Saturday, April 12, 2008

Stress Free Tax Preparation, Even at the last moment

It’s that time of year, 3 days and counting until one of the most horrid days of the year arrives in the United States. Tax Day. April 15th. For some people it is like an evil demon, hovering in their future ready to pounce on them and send them into shivers of terror. Or they may be one of those who spend hours prepping and organizing and filing on January 1st every year. Or there are those of us in between extremes.

I admit, that for years I faced tax day like it was some day made in hell, sweating and worrying for weeks before and then shamefully hiding my head in the sand for another year after it passed and I had yet to get my act together. But it’s not healthy to live like that, so I had to figure out how to handle this monster.

This year, for the first time I’ve realized that my solution actually worked. Here’s how I tamed the beast.

First of all the most essential tool in dealing with tax issues is to have your financial documents in order. This takes a system and a good computer program in order for this to work. I discovered Quickbooks, by Intuit, over 13 years ago now and have never strayed from its easy to understand interface and flexible category system. .

The second secret is to save all your receipts. I mean EVERYTHING. Even if you are not sure if it’s allowable as a deduction; save it anyway. You can use a shoebox on your desk, a drawer, an envelope, or whatever system works for you. I prefer an “inbox” and all receipts are to be placed there by family members. In my purse I keep a legal sized envelope where I put all my receipts during the week and empty into the inbox at the end of the week.

I’ll admit that I’m not an accountant and my system may not be the preferred method by the accountants of the world, but as a simple business owner, with self taught bookkeeping experience and one college class under my belt, I feel that my method works well. In my Quickbooks program I set up whatever bank accounts I have, and then I set up a “cash” account as if it were a bank account. This is where I enter all the receipts I have that I paid with cash, and all the checks or credit card payments into their appropriate accounts. Then I file all my receipts by categories. Utilities, meals, gas, insurance, etc. If there is a company that I always buy from, I might also set up a file just for receipts from that company. But usually the file system is based on categories that would match an IRS form. Try to avoid miscellaneous files. I would rather have a file labeled “cat food” than to have a miscellaneous file to have to sort through at the end of the year. It is better to over categorize your files than to be too general. Over the course of the year I try to keep up with the files, and organize the receipts by month. So that in your “Water Bill” file you will have all the bills organized by month and you can easily see what was paid when.

When the tax day looms, if you have kept up with your inputting of receipts and their organizing, it will be much easier for you to retrieve the information and lessen the feelings of stress.

Set aside a day at least 3 days before D day. If you are a procrastinator like me that is. Otherwise, give yourself a better time cushion. Make sure to lessen all distractions. Have hubby take kids for the day. Gather your supplies. A good pot of coffee, munchies for strength (nothing sticky as you don’t want to get gunk on your tax forms!), mood music if you so desire, and at least some chocolate is essential too.

Run a profit and loss report with Quickbooks and take the time to double check all the categories. Did you get all the power bills entered? Are there any duplicate entries? Are there any receipts entered into the wrong category? Once you have the minor glitches like that worked out, make sure you have plenty of paper and a good internet connection. Because even if you did pick up tax forms at Rev and Tax you may find yourself needing just one more form.

Children are a wonderful asset so take advantage of them. Make sure you check to see if you are eligible for the Child tax Credits, and the Additional Child Tax Credit (I missed that one year), Earned Income Credit and many others. As a small business owner, my goal has always been to make enough money to live, but not enough money to owe taxes. I love those tax credits that help me fulfill that goal.

Then go to it. And pray lots. It always helps to have a little guidance from above.

Perhaps this information has come a little late for some, but at least you have some ideas for next year.

Happy Tax Day!

1 comment:

Karen said...

Great advice Colleen! I love the tax benefits of having a business. Another idea that is helping me this year is I keep a small accordion file box in my car, it's a cute one with a handle, looks almost like a purse! I listed my categories on the tabs and every time I get back in the car I file the receipts right then. It's been a great time saver! Hope Uncle Sam is treating you well this year! :)