What was the reason you started your own business? Was it to process invoices and file receipts? I’m going to go out on a limb and say (unless you’re in the accounting business) I doubt it.
The fact is that most of us got into this entrepreneur thing because we saw a niche we filled — one that we were passionate about, good at and hopefully, made us some cash.
There are few of us that like tax seasons. But if you’re self-employed, the time before tax day can be filled with alternating bouts of procrastination, frustration, desperate searching and just plain denial.
After watching my father’s business struggle to complete its taxes every year and the subsequent stress it put on him and our family, I knew this was one area of my business I would focus on.
While the 2012 tax year is over, 2013 has only just begun, and I’ve got a few tips to set you up for success for the years to come.
Make documentation easy.
All businesses have different types of expenses, but there’s one common factor: We’ve got to document them. The key is to make it as simple and painless as possible, or we just won’t get it done.
For instance, if you use your car for work and you deduct your miles driven, pick up a mileage tracker from your local office supply store along with a few pens. Keep them in the console next to the driver’s seat.
Or if you’re comfortable with your smart phone, download a mileage tracker app. Put a note on your dashboard as a reminder to mark down the miles before you start every day.
Spend a little time creating documentation systems for your business and refine them as needed. Ask your employees for their input. If they’re the ones who would do the work, it makes sense to have them help with the system’s design.
The less friction there is between your documentation and your brain, the better. Sooner or later, that tedious tracking will become second nature, and when tax time rolls around, it will be as simple as plugging in some numbers.
Set up a Tax Box.
Even the most organized of us can admit to losing a few things. When we’re busy, many of us will have piles of paper and notes all over our office, on our computers and on our phones. When we clean it up, receipts and other things can get lost in the shuffle.
The simplest solution I’ve found to this problem is to create a space where you can toss all of your receipts, records of payment and documentation. I have a shiny silver envelope hanging under my desk, and about once a week I unceremoniously shove tons of tax stuff in it.
At the end of each quarter, on the day I spend signing my checks to Uncle Sam, I smooth out all those documents to scan and copy them. Afterwards I put them neatly in a file folder. Of course, your business might require doing this more often. I’m a one-woman operation.
Having one place where you are allowed to be messy with your receipts and documentation puts less pressure on you to “do it right,” which can be one of the reasons we don’t do things at all.
Use one form of payment as often as possible.
When I first started my business, I paid for things with personal checks, cash, my company credit card and my personal credit card.
When I went to figure out those expenses I didn’t get receipts for, like rent, or on the very likely chance that I’d lost the receipt, I had a hard time remembering where to look. Especially months later when I was doing taxes.
Using a company credit card or company banking account to pay for all of your purchases keeps a tidy record you can fall back on. And when that’s not possible, be certain to save those receipts. Be sure to write directly on it what expense it was for and then shove it in your Tax Box.
Use previous years’ returns as a guide.
While we can’t make changes to what we did in 2012 (or 2011 and all the years before for that matter), we can use those records as a roadmap.
Take some time to look through your records from the previous years. What are your strong points? These are the things you’d happily show the IRS — the bulletproof documentation — or the deduction that took seconds to back up. What are you doing here that could apply to your weaker points?
For instance, my office rent is all documented through my bank’s online bill pay system. All I need to do is click a few buttons and I can print out my entire history of payments. However, I pay most of my other bills with a company credit card that doesn’t offer a robust sorting system. I changed how I paid many of those bills so this year, so I won’t be searching through months of statements.
Even using your records to see what you needed to gather in order to file your taxes for the year can help take the pressure off. I’ve been slowly putting together my 2012 return since December by taking a few minutes each week to get paperwork I know I needed in 2011.
I’m certainly not a tax accountant, but I know the stress and frustration that comes around every year. By using these tips, you can spread out your work load throughout the year. Perhaps when April comes, you’ll file early and take a well-deserved vacation.
Do you have any tax shortcuts or tips that help you keep your sanity? Please share them in the comments.
Popular search terms for this article:
Powered by Article Dashboard tax help, Powered by Article Dashboard how to set up email account, Powered by Article Dashboard work at home internet, Powered by Article Dashboard state tax help, Powered by Article Dashboard designing cars yourself on the net