EEW Rule #4
The best way to document your expenses
Everything Every Week Rule #4:
Forward your receipts to yourself.
And forward them to yourself right away.
Doing that covers 80% of your tax compliance with 20% of the effort.
How do I follow Rule #4 on the regular?
It’s super easy!
-Digitally Received Receipts —> Forward to yourself via email.
-Paper Receipts —> Snap a photo and email them to yourself.
Don’t worry about:
Keeping paper copies
Organizing receipts into specific files
Writing a bunch notes
Filling out forms that describe what’s in each receipt
Downloading / paying for complex “smart” software to read receipts for you — you don’t need it
Again… Doing it exactly like this covers nearly 80% of your tax compliance, and requires 20% of the effort you’re used to.
As a Sole Prop, why do I need to follow Rule #4?
Rule #4 is about Tax Compliance.
Tax Compliance just means “following the rules” — specifically the IRS’s.
Now, the IRS has two kinds of compliance rules: those that govern your behavior, and those that prove your behavior.
We’ll call these Behavior Rules and Proof of Behavior Rules.
Some examples…
Behavior Rule: Don’t try to call a personal expense a business expense.
Proof of Behavior Rule: Keep receipts in order to prove you are not claiming personal expenses as business expenses.
The most important rules here are the Behavior Rules.
Why? Because a habit of breaking them will sink your business — even if the IRS never catches you.
The Proof of Behavior Rules are important, too…
But not doing sketchy things is more important.
Since you are already following EEW Rule #3 from last week’s newsletter, forwarding your receipts to your email will cover a large portion of your total tax compliance, while requiring a fraction of your previous efforts.
Okay, I’m about 80% in compliance… What about the other 20%?
It’s true — this forwarding scheme is not 100% in compliance with the IRS.
But keep in mind, Good Compliance is not the enemy of Perfect Compliance.
Forward your email receipt for Good Compliance.
Then you can then climb towards Perfect Compliance with two additional steps:
Reply to your forwarded email receipt — this will create a time-stamped thread.
In your reply, include a sentence like: “Paid to Jenny Smith for Marketing Campaign $1404.00.” That sentence includes a vendor (Jenny Smith, who you paid), a business purpose (Marketing), and the receipt’s value with a dollar sign and cents included.
You now have a searchable receipt database in your email.
So start having Good Compliance today.
Snap a photo of that paper receipt, send it to yourself… and then throw it away!
Forward that digital email receipt to yourself right when it hits your inbox.
Then, when you have time, take those last two steps towards Perfect Compliance — reply to your forwarded email receipt with a simple sentence… one that includes Vendor, Business Purpose, and Value Amount.
My clients forward or photo-and-send receipts to expenses@gilmoreconsultants.com (my consultancy).
Try it, and I’ll send you back a nicely documented, contemporaneous record… so you can see how I help my clients step up into Perfect Compliance.
