Tips to make tax time less stressful

By Anh-Minh Le

For years, I listened to my freelance and small-business owner friends complain about tax season. Prepping materials for their accountants was one of their most dreaded tasks—and filing their taxes every spring was always cause for celebration.

And now I get it.

A few years into my own small-business ownership, I think I’ve got a tax-planning organizational system down now—one that makes April 15’s arrival less stressful for me.

• Keep your receipts: Maintaining receipts is an ongoing, year-long thing. I have a binder, divided by months, that includes pouches that hold all of my receipts. I update the binder on a weekly basis; if I go longer than that, the receipts pile up (or I risk losing them) and I get too overwhelmed.
  • I also like to jot notes on the receipts if there’s information that will help me categorize the expense later. For example, if I had to pay for parking somewhere, I write myself a reminder of the outing’s purpose. (Some people scan all of their receipts so they don’t have to keep hard copies—I’m hoping to get to that point eventually!)
• Have a separate business bank account: This may seem like a no-brainer … but having a separate business bank account and credit card means I don’t have to sort out personal versus business expenses when it’s tax time.
• Remember to look into tax deductions: And one of the reasons why it’s important to record all of your business expenses? Deductions. By taking as many legal deductions as you are allowed to, you help ensure that you’re not paying more in taxes that you should. Common small business-related deductible items include: work equipment (e.g., tools you use to get the job done); services/vendors that you rely on to run your company; a dedicated home office (the IRS requires that it has to be only a home office, not a space that serves other functions as well); and travel expenses (here are the mileage rates for the past few years).
  • When in doubt, I run things by my accountant to be safe; some of the deductions can be tricky (like the home office calculation). Also, the IRS has a Small Business and Self-Employed Tax Center on its website.
• Do good bookkeeping year-round: I absolutely hate bookkeeping—and I know I’m not alone. I utilize an online bookkeeping system to track my expenses and income, and set aside one day a month where all I do is bookkeeping work. Again, if I let this go too long, it gets overwhelming and stresses me out. (In case you missed it, here’s a post on how Breezeworks can assist with some of your bookkeeping chores.)

These are just some of the basic things that I do to help manage my businesses finances in anticipation of tax season. Naturally, your needs and what works best for you depends on the type of business you run and your personal organization style. One thing that I think is universal, though: It’s important to put a system in place that’s realistic for you. That way, you’re setting yourself up for success in the organization department, rather than failure.