Tax Tips for Small Businesses

Preparing to file your taxes can be a huge pain, but it doesn’t have to be with the help of some credible tax services . Twenty dollars and a little planning can make all of the difference. If you are working for yourself, this is for you. I have two small business that I run from home , which lets me maximize my deductions and my personal taxes. This also made me “a good test case” for the IRS. Yep, after being audited for six months I can attest that my method works.

Are you ready to get organized and get the most from your return?! First, begin by outlining what you need to get together for your accountant in a cheat sheet that can be edited and used every year.  If you are not sure, make an appointment with your accountant and ask. This helps to double check that you remember all of your deductions and information you need to supply. These are some general ideas for main tabs for personal and business taxes together, and you can download my worksheet here.

Home –  Contains tax, homestead, and insurance information

Medical – Medical bills, yearly EOB from my insurance company, and yearly print out from pharmacy

Utilities – Water, sewage, phone, internet, and electric bills.  I print a digital summary of my bills for the year. If your utility companies don’t have this function, take a screen shot (command apple 4) and print this. A portion of these are deductible for people who have an at-home business based on the square footage of your office.

Auto – Mileage account for work, receipt for car tag

Donations – Any work that I have donated, money to charities, Goodwill or Salvation army donations

Bank – Yearly interest report from the bank, any print outs of statements

Investments – 401k report

Student Loans – hefty, but at least there is a deduction.

W2/ 1099 Forms – This includes any tax forms for my day job plus freelance work over $600. 1099 forms should be mailed to you from your client.

Business Expenses – This is where I put my large and reoccurring expenses like web server fees, advertising, and memberships.

Business Supplies – This is where I keep the daily stuff like art supplies and shipping receipts. A print out from your bank account or credit card statement is no longer sufficient proof for purchases. Since the carbon will wear off, I copy two receipts at a time on the copier and staple them to the paper.  This also makes it easier to tally your total deductions.

Business Client Invoices – I keep a printed copy of payments from my graphic design business here to show what I have made.

Business Year End – Here I keep a copy of my year end statement from Freshbooks and my year end from my Etsy store.

Once you have a list, you can categorize your deductions in order to easily organize them. I use two methods for this. One is a digital system through drop box (easy access and backup) since most everything I have is digital. I  have a folder in my drop box labeled taxes for the current year with subfolders that match my tab categories. At the end of the year, all you have to do is drop off your folder. I copy all of my invoices and receipts for payments that I get through email in an invoice folder in my Apple mail. Any that I can’t download, I screen shot and add to my drop box folder labeled business receipts.

I have an expandable file folder with tabs, like this one, for my tax categories to keep up with all of my paper bills and invoices. Keep your folder where you pay your bills and/or do your invoicing so it’s easy to stay on top of it. I have listed some of the contents of mine above to give you some ideas and this printable worksheet. This will keep things easy to tally, quickly file, and help you not miss any possible deductions. Currently, I am giving my accountant the drop box link to my taxes folder, since she lives in another state. So, I scan in the contents of my expandable folder and add these to my digital folders. Otherwise, I would print the contents of my digital folder and add them to the corresponding tabs of my file folder and deliver the folder to my accountant.

If you really want to take your accounting to the next level, you can use a program like Freshbooks or QuickBooks like the ones from Fourlane. I had a program for tracking time and creating invoices, but I finally upgraded it to a better one. I love the accounting features. It links into my business credit cards and checking accounts. So, it’s quickly sorted into a category. My favorite part is being able to add the receipt and a note about the purchase. For example, if you meet a potential client at Starbucks, you can record the mileage as an added expense, select the category of the expense, and upload a copy of the receipt for your coffee.

Amazing right! If you would like to look into Freshbooks you can use this link to try in for free for 30 days.

After you file your taxes, save your digital files and store the contents and your tax information in a manila envelope with the date on it for at least two years, just in case you are audited. Managing your taxes can seem like a real beast, but it’s super easy when you know what you need to track, and find a system that works for you. Every time you need motivation to stay on top of it, just think of what re-investing that income tax fund could do for your business (or vacation)!