{Business Tips} Getting Ready for the Tax Man!

It’s that special time of year once again – Tax Season.  I have spent most of the weekend and week getting my paperwork in order, but thanks to technology this task seems to be getting easier and easier every year.  I can’t give you any great tax advice, but I can give you some helpful tips to ensure you are organized, ready and able to maximize your tax deduction. Here we go:

Keeping Receipts Organized

I am by no means a paper person.  If you hand me a piece of paper you might as well equate it to tossing it in the trash because I’m 99.9% likely to either lose it or forget where I put it.  If you are like me than you should consider:

  • investing in a nifty personal scanner (however, if you have a smartphone then you already have a personal scanner), and
  • opening a Dropbox.com account (it’s free)

An alternative to using Dropbox is Shoeboxed.com.  For a fee Shoeboxed.com will help you electronically organize your receipts; so if you are one who has boxes filled with receipts you may consider this service.

I prefer free, so here is how I use these my iPhone and Dropbox to keep my receipts organized:

First, I created a new folder in my Dropbox and I named it after my Etsy shop – “HerbanLuxe“.  Then, in the HerbanLuxe folder, I created a subfolder for the year “2011” (and now one for 2012).  In each subfolder I created subfolders as follows:

  • Office expenses ( for office furniture, equipment, tablets, laptops)
  • Supplies (for pens, paper, printer ink)
  • Materials (for things I use to create my products)
  • Advertising (for blog ads, magazine ads, giveaways stuff)
  • Shipping (for postage purchases)
  • Travel & Entertainment (for mileage logs, gas receipts, toll and parking receipts)
  • Events (for registration receipts)
Dropbox Setup

Dropbox Setup

Every time I have a receipt, I take a picture of it and upload it to the appropriate sub-folder (tip: use a name convention such as Vendor-Day-Month, so you are able to find receipts for specific purchases). I also save electronic receipts I receive via email in the same manner.  I’ve downloaded the Dropbox.com app to my iPhone so I can just automatically save the receipt photos without having to connect to a computer. Gotta love technology!

This means that I’ll never lose another piece of paper again and if my laptop decides to crash, my receipts are still safe in the cloud.  Granted, I have conditioned myself to snap that picture before the receipt ends up in the bottomless abyss I call a purse or scrunched up in one of my many pockets.


Getting a handle on your receipts and keeping them organized electronically is only part of the battle.  A major player in the tax preparation game is Bookkeeping. I am not big on using outside sources to handle my bookkeeping because I’m a bit of a control freak – I like to see where, when and how much income I’m generating and how much of that income is leaving my hands.  This is where Bookkeeping software becomes your friend.

There are lots of options out there, one of the most popular is Quicken.  However, it’s way too complex for my taste so let me introduce you to my BFF, Outright, a FREE bookkeeping software.  Outright is not only free, it’s super easy to use. What makes Outright awesome is it’s ability to connect and pull your financial from your Etsy, PayPal, and other accounts you configure.

Outright Product Overview from Outright, Inc on Vimeo.

Once you have granted Outright access to your accounts, it will sync and update itself with the financial data it retrieves from your accounts and it will try to categorize your income and expenses.  You can then go in and re-categorize items on the fly.  You can also add transactions which may not be included in your electronic records, such as cash transactions.

After all your data is updated you can create snapshots of your activity for a certain month, quarter or year; making it an awesome tool for tax time. If you pay for a Shoeboxed.com account, you can integrate it with your Outright account.

I’ve connected Outright to my Etsy shops, Paypal and the bank account I have setup for business use only.  Every time I log on to Outright my data is updated and I can keep track of all my expenses and income. At tax time I can create a report that can be used to complete my income tax return.

 Sorting Through Records

Once you have your receipts organized electronically and have configured Outright or your preferred bookkeeping software, it’s time to do some housecleaning.  The information your bookkeeping software provides is only as good as the information it gets.  What does this mean?  It means that some effort is still required on your part.  I know, I know…bummer, right?

I suggest checking your bookkeeping records on a monthly basis just to make sure that it is connecting to your accounts and the information is being classified correctly.  For instance,  I’ve connected my Outright to a bank account I use for business, but there are times when I accidentally sneak in a personal purchase.  Outright will not know which expenses and income are personal in nature, so you have to tell it by classifying any non-business expenses as “personal expense” and any non-business income as “personal income”.  Any income and expenses classified as personal will not be counted in your business reports ensuring you have a more accurate picture of your business activities.

