As a small business owner, or let’s face it, just as an individual, tax time can be stressful. But there are ways to reduce that stress and be ready for tax time before you know it. As a former tax preparer and practicing bookkeeper, here are my top suggestions;
#1 – Designate a folder or box for all the mail that arrives regarding taxes. You don’t even have to open the envelopes just collect it all in your “spot”. Super simple!
#2 – If you are doing your banking online, you are probably getting email notifications that your tax statements are available. I like to flag these emails as they come in and then sit down when I have some time later in the week to go back through the emails, log in and download each statement from the bank. Save all of these to a file folder you’ll call 2017 Tax Documents.
#3 – If you are running a small business (and a side hustle does count), please, please, please tell me you have been running that business out of a bank account separate from your personal spending. If not, go open that separate account right now! If so, you can easily determine your income and expenses for the year by reviewing your bank statements. Better yet, if you are running your business on an accounting platform such as Quickbooks Online and you have updated and reconciled your accounts, those reports are right at your fingertips. I do suggest that you start this step in January just to give yourself plenty of time.
#4 – You should have received all of your tax mailings by mid-February. If your tax preparer is going to want everything in electronic form (or you just want to stay super organized) scan all of your paper statements and add them to your 2017 Tax Documents folder.
#5 – Grab a copy of last year’s tax return and review the entries you had last year. Or if you have a digital file from last year, compare the statements with the information you have for this year. This can jog your memory so you know you haven’t missed anything. The last thing you want is to have to file a corrected tax return because you left something out, so just take the time and make sure you’ve got all of your information.
You did it! You are ready for tax time! And if #3 is causing you to pull out your hair, maybe it’s time to talk to a professional to help you set up a system or to decide if you are ready for ongoing proactive bookkeeping. Come January of 2018, you’ll be glad you did!