I’m feeling rather inspired by all the Instagram photos I’m seeing my friends post lately of them sorting their gigantic piles of tax receipts, so I thought today would be the perfect day to start talking taxes with our Smart Artist Community!
One of the reasons I started this podcast series was I know from personal experience how overwhelming finances and taxes can be as an artist. I think we forget how much emotion there is tied to money- whether we have enough of it or we don’t have enough of it- and I know that even with my work as an accounting professional the areas of taxation can be so confusing!
Today, I want to arm you with some really basic finance knowledge to help you conquer your tax season! In today’s Friday 5, I’m going to share my favourite ways to organize all your tax receipts. These are all super easy tasks and by doing them now before heading into tax season you’re going to set yourself up for success for this year and beyond. I’m also giving away my #1 requested resource that I share with the clients I work with (see below to get your copy!)
LET’S GET STARTED!
1. Decide NOW how your want to organize and store your receipts, long-term. The Canada Revenue Agency requires you to keep your receipts up to 7 years (longer if you file late), so you want to create a system that will be compact and protect your paperwork. I personally love accordion files (like this one, available from Amazon.ca); cheap, effective, and compact!
How your receipts are organized within the folder may vary based on your individual situation, but here’s a cheatsheet of accordion file labels that I like to use with my own clients.
2. Create a system to organize digital receipts. With so many purchases being made online now it’s so easy to lose track of those e-mails receipts, so I’ve got a couple suggestions on how to keep this organized. A super easy tip for for digital storage is to create a folder called “2015 Receipts” within your preferred email program. (And then you’ll create a new folder each year). This way, whenever you receive a digital receipt in your email you move it into that folder right away. Don’t open the email, look at it, and think, “I’ll come back and file that later” because guess what- you probably won’t. 🙂 I know that’s something I struggle with personally; if I don’t deal with an email right away then it somehow disappears into the magical abyss! Bonus tip: set up a 2015 Income folder at the same time, to deal with all things income-related (copies of invoices you send, e-transfer payment receipts, etc).
3. One of my all-time favorite tools that I stumbled on a couple years ago is an app and online tool called OneReceipt. I loooooooove using OneReceipt because it has a really cool function where you can link it to your email and it will scan through your email and identify anything it thinks may be a receipt. You can then login to OneReceipt and view/label all those receipts online, and even share the info with your accountant as a PDF or Excel file.
There is also a downloadable iPhone app that lets you take photos of receipts on-the-go. If you’ve ever looked at a receipt that’s a year or two old, you’ll know that nowadays the ink doesn’t last very long on those thermal paper receipts. The last thing you want to do during a tax audit is try and figure out what date or amount was originally on that receipt. You can also add notes to the photo receipt, (i.e. for a taxi receipt you want to include where you were going, and why).
UPDATE: OneReceipt is now longer available. I’ve been using Expensify and loving it- it starts at $5 a month, but worth it if you have a lot of receipts! (Especially while travelling!)
4. Organizing income becomes just as important as organizing receipts. If you run more than one business (for example, you teach under your own name and have a registered production company under a different name) you’ll end up filing out more than one self-employed section on your tax return. So, it’s really important to keep your income organized by activity. If you listened to our podcast episode 2 about invoicing, you’ll have learned the importance of a tracking document. Basically, if you’re not using a computerized accounting system, you’ll want to have a summary sheet of all invoices that you have sent out during the tax year (January-December). This is preferred to just having payment or cheque stubs as it will have the important information summarized including the date of invoice, who was invoiced, what the invoice was for, and how much. Click here for a sample invoice tracker!
5- The last tip is a special giveaway and it’s a real goody- I’m giving you an arts-specific cheatsheet of receipt categories I give to all the clients I work one-on-one with. How taxes are filed tends to be fairly standardized across different industries, but it can be a bit confusing trying to decide which expense goes into which category on the tax return. The cheat sheet I’ve prepared lists examples of the most common arts expenses for each category. Want it? Sign up below and we’ll deliver it instantaneously to your email inbox! Then, whenever you are ready, brew yourself a cup of your favourite tea, put on a fantastic movie, and dive in to sorting your receipts.
Remember, every individual is unique so use the guidelines above as general information only and see a tax pro about your specific situation.
Thanks for being a part of The Smart Artist community!