How to Categorize Receipts For Small Business Taxes
September 4th, 2022 | 4 min. read
We all have different skills. Organizing (in any aspect of our lives) comes naturally to some people, while many others struggle.
Organization is important when it comes to accounting. That’s why small business owners who work with annual tax accountants put so much effort into correctly categorizing their receipts before their yearly appointment.
CSI Accounting & Payroll has helped thousands of small business owners with their taxes over the course of more than 50 years. In this article, we’ll detail our expertise in organizing your receipts on your own - unless you work with a monthly accountant and already get everything broken down for you!
Categorizing Your Own Receipts
Here are a few tips for categorizing your receipts on your own, as well as the categories to sort your receipts into.
5 Tips For Categorizing Receipts
- Use broad categories. A common mistake that we see is when business owners categorize by the vendor; this doesn’t explain what you purchased.
- Avoid detailing each receipt - just summarize them. If you have 200 charges under “office expense,” for example, you should just write the total expense.
- Hang onto copies of the receipts. This is for your own benefit, and you don’t need to give them to your accountant unless they request them for clarification. If you don’t want to hang onto paper receipts, there are ways to digitalize them, such as Dext (formerly ReceiptBank).
- Use a dedicated business bank account and a dedicated business credit card. These will help you see which transactions are business-related and which are personal.
- Categorize the best that you can! Putting too much into a miscellaneous category is a red flag to the government. It’s not as important to place things in the right bucket as it is to just capture all expenses. Most are deductible at the same rate aside from meals (50 percent deductible) and entertainment (not deductible).
Categories For Business Receipts
Here are the categories that we commonly use for our clients when organizing their business receipts:
- Rent and utilities
- Vehicle expenses
- Travel expenses
- Equipment rental
- Outside contractors
- Telephone expenses
- Repairs and maintenance
- Bank service charges
- Office expenses and supplies
- Education and business training
- Dues and subscriptions
- Taxes and licenses
- Professional service fees
- Interest expense
- Cost of goods sold
- Salaries (payroll)
- Payroll taxes
- Employee benefits
Receiving Categorized Expenses From a Monthly Accountant
When you have to do things yourself, categorizing your expenses can be extremely time-consuming. Do you know the value of your time?
Don’t forget this fun fact; when you work with a monthly accountant, you’ll receive financial statements that already break everything down for you! Each month, you’ll receive a Balance Sheet and an Income Statement (where small items are expensed right away) to help.
Not to mention, there are plenty of other benefits to receiving monthly financial statements and advice! Don’t believe us? Check out our most recent Google reviews to see for yourself.
Work With a Monthly Accountant This Year
Whether you continue to organize your receipts on your own or want to look into having a monthly accountant take over, you should now have a better understanding of best practices for categorizing expenses. We hope you found our tips useful!
If you want to have a discussion about if CSI Accounting & Payroll is a good fit for your company, click the button below for a free consultation.
Not ready for a discussion yet but still want to learn more about monthly accounting? Click the button below to read about the cost of monthly accounting.
Bryan joined CSI Accounting in 2019. He joined the team after CSI purchased his accounting firm, AccountSource LLC, which he had owned since 2005. He graduated from St. Cloud State in 2001 with a Bachelor's Degree in Accounting and has been an Enrolled Agent since 2010. Before owning his own accounting practice, Bryan had worked at the State of MN handling financial reporting and had been in private industry as a Controller. His primary responsibilities include overseeing the accounting department and making sure clients are receiving quality service. Fun Fact: Bryan has played soccer since the age of 4. He still plays soccer year round through various adult leagues and is an avid supporter of the Minnesota United MLS soccer team. COYL!!! (Come on, you Loons!!!)