Back again with your post-tax season money moves! I’ve talked a few times about reflecting on your tax experience this year to pave the way for ease and flow or the next tax season. Do you feel you maximized your tax deductions and why? The best way to do that is by organizing your documents consistently and regularly (receipts, invoices, etc.) all year round.
There are so many deductions available to small business owners, but if you want to take advantage of those deductions you need to plan carefully. I see it all too often, entrepreneurs scrambling for receipts and trying to think back to when they bought what and when! Imagine when tax time comes you know where all your documents are and exactly what you can deduct… Sounds pretty great right?
Here are 5 ways you can keep track of your deductible expenses:
- Be timely and consistent.
There’s a reason this one is at the top of the list. Organize your documents as soon as possible. A good way to do this is to carve out time once a week to do this. Trust me… I get it, organizing your numbers once a week is much more realistic than me telling you to do it every day. Set a recurring reminder on your phone to organize appropriate files once a week. I like to review my numbers on Mondays when I plan my week ahead. It puts me in a motivated mood to have a successful week.
- Set up separate bank accounts.
This one is SO important! Even if you think your business is too small, set up a separate business account for your business. This will help you keep track of your expenses and deductions. Trying to dig through your personal account for business expenses is too messy. Not to mention, you risk being audited by the IRS who can then conclude that none of your expenses are deductible because of commingling business and personal expenses. You don’t want those problems so set up a separate bank account to use for business matters only.
- Review your most recent tax return.
Go through your tax return (specifically the business income and expenses summary pages and schedules). Highlight all the deductions you took. This will give you a good place to start when thinking about what purchases you’ll need to organize and maybe even strategically spend more in certain expense categories as a means to increase your tax savings for the year.
- Use software.
If you’re anything like me, you roll your eyes at the thought of implementing yet another software into your business. But trust me on this, this is software you’ll never regret learning. Bookkeeping software can be a lifesaver. You can upload documents and receipts digitally and never worry about losing them again. We personally enjoy using Quickbooks but there are many free bookkeeping software to choose from if you are just getting started in your business.
- Hire a professional.
If you read the above points and thought… “I don’t have time for that.” Then it might be time to hire an accountant to help you with the numbers and the tax strategy. Remember, there’s no shame in the outsourcing game. Looking for a trustworthy CPA to build a lasting relationship with to skyrocket your business growth? Apply to work with me. Tell me about your business and we can discuss if my bundled CPA services is right for you and your business!
If you take anything away from this email let it be this: Organization is key to tracking your deductions and maximizing your savings!!! Find a method of organization that works for you. This will look different for every business, but it will be essential for your business’s long-term growth.