Now that you’ve recovered from April 15, it’s time to level with yourself. Was this year’s tax preparation a total nightmare? If so, let’s get you organized so you don’t get another migraine next year. Below, TaxJar’s Chief of Content, Jennifer Dunn, goes through how to avoid a Tax Day hangover — aka how to get your ducks in a row well before the deadline approaches.
Almost all of us have been there. As in, we’ve woken up on April 16 with a Tax Day hangover. It’s the combination of all the energy you put forth to complete your taxes in record time the day before, and the sinking feeling you left something out and didn’t do all the paperwork correctly.
Never want to have this feeling again? Then don’t wait until January 1, 2016, to get your life and taxes in order. Here is a short list of things you should start now:
Track income and expenses.
One of the most time-consuming activities you encounter when doing your taxes is catching up with your income and all the expenses from over the year. Scouring through desk drawers and boxes looking for receipts and signing in to different platforms (like Square or your banking app) to find out how much you made takes up a ton of time. And if you do this at the last minute, you’re more likely to miss something important.
To avoid this mess, start tracking now. Take a few minutes each day, week, or month to account for all the money that went in and out over that period. This will save you hours of headache at the end of the year and also give you the added bonus of having a finger on the pulse of your business’s financial health every week. Use an online service (there are several great bookkeeping apps to choose from) if you don’t want to track income and expenses manually.
Master your receipts.
Do you typically just toss your receipts in a box in the closet? Stick them in a drawer in your bedroom? Bad ideas. It’s time to become the master of your business receipts.
One way is to pass the buck and let someone else do it. Use a service like Shoeboxed, or purchase a portable scanner like NeatReceipts to scan and organize your receipts. Whether it’s a lunch meeting with a client or 500 feet of yarn, they’ll digitize your receipts so you can have them right at your fingertips. Come tax time when you’re wondering what the $500 purchase from Best Buy could possibly have been, you can quickly and easily look it up on your computer. (And not in your giant shoebox of receipts.)
Set up an inventory system.
Considering your taxes depend on keeping track of every piece of inventory, getting a system to manage it all — especially if your business is growing — is a good idea. What’s more, utilizing an inventory system can help you grow your business as you streamline your processes.
Separate your business and personal expenses.
You should have separate bank accounts for your personal expenses and your business expenses. It might seem like a pain at first, but it’s worth it. It immediately makes tracking your income and expenses simpler and lets you watch how much your company is growing. And tax time in the years to come won’t be nearly as tough.
Log your mileage.
That nagging feeling you left something out of your 2014 taxes? That was most likely a deduction like mileage on your car. To make tax time truly happy rather than stressful, you need to master your deductions. Automobile-related tax deductions are a good starting place.
Do you work from home and hardly ever travel for business? You still undoubtedly have mileage to count somewhere. You’re forgetting that trip across state to attend the freelancers’ conference or the countless times you drove to Hobby Lobby for supplies. It all adds up to a decent deduction if you give it a chance.
Take advantage of other deductions.
Mileage is just the beginning of the deductions world, though. If you feel like you’re being nickled and dimed every tax season, you probably are. Every single deduction you can use to lower your tax obligation makes your life easier. Start by looking around you right now.
For example, taking the home office deduction can save you a lot of dough when you owe Uncle Sam. If you use a specific area of your home for office duties, you can claim the area as a home office. This also means you can then deduct partial expenses like electricity, Internet, and other monthly payments. Obviously you can’t deduct your entire home’s power bill, but again, every little bit counts.
Get an accountant.
No matter how small your business is, consulting with an accountant is never a bad idea. Even one session or two can make a big difference in how smoothly tax time goes every year. Go look up ones in your area and at least ask them what one meeting would cost — it could save you a ton in the future. (Read up on tips and tricks for hiring a good accountant.)
What you want from an accountant is a plan for how to tackle taxes for your individual needs throughout the year. There are so many variables to account for that we can’t cover everything. An accountant can look at your unique situation and set you up on a real path to success for both next year and the rest of your business-owning career. Plus, if the initial meeting goes well, you can bring her in on a more permanent basis.
Hopefully, these tips will help make next year’s tax prep a snap — and April 16 a much more pleasant day. For more advice on how to run and grow your business, sign up for our monthly newsletter, Town Square News.
Sales tax is complex. That’s why we created TaxJar — to handle the burden of sales tax while you get back to running your business. TaxJar pulls in sales tax collected from all the channels where you sell, compiles your data into return-ready reports, and can even AutoFile your sales tax returns for you in 26 states (and counting). Sign up for a 30-day TaxJar free trial today and put a lid on sales tax. And check out Square App Marketplace for more information on how to link your Square account to TaxJar’s tools.