Do I need to keep EVERY SINGLE receipt ?

Q: I went thru 2006 receipts ('cause I found 'em looking for something else in the garage today)...do I need to keep EVERY SINGLE receipt that would have been a business receipt (like computer ink purchases, postage receipts...) and what do I do with my duplicate checks- are they good to keep or not worth it?

A: In a perfect world, there would be no IRS audits, so you wouldn't need to keep receipts. In a less perfect, but prepared, world, you keep all deductible receipts to prove expenses if you are audited. However, the IRS chooses to audit based on whether your deductions in any area are over their calculation of "average" expense range for your profession. So if you have low expenses in an area, it's unlikely you would be flagged for auditing. Meals and entertainment, mileage, and the home office deduction are particular areas which get red flagged. So the real question is "Do you feel lucky?" [with a nod to Clint]. If you are never audited, you'll never need the receipts. And I have had at least one client where the IRS auditor took his Quicken register as sufficient documentation (although there's no promise every auditor would).

Finally, you only need to save the receipts for three years from the date you filed (i.e. if you filed your 2004 taxes in April 2005, then you would keep those receipts until April 2008).

If the receipts are in a box in the garage, it's probably not worth sorting them now. If they are in a pile in your office, do a quick sort by year, then file them with your taxes for that year. From today, the easiest way is to sort your business receipts into a separate file as you enter them into Quicken. Then there is no sorting at all at year's end. And don't forget to label a new manila folder (i.e. 'Deductions 2008') so you don't start mixing 2008 receipts with 2007 receipts.

Re: duplicate checks

Your bank has copies for three years, so not really necessary once entered into Quicken.