And no, we didn’t hire someone, but we definitely recommend doing so if you’re a small business to save yourself the hassle. Even if you plan to hire an expert (definitely going this route next year!) these tips will help you organize your expenses so that come tax season 2014 you’re not spending days or weeks getting everything ready.
We are not tax experts, but we did follow these tips this year to make our business life easier…(most of the tips below are how to organize your expenses, which can be a huge mess at the end of 12 months if you don’t have a system…trust us.)
Tip #1: Attend a Tax workshop.
Seriously, this is one of the best things we did last year as small business owners. The individuals running the class are auditors and, contrary to popular belief, are the most helpful, friendly people. We definitely recommend attending a workshop if you’ve moved states or are a new small business owner! For workshops and online tutorials in Washington State visit http://dor.wa.gov/content/workshopsandeducation/
Tip #2: Keep ALL of your receipts!
At the end of each month we go through our receipts and highlight the date and amount to make it easier to spot. Each month’s worth of receipts is put into categories (see tip #4) and in order of date in each category, stapled together with that month’s label, and placed in a hanging file folder for that year’s receipts.
Tip #3: Create a filing system.
We like to use bins that can easily go away in our closet with hanging file folders. One file keeps all receipts coming in for that month needing filing. Another file keeps all finished months for a particular year so that when it’s tax time all we have to do is pull out the 12 stapled months from this file and everything is together.
Tip #4: Create a spreadsheet that works for you.
At the end of each month we take the receipts from the “need to be filed folder” and put them into their category in an excel spreadsheet. We chose our categories based off TurboTax so that it would be easier for us to input the data at tax time (some examples include: mileage,parking, tolls – which are all sub categories for car expenses)
Tip #5: Make sure your system calculates not only monthly expense totals for your sake, but yearly totals for each category to make it easy for you!
Our excel spreadsheet tallies up each month’s expenses, but also each category so that, for example, at the end of the year we know exactly how much we spent on parking and can insert it easily when filing. (see above example)
Lesson Learned: Get a system. Stick to it. Stay organized. = Happy Tax Season
If you have a different system or other tips share them below!
~Erik & Marissa