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IT’S TAX SEASON. In case you haven’t noticed!! It can be super stressful as a small business owner to know you are doing everything right, not paying more than you have to, and having the documentation needed to file and in case of any possible audits.
Today I’m sharing my Small Business Tax Hacks that have helped me be more than prepared come tax season!
Would you believe me if I told you that 3 years ago I decided to file taxes early (like February) and over a month later I was finally able to. I had spent that whole month looking thru credit card statements, calling companies, highlighting, recording and wearing out the buttons on my calculator. It was so much harder than it ever should have been if I had just been on top of things all throughout the year before. I learned all the tips over the years and today I’m gonna share it with you so that it won’t take YOU a month to collect everything you need!!
#1 – Consult an accountant. The best way to go into a business is understanding what is expected when it comes time to file taxes. Make sure you find one who knows and understands the type of business you are doing. For me, it was important to find someone who fully understood what blogging is, what all it entails and the legalities when it came to deductions. We all want to pay the government the least amount necessary, right?!
#2 – KEEP EVERYTHING! I’m a firm believer that there’s no such thing as too much paper trail. I keep receipts, emails, bills, statements, contracts….you name it and I have record of it. Once again I’m going back to being audited. IF it were to ever happen (and we pray it won’t) you want to be able to “prove” what you claim on your tax forms.
#3 – Going along with tip #2, don’t use cash. Always pay using a card, online paying service, or check that way there’s some sort of record for tax purposes.
#4 – Plan ahead. Always save a % of your income, in a high interest account, to cover tax costs next year. You don’t want to end up owing a few thousand dollars at the end of the year, and not have the $$$ to cover it. Whether you pay quarterly or yearly to the IRS, it’s important to always make sure you have that money set aside when it comes time to pay. Personally, I keep 25% of my income aside.
Once you have paid your taxes out of the $$$ saved, reward yourself and take the remaining money as your “tax return! I’m giving you permission to go on a little shopping spree! Tell your husband/wife I said it was ok!
#5 – DON’T LEAVE IT TO THE LAST MINUTE. Even if you have all of the paperwork and information it can be time consuming to get it all in order. The best thing to do is BE ORGANIZED all year long! What do I mean? Oh, I’m not gonna leave you hanging there. Not only was I gonna share my tips with you, but also sharing how I keep it all organized!
I got myself 4 important products that are lifesavers with keeping me organized throughout the year.
- Small Coupon Wallet
- Envelope size accordion folder
- DYMO LabelWriter® 450 Value Pack (Your solution for taxes, filing or addressing. Currently on sale at Staples sold with 4 LabelWriter® Label Rolls and has Thermal printing technology so you don’t have to worry about ink)
I have used a coupon wallet for YEARS (I used to be a die hard couponer!) and my newest use for it is a complete lifesaver. I almost feel like saying it’s a lifesaver is an understatement. It’s saved my sanity during tax season….100%.
The wallet has an accordion folder on one side and a small notepad on the other. I make good use of both of them!! I plan 3 months at a time and print labels on the slot dividers for the accordion folder. This is where tip #1 will come in handy. Knowing the different categories you will need to save paperwork for will help determine your labels.
My main 2 categories that I have to save paperwork for is supplies and food. So those are the two sections I make room for each month. Using the DYMO LabelWriter® I created labels for my file folder dividers as well as my envelopes. All of the envelopes and file dividers have matching categories.
Side note, I love that with the DYMO LabelWriter® I can quickly (so no procrastinating!) get my labels printed and I don’t have to hassle with the full sheets of labels printed from my desktop. This prints one at a time so I can print one or 20 at once!!!!! I usually make 3 months of labels at a time. Also, you can print from Microsoft® Word, Excel®, Outlook®, QuickBooks® and other programs or easily print addresses from Outlook® Contacts or Mac® Address Book
Ok, now that you know how I set it up, lets get down to the nitty gritty details of how I stay organized all year long!!!
My coupon wallet goes everywhere with me. I put my work card in it, so that in order to buy something work related, I have to have the wallet with me!! As soon as I make a purchase, whether it be supplies, paying a bill, or food, I record the purchase on the notepad with the store and amount spent. Then the receipt goes straight into the coordinating slot in the accordion folder. All receipts get filed during the month.
Once a week (or so!!!) I transfer the information from the notepad, onto a spreadsheet where I enter the same information into appropriate category columns. Hiding behind the “food” section in that screenshot you would see that I have detailed write up of what was bought at each store (per the receipt!) and what I’m using it for on the blog (once again for audit reasons!!!)
At the end of every month, I total up all purchases and move the receipts from the wallet and into the corresponding envelopes. I then write the total for each category on the label I printed with my logo on it (cute right?! The DYMO Labelwriter lets me import my own images and it prints it, clear as can be, on any of the size labels!!) I also add in any statements/bills sent to me along with screen shots (printed out) for any/all online purchases.
Those envelopes then go into a large accordion folder that is specific for the year. Yup, you better believe I have a whole bunch of these sitting around the house now, full of receipts from years ago!
I repeat this same process for each and every month throughout the year. Then guess what? Once the year ends, all I have to do is total up each category from all 12 months, and not even take a second look at all the receipts/bills!
Now, on to the income portion of this whole thing!!
SPREADSHEETS SPREADSHEETS SPREADSHEETS
The biggest part of tracking my income is to document it as soon as it comes in. That’s the important part, WHEN IT COMES IN. I keep track of income made (service performed) each month, but I rarely get paid right after. So don’t count the income until you physically have it. The reason for this, is you may perform the service (or in my case, write the blog post) on December 12, 2015, but then you won’t get paid for net 30-90 days. So technically you didn’t make that money in 2015. You may have “earned” the money in December, but you didn’t get paid until the following year.
So what I do, is the day that the money goes into my account (or I receive a physical check) I then enter it into ONE spreadsheet. Yup, one sheet for the whole year. The reason for this is I can easily add all the amounts together to get my YTD total!!! I have 3 columns for this sheet. Date, Amount, and description. In the description I enter in the company I worked with, whether that be a PR agency, blogger network, or a direct contract with a company. I then also enter in what post or service was done to earn the money. Remember, the more documentation you have, the better!!!!
I firmly believe that if you follow these tips, you will have a smooth and hassle free Tax Season.
Remember, the best tip is to prepare all year long
So you don’t have to play catch up at the end.
What small business do you have? What tips have you found to help you?
At Staples, the DYMO LabelWriter® 450 Value Pack is now free when you purchase 4 LabelWriter label rolls!!!