Oh boy. It’s that time of year again. Time to pull the shoe box full of receipts out of the closet and gather up the many different places you’ve stored your business revenue and expense information to get ready for tax preparation. For most, this is a dreaded distraction from the flow of revenue producing tasks in exchange for a mind-numbing pile of admin. Since your time is money, we decided to put together a few tips on how to make your next tax year much smoother.
- Don’t overestimate the challenge. Tax time should require no more than a summary of your income and expenses. If you’re keeping them up to date each week, manually or otherwise, then tax time should be nothing more than transitioning the summary of your revenue and expenses to CPA or into your own return if you’re self-preparing. Check out these IRS guideliness for the form you’ll need to complete.
- Track your expenses in categories that match those on your tax return. It’s tempting to create 200 different expense categories but it’s only going to make your life difficult when you need to compress them back into the categories offered on Part 2 of Schedule C for your tax return. Use the same expense categories on the tax form all year and you’ll eliminate the headache of trying to consolidate your categories later. See the categories now on Part 2 of this form.
- Use fewer tools to run your business. Less truely is more when it comes to running a solo business. Try to consolidate your daily business operation, purchase transactions, and expense tracking into one place so that you’ll only need to manage a single source of data. For many, this means ditching the three ring binder with clients notes, the mobile payment swiper, and the clunky accounting software, in exchange for a single solution that captures everything in one place. Yes, we are seriously biased in this category but even if you’re going to go with pen and paper, at least keep everything in one place. If the IRS decides to flag you for an audit (ugh), would you rather pull out 10 years of shoe boxes, apps, and handwritten notes or fire up your business platform and answer all the questions quickly?
- Use automation. Sound complicated? Well, it’s not. Today, so many tools online offer automation that converts previous manually tasks into automated tasks. Do you have a client on a regular schedule, automate the collection and recordation of the revenue. The same is true for expenses. If you’re business tools don’t offer these features, it’s time to shop around. Automation converts admin time to billable hours which means more income for you. Some business platforms even send a year end tax summary without asking you to lift a finger. Wink wink. Interested now?
Let’s face it, tax time is taxing for all of us but it doesn’t need to consume billable hours. Commit to streamlining your business management tools, thinking ahead about the simple info required for your annual return, and keeping records up to date and watch the stress melt away.