Keeping good, accurate records is extremely important.  If you were ever audited by the IRS, they would now ask you for electronic backup of your receipts and your bookkeeping software. So it’s time to toss the shoebox and move into the new century. You don’t need an MBA to get the job done, you just need the resources.

(p.s. You can use all these tips for organizing your personal receipts and bills as well)


For more helpful resources and information check out the following: 

The IRS has a video portal that offers useful information covering various small business topics, you can access the videos by visiting http://www.irsvideos.gov/SmallBusinessTaxpayer.

You can also access the IRS Virtual Small Business Tax Workshop by visiting http://www.irsvideos.gov/virtualworkshop/

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About Myra @ HerbanLuxe

Myra is an Etsian with an MBA. The art of business and technology are her two obsessions. She has been writing EcoEtsy Business Tips since 2010. Myra grew up in Puerto Rico with grandparents who were a head of their time and didn't know it - living what we would call today, "a simple green life." Her love of learning and teaching are the key drivers in almost everything she does.


  1. I just signed up for Outright and Dropbox. I’m a bit slow and new to this new technology stuff, so my questions might sound dumb. I think I googled myself to death reading too much info on these topics. What app on your phone did you download to save your receipts to dropbox? Can you do this with dropbox app? I guess I am confused because I read about so many different apps such as Receipt Bank and how to connect Freshbooks and Dropbox via receipt bank. Please help. I have an android. Thanks.

    • Elise,

      First, thanks for reading this post. Now to answer your question. To save receipts from my phone to Dropbox, I just use the Dropbox app. Keep it simple. I take a picture of my receipts with my phone and then I launch Dropbox on my phone, navigate to the folder I want to upload the receipts to and then tap on upload from the Dropbox menu, there is a plus sign on the top tap that to access all your photos. Tap on the ones you want to upload and you’re done.

      For iPhone there is an app called Genius Scan + that allows you to take of picture of your receipts, remove unnecessary background and upload to Dropbox right from the app.

      For Android there is an app called CamScanner which does the same thing as Genius Scan, but it also turns your phone into a fax machine. (pretty cool).

      Hope this helps.


  2. This is so helpful – thank you for sharing!

  3. Great post Myra! I’ve been using Quickbooks paired with an accordion file for receipts by month. I really like the idea of going electronic with the receipts – I’ll have to try that. Outright seems awesome and if Quickbooks wasn’t already set up I would be flying to that software! Currently, I don’t have my software connected to Etsy and PayPal….I wonder if I can do that….clearly a to do to put on the list. Looking forward to the tracking inventory post!

  4. Thanks for all the wonderful organizing tips!! This is exactly what I needed rght now. . . love the idea of taking photos of receipts and filing them immediately!! This will be a super time saver, don’t know why I didn’t think of this before?!!

  5. Keeping your reciepts is vital to ensure you can prove that an specific costs were incurred by your business. The IRS need you to prove you are not making personal purchases through your business and then claiming these expenses as tax deductable business purchases.

    Generally it is 6 to 7 years you need to keep records.

  6. Thank you so much for this article! I just got my Outright account set up and its truly awesome :) I’ve been reading all morning on Cost of Goods Sold and inventory. How do you guys deal with that?

    • Jay, Outright rocks. Good questions on the Cost of Goods Sold and inventory – you’ve just given me my next post topic. To give you a short answer, on cost of goods sold which is beginning inventory + added inventory – inventory left at end of month (or year) can be difficult to calculate manually so I let the software do the math for me. I just make sure that I keep an inventory count for each item I sell. Since I don’t actually make my products until ordered, I keep track of my jars and tubes and amount of product I mix for the month. I know it’s a bit vague but I’ll try to get more detailed in my next post.

  7. Nice!
    I found a record retention guide here,
    although I use the by hand method, these ideas are wonderfully organized.

  8. This is the last year I had planned to keep any physical receipts but I had absolutely no idea where to begin. Now I have a very clear picture so thanks a million!

    Question – any idea how long a business has to keep IRS records on file? Personal is 7 years, right? I wonder if company records are the same? Will have to look into that.

    • Jenn; I file my business tax with my personal taxes so I keep my business records as long as I keep my personal records. If you file your business separate from your business I’m not really sure.

  9. Very informative article! I still keep all my records by hand because my brain processes the info better this way, but I’m digging the idea of Outright. Thanks for sharing!!! Heather