For a brief period in middle school, my wallet was thicker with receipts than it’d ever be with cash. I’d just gotten my first debit card and proceeded to store each and every receipt in my billfold.
Why? I wasn’t entirely sure, but my father kept his receipts there, and he was an accountant, so he probably had a good reason. I figured it had something to do with taxes or the IRS, and I did not want to go down for tax evasion like some kind of pre-teen Al Capone. So I simply let those slips of paper—mostly detailing my slurpee consumption—languish, until they turned blank with age or from the heat of being in my back pocket.
Now, more than a decade later, I’ve finally gotten around to answering that burning question...
Do you really need to hang on to receipts?
Short answer: Sometimes, yes, but mostly no.
While keeping receipts from everyday expenses (such as slurpees) could be helpful for budgeting purposes, it’s probably not necessary for anyone not on an all-cash diet. Your debit or credit card statements should suffice, or you can try out digital budgeting tools—like Mint or You Need a Budget—that do the work for you, allowing you to ditch the clutter of paper receipts altogether.
However, if you’ve got medical expenses; charitable contributions (including cash and old clothes donations to GoodWill); payments toward property, state and local taxes; or payments toward home mortgage interest, those carbon copies could come in handy if you plan on itemizing related deductions on your tax return. “If you’re audited, the burden of proof is on you,” Davon Barrett, a Certified Financial Planner at Francis Financial, tells me.
You lost me at “itemizing.” What’s that?
When you file your taxes, you can opt to take the set standard deduction or itemize (a.k.a. list out) your qualified deductions. Just pick whichever one is greater, says Sallie Mullins Thompson, a Certified Public Accountant and financial planner. And keep in mind that if you’re married and filing jointly, you must file the same way as your spouse.
In years past, about 30 percent of filers itemized their deductions. But this year, almost 90 percent of Americans are expected to take the standard deduction, which recently almost doubled from $6,350 in 2017 to $12,000 in 2018 for individuals and from $12,700 to $24,000 for married couples who file jointly.
So how long do I have to keep receipts for tax purposes?
Once you’ve submitted your tax return, plan to hold onto any receipts related to deductions you claim for at least three years, Thompson says—though you might keep them for seven to be extra safe. The IRS can audit you for up to six years after you file a return if you’re suspected of underreporting income by more than 25 percent.
Fortunately, you don’t have to keep a literal paper trail. Barrett recommends digitizing your receipts by scanning or snapping a pic with your phone.
February 4, 2019