Well, tax season is officially over. Take a deep breath. You made it.
If you own a business and tax season has left you feeling hungover, but without the party, we’re here to tell you that filing your taxes doesn’t have to suck so much.
Here are three things you can start doing now to make filing your taxes a whole lot easier for yourself next year.
1. Keep track of your expenses all year
Don’t wait until you’re desperately trying to squeak out every last deduction at tax time to pay attention to your business expenses. If you stay organized and timely with tracking your expenses throughout the year, you’ll be much more prepared once tax season rolls around.
Avoid tax-time headaches by keeping your business and personal expenses separate.
Never, ever commingle your business and personal expenses. This is a major cause of tax-time headaches for business owners, and it’s easily avoided by maintaining a separate business account.
Organize yourself by scanning your receipts and storing the files in a cloud-based system throughout the year. We like ExpensePath as an easy-to-use solution for keeping business expenses in order (and no, they aren’t paying us to say that).
2. Balance your books every month
Even if you like surprises, your tax bill shouldn’t be one of them.
If you have an accurate, reliable picture of your financial records at all times, you’ll have a better idea of what you’ll owe the IRS in taxes for the year.
Take the time each month to settle your finances – send out invoices, pay your bills, and balance your books – so you never fall behind. This will help you to know exactly how much money your business is taking in so you can accurately estimate what you’ll owe in taxes, which leads us to our next tip….
3. Pay your estimated taxes throughout the year
Paying late or insufficient taxes means costly penalties from the IRS. Don’t you already pay enough in taxes? Why would you want to pay more?
If you are self-employed, you generally have to make estimated tax payments if you expect to owe a tax of $1,000 or more when you file your return. When your books are well-organized, and you have confidence in your numbers, estimating your quarterly tax payments suddenly becomes quite easy. Funny how that works.
Aside from avoiding penalties, making estimated tax payments is also easier on your budget. It’s far easier to budget around smaller payments throughout the year, rather than one gigantic check at tax time.
When it comes to your taxes, you will be rewarded for planning ahead. Even better, the benefits of having accurate financial records don’t end with tax season. Always know your numbers – and what they mean to your business – and you’ll make smarter decisions for your business now, and in the future.