another vehicle that you use for commuting.
• Your bills regarding work- You can also add receipts that concern your work. These include your internet bills(the amount you use for work), your phone bills. Remember to calculate only the amount that concerns work for more accuracy.
• Any meetups regarding work- If you met with a client and offered lunch, then you can add that receipt. In addition to that, if you met someone with regard to completion of your project, you can add that too.
• Software expenses- Have you bought any software to do your business? For example, if you’ve bought the premium account for Grammarly, you can keep that in mind while saving your receipts as a freelancer. However, if you’ve bought a Spotify premium, you can let that one go.
• Learning expenses- If you’re taking a course to know more about your field or explore it more, you can file those expenses and save those receipts. As long as they fall under your business, you’re within your rights to do so.

How to manage all the Receipts?

You might be stuck in the chaos as to how to manage the receipts that accumulate in the three-year period of storing the receipts. That’s a lot of paper and might be bound to lose a track of. But if you look at it closely, managing these files is not that difficult. While saving your receipts as a freelancer, you can maintain a practice of clicking the picture of each receipt. 

There are many apps out there that can help you with managing your receipts on your phone. But, even without them, you can maintain a folder of receipts on your devices. If you have any online receipts that you get through your email, create another inbox division to save them. Alternatively, you can also click screenshots or mark those mails as important if you want to go through them later. 

Concluding words

When you make it a daily practice, saving your receipts as a freelancer isn’t so hard. It takes a little organizing and a little care. You can then ensure that you know where all your receipts are at. Storing receipts about your expenses can also help you to track your expenses and save a lot more. 

Therefore, this is a ritual for many freelancers to increase their income and be more calculative about their costs. Your receipts are an important part while you’re filing your income tax return and serve as a security blanket for any out of the box tax return audit. So keep yourself organized and prepared.

Also Read: 10 Pricing Mistakes Freelancers Make