Everything runs smoother when you organize your home business taxes throughout the year.
As another year draws to a close, it makes sense to review your financial situation — including your tax situation. One of the most important things you can do is make sure that you start organizing your home business tax information, if you haven't already.
Start Organizing Your Tax Papers Now
If your home business tax information (or any other tax information) is unorganized, now is a good time to try to remedy the problem. You don't have to do everything all at once; you can do it a little bit at a time.
Starting a little bit earlier is a good idea, since it gives you time to prepare your finances, and figure out what, exactly, you need to fill out your tax forms. Take a few minutes each day to do something to organize your tax papers. Whether it's finding a few receipts, or working on re-doing your filing system so that it's paperless, work on getting organized now, before tax season really sets in and you find yourself frantically trying to figure out what you need.
Once you have your tax information organized, try to keep it that way throughout the year. I save all my receipts in a specially labeled folder that is sitting near my computer. All I have to do is slip the receipts into the folder as I get them. I also have my other tax-related documents organized. I also make use of personal finance software to help me keep track of business income and expenses, as well as mark tax-related items. When the time comes to create my profit and loss statement, I'm ready to go.
It's much easier to keep everything organized in a system throughout the year, rather than try to force it in a frenzy the night before you see the accountant.
Prepare for the Rest of the Year
Another good reason to organize your home business tax information early is so that you can figure out what to do?before the year ends. There are some tax moves that you can make to improve your tax efficiency before the year finishes, and it's good to know these things before it's too late.
Your organized tax documents can help you identify whether you can pile on a few more deductions for your home business before the year ends, or obtain a tax credit. While you organize your home business tax documents, you can also consider your business needs, and make the necessary plans to do some well-placed business spending now, or decide to hold off until next year — whatever makes the most sense for your situation.
Having your home business tax information properly organized is a great way to stay on top of your situation. You can see exactly what your situation is, and you have more information to make better decisions throughout the year. And, of course, you avoid the last-minute tax time rush each year.
I have my small business info more organized than some but my system isn’t perfect yet. Hopefully I will improve it by the end of the year and have a great system in place for next year.
There’s always room for improvement 🙂 The idea is to get things working smoothly for you.
Thanks for the reminder I am several months behind on my quickbooks entries–I don’t mind doing others books, but for some reason I hate doing mine.
Haha. Sometimes it is the hardest to get excited about doing your own work. But the better you keep up with it, the less onerous it will be at tax time.
Miranda,
It’s very important when you have a business, no matter how small, that you plan for your taxes far, far in advance. This is definitely not something you want to wait on until tax time. First, there’s the issue of quarterly filings which I know you’ve written about before. But also, it’s critical to start figuring out and precisely recording things like expenses early on so that you don’t need to scramble at tax time and can take all the advantages possible.
So true! I record my expenses as I go along, and save my receipts as I get them. Keeping them organized in the moment helps me avoid the scramble later.
Try out http://www.docketbank.com. It’s a free way to electronically store your receipts and warranties, as well as track your finances/budget. It will even warn you when a warranty is going to expire (as well as many other features). Also free are the apple and android apps that compliment the site.