Five ways to make tax season more manageable for your small business
Tax season isn’t the most eagerly anticipated time of year for most of us, and can often be an especially challenging period for overburdened small business owners.
Whether this is your first time filing taxes as a small business owner, or your latest attempt to navigate the sometimes stormy waters of tax preparation, here are five things you can do now and in the years ahead to help reduce the strain and stress of tax season. A hint: it’s all about organization, and works best when you can give the task 12 months of occasional attention, rather than rushing to get everything done by the deadline.
Split tax preparation chores into bite-sized chunks
Getting ready to file your taxes can often feel a bit overwhelming – it seems like there’s more work than anyone could ever get done. Rather than trying to slay the tax preparation monster with one big swing, try to take it down slowly by splitting the job into manageable portions and tackling them over the course of a few days or a couple of weeks. The earlier you start, the more you’ll be able to break up the process.
Reward yourself along the way, if you like, by scheduling time for a personal hobby, exercise, or relaxation. This will reduce stress and anxiety while boosting energy and motivation. Also, don’t forget to eat and sleep right; skipping meals and staying up all night won’t do you any good.
Separate your business and personal finances, and other records
Whether it’s with separate bank accounts or just a different credit card for business purchases, there are multiple things small business owners can do to keep business spending distinct from personal finances. Months later, you’re not always going to remember what you spent money on, or whether it was for work or pleasure. If you claim mileage for trips in the car as part of your business, make sure to maintain a log of kilometers traveled on all work-related journeys, as well as the reasons for those trips – it’s an essential part of making such claims on your return.
Organize and digitize important records and receipts
Don’t be that person who carries around a shoebox stuffed with documents and receipts. Make a point of filing paperwork away as you accumulate it throughout the year, and use free scanning software to store electronic versions of important items. Besides saving those electronic records on your computer, consider keeping a backup version in the cloud – just remember to use the appropriate security settings to protect your personal information.
Along with maintaining your own electronic records, don’t forget to use the ones made available to you by your financial institution. Nearly all the big banks have websites and mobile apps loaded with helpful tools and trackers, and the ability to search your own financial history for the past year or more in case you need to track down the details of a specific transaction.
Get the help you need
Chances are you’re an expert in your business field, not the tax system. A tax return can be a tough thing to untangle for some people, so there’s no shame in hiring an accountant or tax professional to provide advice or complete your return for you. The last thing you want to do is make costly mistakes because of complications that could have been easily cleared up or avoided by consulting a specialist. Additionally, a professional can identify deductions and credits you may not otherwise have been aware of, saving you money and helping offset the cost of their fee.
If you don’t want to hire a professional, one alternative is to purchase software to help complete and file your tax return. Many people, however, appreciate the option of asking questions and getting the specific advice they need, rather than relying on software to solve their problems.
Put money for taxes aside throughout the year
No one wants to run around scrambling for a huge chunk of change to pay their tax bill, or sweat the stress of interest piling up because of a late payment. Get your finances in order and make sure there’s always enough to pay your bill by putting a percentage of all your earnings aside in a special account throughout the year. For those whose balance owing is more than $3,000, your taxes will have to be paid in quarterly installments. This can be a helpful way of forcing you to budget for your tax bill and avoid the headache of tracking down the funds to pay off a big balance come the end of April.