Tax time can be super stressful if you aren’t prepared. Last year I learned the hard way. I had to file an extension for my taxes because my documentation was not organized. Then I spent about 30 hours trying to organize my documentation before I sent it to my tax preparer. Talk about hard work! That was time that I could have been preparing for the arrival of my twins or doing work in my business. During that time, I vowed to make life easier on myself the next time I filed taxes because I would not be able to spend that time preparing for taxes once my little ones were here.
This year went smoother, but I am still working on how to streamline the process so my 2016 taxes will be even better. As a business owner, it is challenging to keep up with the organizational piece, because I’m focused on all parts of running a business and raising two children. However, it is important to make time to do this. The biggest time-saver is to take time monthly to get organized. Each month, take the time to review and organize your income and expenses because these will also impact your ability to take deductions at tax time.
Here are a few tips that can help:
Watch your mail in January. When the W2s, 1099s, and other tax-related items come in the mail, file them away immediately in a simple manila envelope. I do this so I do not misplace the information. Follow-up if you don’t receive your W2 or 1099s by mid-February.
Organize your receipts. If you have childcare, medical, or other tax-deductible expenses, keep all of the documentations and records for the costs. This is essential for you to be able to use the childcare tax credit. File these receipts away immediately once paid. As an entrepreneur, you will have additional work because you will be required to submit a Schedule C for your business. It is essential that you keep good records. If you have paper receipts, I recommend using an accordion file to organize receipts by month. This will help you to quickly gather receipts if you need to reference them. Another option is to use a use an app like Deductr, which allows you to take pictures of the receipts and store them. This will help to avoid the receipts fading, getting crumpled up, or lost. I also love Deductr because it has a built in mileage tracking function that allows you to hit start when you begin driving and end when you finish your drive. No more annoying mileage log!
Get electronic. Very seldom do I use cash for expenses in my business. If I receive cash from book sales, then I immediately deposit it in my business account. I do this because I want to be able to track everything that goes in and out so I can run reports in a system like Deductr or Quick Books. The ability to run reports makes organizing a lot easier. This year I didn’t have to do my books just so I could file taxes.
I know that tax time can be overwhelming, so here is a checklist that will help ensure that you know what you need to have to file your taxes. Hopefully, this will make life easier by reducing the time that you spend preparing to file taxes.
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Aisha Taylor is a single mom of twins, personal financial coach, work from home entrepreneur, and #1 Amazon Best Selling Author of the book “5+5 FNPhenomenal Ways to Save $100 This Week Without Killing Your Lifestyle.” Aisha has been featured in ESSENCE and Jet Magazine. She is also the Founder of FNPhenomenal (Frugal –n- Phenomenal), a movement designed to help single moms transform their finances, enjoy life, and stop living from paycheck-to-paycheck. It’s time for you to be Financially Phenomenal!