Since I wound up owing income tax this year, I've learned to keep every single receipt. I do mean every one of them. From gas purchases for my car to pens and pencils, they all stay in a file.
I have a 12 pocket file folder I use and the receipts are placed in the pockets for each month. Once a month, I sit down and sort them into categories. This way, I'll know exactly what the purchases are for and will have them well organized when I have my taxes filed next year.
I also download and print my bank statements and my PayPal statements. The great thing about PayPal is that you can actually download the whole month or you can sort the downloads by type of transaction, so you get a better idea of what you've received in PayPal and what you've spent.
Keeping up with every dime spent may seem tedious and unnecessary, but to me it's worth it if I have more that I can deduct as expenses. For instance, I was estimating the miles I drive instead of keeping track of the money I spent on gas, oil changes, etc. I have no doubt that I will come out a little better by having the exact amount spent in front of me.
