5 Things You Can Do Now to Make Tax Season Easier
Even though the 2019 tax season is still months away, smart business owners can, and probably should, begin their tax preparation checklists.
We’re not saying you should start agonizing over your tax forms (you can totally leave that for the start of tax season), but preparing for taxes now will make your life a lot easier next January.
Tax Preparation Checklist: 5 Tips for Filing Taxes Stress-Free
- Be Organized
Easier said than done, but the road to stress-free tax filing leads inevitably through strict organization. Keeping all your invoices, receipts, and expenses organized sounds like a pain, but when tax season arrives, you can save yourself a lot of trouble.
Don’t worry about keeping the actual pieces of paper. The slip will crumble and the ink fades within a few months anyway.
Create an electronic filing system where you scan or take a picture of each one of your invoices and upload it to your computer or to the cloud. There are numerous platforms you can use for this purpose; Hubdoc and ReceiptBank are two great examples. This way you can save a considerable amount of space and create a searchable database of all your receipts.
There’s a legitimate cheat-sheet you can use that comes in the form of your annual business credit card report. This document neatly summarizes each of your purchases, helping you to check if you’ve missed listing any business expenses on your tax form.
The one drawback is that — obviously — this document can only help you with expenses you’ve paid for with your credit card. And — even more obviously — it only works with business (not personal) expenses. (We’re not going to say you should keep separate business and personal accounts, because you already know that.)
Consider investing in an accounting software. QuickBooks, Xero, and many other accounting platforms can make your life a lot easier by keeping your records up-to-date and organizing all your invoices, payments, and expenses automatically.
2. Create Vendor Categories
In your electronic database, file each receipt under its related expense category. Create folders for “fuel,” “office supplies,” etc, and put all your receipts into their respective categories. It will be much easier to access them when the time comes to start filing your taxes.
Many business owners believe they must name the specific vendor with each business expense when filing their taxes. Although that may be the case if you get an audit, generally, the IRS doesn’t want to know that amount of detail on every tax receipt.
Submit your the end sums of your vendor categories, not each individual invoice on your tax return.This useful tip for filing your taxes will save you time and trouble. However, make sure to keep the invoices in case you get an IRS audit.
3. Keep Your Deductions a Priority
While it’s important to keep a close eye on your business’ spending, it’s also true that investing some cash to buy necessary equipment can save you lots of money in the long term.
How? In the form of tax deductions.
Check your budget and see what you can afford. Don’t buy anything just to increase your deductions, but if there are purchases you have to make and you have the cash for it, why not make them now?
There are various purchase categories eligible for tax deductions. For example, if you’ve been eyeing a new office chair, now is the time to get it. Thanks to Section 179, the full purchase price of new IT equipment or office furniture is deductible and not just the value of depreciation.
Most types of office equipment qualify for this rule; check here whether your purchase is eligible.
Did you know your employee bonuses are deductible? Are you happy with your employees? Give them a bonus before the end of the year. It’s a clear win-win situation: your employees will appreciate the gesture and will be working even harder for you, and you can deduct it from your taxes.
Charitable donations are similar. You can donate both cash or equipment to qualify for tax deductions. Get into the generous spirit and you’ll experience the joys of both giving (a donation) and receiving (a tax deduction). Eat that, Santa.
And finally, don’t forget to throw a holiday party for your employees. If you keep the costs within limits (i.e. appropriate according to your annual revenue), and you don’t invite anyone besides your employees and their spouses, your costs can be deducted from your taxes.
Who knew the IRS liked to party?
4. Revise Your Records
Another good tip on how to prepare for taxes is updating your records.
A lot can change in a year. Employees move, get married (and change their names), contractors come and go. Last year’s records and databases may not be accurate anymore.
Don’t wait until the last minute to update your records. Waiting for the last sluggish contractor to fill in their details can cause you lots of unnecessary stress when tax season starts.
While preparing for taxes, take a few minutes to ask each of your employees and contractors to review their details and amend where necessary. That way, you’ll have an accurate database ready before you type “when can I start filing my taxes” into Google next January.
5. Keep Track of Regulatory Changes
The last item on your tax preparation checklist is keeping an eye on changing regulations. With the new Tax Cuts and Jobs Act coming into effect, you’ll have to do a couple of things differently from last year.
Make sure to ask your accountant about the details. If you don’t have a permanent accountant, we suggest you still seek counsel about the regulatory changes from an accounting professional. Misfiled taxes can lead to a long procedure of corrections, not to mention potential penalties.
When Can I Start Filing My Taxes?
The IRS hasn’t released the dates of the 2019 tax season yet, but it’s safe to assume that it will go according to the schedule of previous years. Tax season will start around mid-January 2019, and finish in mid-April. Bear in mind that personal and business tax seasons usually have a different schedule.
Filing tax returns is nobody’s favorite activity. However, it’s a good idea to get it out of the way as soon as possible. Not only will you get your tax returns faster, but you also eliminate the possibility of identity theft. How?
If you’ve already filed your taxes, fraudsters can’t file them for you and collect your refunds while you’re still trying to scrape together all the information you need to file your taxes.
The first few months of the year are a time business owners tend to dread. But if you know how to prepare for tax season and keep your books organized and updated over the year, you can expect a stress-free, easy first few months of the year (at least tax-wise).