Things You'll Need:
- Small filing box
- File folders
- Highlighters
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Step 1
Purchase a small filing box. A large filing cabinet is unnecessary for a home office. All you really need is a small filing box, which allows for easy portability. Should you need to leave your home unexpectedly, it will be easy to grab your paperwork and go.
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Step 2
Create folders for each expense and financial account. To organize your paperwork, it’s best to create a folder for each expense and financial account. For example, you may have expense folders for your rent/mortgage and your electricity bill. You would also want to create a different folder for each financial account. For example, you may have a folder for your business account and one for your PayPal account.
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Step 3
Write the date and check number on each billing statement. As soon as you pay a bill, write the check number and date on the statement. This will make it easier to compare your billing statements and bank statements should you ever be audited.
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Step 4
Keep track of total expenses using spreadsheets. Instead of sitting down at the end of the year to total your deductions, you can create spreadsheets. Using a spreadsheet for your expenses allows you to keep track of dates and check numbers, as well as totals. At the end of the year, you can print out your spreadsheets and attach them to your deduction paperwork.
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Step 5
Highlight bills paid on each bank/credit card statement. When your bank statements arrive, highlight each transaction that is associated with your home office. This is yet another tip that will make it easier to prove your deductions during an audit.
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Step 6
File bills and bank/credit card statements immediately. It’s important to file paperwork as soon as you’re done with it. If you let paperwork pile up, you make an easy task seem more difficult.
