Oh, January. The magical month of resolutions, intentions, goal setting, business planning and….taxes! But wait- aren’t taxes due like a million years from now? If only.
Tax season is upon us and before you get all clammy and start searching for your escape pod, I want to impart this one very important thing- it IS possible to file your self-employed taxes without freaking the f*ck out.
So you’re rolling your eyes and shaking your head at me. And I get it! One year ago I would have given myself a big, hearty dish of “talk to the hand”. When you’re self-employed there is SO MUCH more to do and it always feels like you’re rushing in the end. There’s no way taxes can be stress-free!
Well, actually there is. And I’m sharing five secrets I’ve learned that have helped me (and my clients!) file our taxes with ease:
The number one secret to getting your taxes done without having a colossal meltdown is starting your tax prep early. The longer you wait, the more likely you are to rush through the paperwork, miss deductions, and freak out late at night whilst trying to crunch your numbers in a caffeine and sugar induced state of delirium.
Lots of self-employed people put off prepping for their taxes until the last minutes because they are scared of what they are going to owe. They hope by ignoring and avoiding their taxes their tax bill will go away.
The IRS is a lot of things, but they are not are quitters. That means the IRS is not going to stop requiring you to file and pay your taxes anytime soon. Tax time can be a very stressful time of year, but by putting off your taxes you don’t avoid the stress- you prolong it.
Instead of getting caught up in a 3-month stress cycle of tax prep, start now and finish early so you can move on. Spend all that time you are NOT stressing about taxes on kicking ass in your business and accomplishing your goals.
Organize your paperwork
The easiest way to start getting your taxes organized early is by organizing your paperwork- EVEN if you don’t plan to file for another few months and EVEN if you are going to file an extension. Trust me, your future self will shower you will rainbows and puppies when it finds out you didn’t toss that tax doc in a dark, cluttered corner where paperwork goes to die.
January is the time of year where your mailbox fills up with important tax paperwork. Instead of tossing those documents into oblivion, make a clearly labeled folder for all your tax documents and put every single piece of tax-related mail in that folder.
Extra bonus points for clipping like documents together, like 1099s, interest statements, merchant processing statements, and donations receipts.
Close Out Your Bookkeeping
I’m sure there are 100 other way more fun things on your to-do list than closing out your bookkeeping, but unfinished books are the number one reason people need to file an extension.
And as much as we all wish bookkeeping elves lived in our computer, drinking mead, doing a jig, and finishing our books for us in the wee hours of the morning (am I the only one imagining David the Gnome here?)– they don’t. Which means it’s up to you to get your books done.
If you are way behind on your books, you have two options:
One- get serious about finishing your books and block out large chunks of time in the next month to do it yourself or
Two- hire someone to do your books for you
Both of these options have pros and cons and depending on your business, you may choose one over the other. The point here is to choose one. Make an action plan for how you are going to get your books done and then stick to it!
Take Care of the Little Things
After you close out last year’s books, you may be tempted to skip town on a 24-hour booze cruise in celebration. Not so fast! There are a few smaller items that all self-employed people should be tracking.
Taking the time to go over these smaller items not only levels up your tax game- it also can help you save some serious bucks. They are:
- Log your mileage
- Calculate your yearly auto expenses (if you take the actual cost deduction for your car)
- Calculate your yearly home office expenses (if you take a home office deduction)
- Go through your personal statements and look for missed business deductions
- Go through your personal statements and calculate the business portion of split expenses (common examples are cell phone and in-home internet)
Hire a CPA
One of the most common questions people ask me is at what point should they hire a CPA (a person who files your taxes for you) and my answer is always, “As soon as you can afford it.”
A good CPA is one of the best investments you can make for your business. Not only will they help you maximize your deductions (and save money!) they can also help you strategize ways to shift your business structure to save money for years to come.
How do you find a good CPA? By asking around. Start by asking other’s in your industry who files their taxes. By finding a recommendation in your industry, you are more likely to find someone who understands the unique tax considerations of your business.
After you get a few recommendations interview people! Remember, this is someone you will be trusting with your money so you want to be absolutely sure it is a good fit. Make sure you feel comfortable talking to the CPA and that you actually like them.
Trust me on this one- even if someone seems perfect on paper- if you don’t like them you’re going to dread filing your taxes. A CPA is there to support you, not to make you feel bad about yourself or ashamed of your finances.
How are you doing on your taxes? Do you have any tax tips to share?