Okay, so here’s the post in which I explain our decision to go receipt-free in 2011 and why I still contend it was a really great decision.
[Disclaimer: I am neither a lawyer nor an accountant. I am simply an officer in a corporation we opened a decade ago.]
After years of hanging onto every receipt — like we all do — in December of 2010, we decided we were done with that ritual. DONE.
Why? Well, why would we need these receipts we were hanging onto?
What if you need to return something?
Anything we buy that we might want to return — if the store’s policy requires receipt for return — we hold onto the receipt until we’re sure we aren’t returning the thing (usually within days, maybe weeks for bigger purchases, but even with a big-ass printer purchase — a printer we did ship back due to defect, and for which we were sent a replacement — we were never asked for a receipt, because the printer was charged and there’s a record for that, without a receipt). But that means most receipts are gone either at the moment they are handed to us, at the end of that day, at the end of that week, or at the end of that month. Period.
What if you need to prove how much you spent on something?
Welp, since 99% of our spending is done on plastic, that proof is on the monthly statement, now isn’t it? Yup. And if we’re spending more than a few bucks in cash, we either note it or — ’til we can log it somewhere more formal — we keep the receipt for the moments it’ll take to get that done. Which means cash receipts are gone even sooner than the above-mentioned “what if we might return it” receipts. But we usually are only spending a few bucks in cash, so there’s rarely a reason to have a receipt.
What if you need to prove something was a business meeting?
Honey, it’s always a business meeting. And I am the president of the corporation that decides what is “write-off-able” and that is, at Cricket Feet, everything. It is our right to say so, and we do. So, if it’s a meal out — except for very rare dates on which we do not do business (like, maybe twice in 2011) — it’s related to our business. On those dates? We use a personal card, not the corporate one. Groceries? That’s homelife and not a write-off. Also a different card. Gym membership? Our company covers that for its officers. Internet? Phone? Rental of space for meetings? All a write-off.
So, why would I need to prove the dinner we had on a particular date, paid with the corporate card, was a business meeting? Of course it was. Based on the date, I can see that that was dinner before class with members of Team Cricket Feet and we talked about growing Brand Bonnie Gillespie and Cricket Feet picked up the tab. Done. Why do I need to keep a list of who had the fish and who had the tofu? That meal was business, so it’s irrelevant who had what. And that’s all a receipt shows.
What if you get audited?
Ah, this is the big question most folks have and it’s probably my favorite one to answer, because I’m just so damn excited about my attitude on this.
1. I don’t live in a world where I get audited. I own a corporation. I’m not an employee of anyone on the planet. Every penny our company makes goes back into the company and I do not draw a salary. People who get a gazillion 1099s or who claim loads of deductions tend to be juicy targets for audits. I earn zero, so I’m no fun to audit. I’m a small business owner and our lovely government tends to leave us alone as we build up our companies (usually operating at a loss, the first few years, then breaking even, then slowly building up some profits), because we’ll be a source for jobs if we can get our businesses off the ground. The government is very nice, that way.
2. Let’s say I *do* get audited. Okay. They’re going to look at, say, 2007, the last year in which I got a 1099, because I still coded webpages and online shopping carts as the Amazon liaison for a small college textbook publishing company. Awesome! How much money did Cricket Feet list as profit for 2007? Zero. We lost money. How much money did Bonnie Gillespie earn in 2007? A couple thou. Anything I wrote off was through the company, not through my individual taxes, and even though I could have, I never drew unemployment (instead, I celebrated the end of an era and truly took that big-ass leap of “no more survival job” for the first time in my artist life — scary as hell, BTW, but totally life-changing). So, the IRS wants me to prove that the dinner I ate for which Cricket Feet paid on a particular date was business-related, not personal. Okay, cool. How is a RECEIPT gonna prove that?
Think about it.
HOW IS A RECEIPT GONNA PROVE THAT?
I already have the bank statement that shows the credit card (or debit card, usually) charge from our corporate bank account. I also have my ridiculously meticulous iCal (and Entourage before that) records from when the dinner date was on my books. I have it color-coded by the project about which we were meeting and I have the where and the whom in the details of the blocked-out time on my calendar. If they want to see a version of my calendar to which I haven’t had recent access, there are dozens of backups living here (DVDs, external drives, etc.), as well as my notebook, which goes with me everywhere I take a meeting, and it also lists who is at every meeting, what we discussed, and where we met.
What does a receipt do that my existing records don’t do better?
It tells me that someone ordered fish and someone ordered tofu and that we tipped 22%. *yawn*
But, but, but… BONNIE, what if you piss off the IRS with your cocky, cocky attitude about all this?
Awesome! Let’s worst-case-scenario this thing.
I’m audited. They decide I didn’t properly classify that particular dinner from five years ago and because I have no receipt for it (Note: I do. I only stopped keeping receipts in 2011, but go with me for the full walk-through of this scenario, because an audit *would* be on something YEARS later, typically.) and they don’t like my iCal or my attitude, I am not allowed to say Cricket Feet is covering that dinner. (First of all, they can’t do that, because it is up to Cricket Feet what is write-off-able in its corporation and what is not, and everything we do is through the corporation, but again, let’s just say we’re at an impasse with the IRS and we’re gonna have to throw some money at this issue.) Great! We didn’t have the headache of going through all our receipts to try and attach each one to each event and identify who was there and what the meeting was about (because that all lives in the iCal, the notebook, and the bank statement anyway), we ask the IRS what we owe for our brazenly hussy-like ways and they do the math and come up with back taxes of $100 and a penalty of $35 for not having paid it back then.
Lemme write ya’ a check.
For anyone who doubts that a headache of going through years-old receipts and trying to line up a whole bunch of proof (that only proves that someone had fish and someone else had tofu, BTW) isn’t worth writing a check, please think about the number of years over which that penalty is amortized and how much stress is in your life as you desperately sit on the floor, surrounded by slips of faded, hard-to-read, slick register tape, hoping to prove something the IRS can end up saying proves nothing, at their whim is WORTH.
Lemme write ya’ a check.
So, let’s look at what’s more realistic, which is that it’ll be 2016 that our 2011 (the year of no receipts) gets an audit, and by now Cricket Feet has continued its trajectory and there’s a little more than just this month’s rent in the bank at any given time. Cool! The IRS comes around, we introduce them to our guy Ray (the CPA) and he tells us how much to write a check for, for our brazenly hussy-like cocky, cocky ways.
I’m sure this will spark debate, and I’d love to hear it. Why do YOU keep receipts? What do your receipts do that your other recordkeeping cannot do?
(Yes, I get it, if you’re not incorporated, your write-offs are scrutinized because the IRS *does* get to tell YOU what is write-off-able. To that I ask, “Why the heck aren’t you incorporated?” Dang, son. Start keeping more of your money RIGHT NOW. It’s sooooooo worth it. Don’t believe me? Just grab this amazing book. It changed our lives for the better, a decade ago.)
Okay, folks… so, *am* I a brazen hussy, or is this brilliant (or both)? 😉 Let’s hear from you in the comments below!