Everybody talks about taxes for two or three months every year. And, it’s usually negative. Accountants talk about taxes all year long. Working on your taxes a little at a time throughout the year will help you organize at the end of the year. I’m going to give you some tips to make your taxes a little easier for next year.
I will talk about this in another post. But, start thinking about income. If you write a blog, sometimes you receive gifts and merchandise instead of payments. The IRS classifies these items as income. So, if you try to go back through your records for the whole year, it can be difficult to track income. Instead if you spend a little time each month or even as soon as you receive things, you will spend less time sorting through your records.
Many small businesses use their personal checking accounts to pay for all expenses. Then, at the end of the year, you need to go through your checking account and pull out the items that include business expenses. If you use the same account for personal and business expenses, even if you use an accountant, they will expect you to send them a list of the business only expenses. Additionally, the IRS can require receipts in an audit. So, each month you should start organizing the receipts in a system that works for you. You can organize them by month, alphabetically or keep all similar items together. Waiting until the end of the year could make it so receipts are lost, not organized or difficult to read.
Track Other Items
Here are some other items to track throughout the year. Mileage tracking and business use of home should also be tracked through the year.
First of all, it is easy to see why tracking mileage throughout the year is much easier. Some people that go to the same places regularly can easily write down the location and date. Then at the end of the year, you can look up the mileage for those places and then add up the mileage. If you go different places all of the time, you should track mileage every time you use your car for business purposes. Depending on how many miles you travel, you might want to add up your mileage each month.
If you use a portion of your home for business, you need to track your utilities and rent or mortgage interest. These are items that aren’t had to find at the end of the year but it is still easier to track throughout the year.
Tracking these items throughout the year will help make your life a little easier at tax time. So, decide now to spend a little time once a week, month or quarter in order to keep all of your tax items organized.