Tax season is tough. Especially for small business owners who don’t have the luxury of simply inputting W2 information into Turbo Tax. While hiring an accountant is the best way to ease the tax filing burden, many of us just don’t have the extra funds to seek professional help. But not all is lost. Here are some ways to help make filing your business taxes less of a headache this year.
1. TURN TO TECHNOLOGY
There are many online programs geared toward helping you stay organized. Mint.com is a free, web-based personal financial management service that can continuously monitor your spending, help manage your money, pay your bills, track your credit scores, and ultimately, make it easier to pull out certain details needed for taxes. Learnvest.com is a personal financial planning program that gives you access to a dedicated financial planner, available to you 24/7 via email, a fully-customized financial plan that helps balance your wants and needs, and online tools, classes, and articles to help you put the advice into action.
Apps for Organization: The best way to have a stress-free tax season is to be organized. Luckily, there are also mobile apps that make it easier than ever to prepare. Shoeboxed is a free app that stores your receipts, bills, and other financial documents. All you need to do is snap a photo, upload the document to the app, and it automatically extracts the important information, such as vendor, date, total, and payment type. In an instant, that information is added to your fully searchable digital database of transactions. For small business owners, Shoeboxed can save you time and money.
Evernote is an online workspace tool that ranges from a basic free version to two different paid options. This robust note-taking tool manages the documents you will need to file your taxes. As with Shoeboxed, you can take pictures of documents and receipts, or use the scan option, for a flat annual fee. The app syncs everything between your phone and your computer, post-it notes, and saves things you find on the web.
Do you contribute to charitable organizations throughout the year? If so, IDonatedIt is an app to help track and value your non-cash charitable donations. These are tax-deductible expenses that can reduce your taxable income and lower your tax bill. To document your donations quickly and easily, just open IDonatedIt and input the donation date, the charity name, and the fair-market value of the item. You can also attach photos of donated items and email the detailed donation report to yourself or your accountant.
Apps for Filing Taxes: There are a bunch of apps out there that can help with your taxes. TurboTax and H&R Block are perhaps the most recognizable names in taxes, and they each have an app that helps e-file your taxes for a small to medium fee. TaxCaster is designed to give you a glimpse at any possible tax return you can expect — just enter in basic information about your lifestyle and business and TaxCaster will estimate what you owe and how much you can expect to get back. It can also recommend a product to help you complete the filing process. Lastly, IRS2Go is an app from the Internal Revenue Service that lets you track your refund once it’s been submitted. It also provides tax prep information, and you can also request tax return information and account transcripts through the app.
Other Helpful Apps: Then there’s Ask A CPA, which is an Android/iPhone app that gives access to thousands of tax and accounting questions and answers — free of charge! The app lets you search for up-to-date answers to help you prepare this year’s tax return and plan for the future. It even has information on the latest tax changes and how they affect you.
2. BE SURE TO NOTE WHAT’S NEW
A lot can happen in a year. Did you sell or buy a home? Change your marital status? Move to another state? Got a kid who started college? Many of these personal life changes can affect your taxes. If you are buying or selling a home, learn about possible tax incentives for first-time home buyers and for taxpayers buying investment properties such as commercial buildings. Also check into capital gains tax before you list your home for sale.
If your last name has changed due to marital status, you’ll need to apply for a new Social Security card. If your SS# and your name don’t match on your tax form, there will be a delay in processing your tax forms.
If you have a kid who just went off to college, you can probably claim some of their tuition. According to the IRS, you can claim the tuition and fees deduction if:
- You pay qualified education expenses of higher education.
- You pay the education expenses for an eligible student.
- The eligible student is you, your spouse, or a dependent for whom you can claim an exemption on your tax return.
Just as things change in your life, the IRS changes from time to time as well. It’s important to check with them online to see if there are changes or new information with the laws, tax forms, or documents. Most documents at www.irs.gov/formspubs have dates, so you will know if you have the most up-to-date information. They’ll also have information on anything new in the tax code. It’s good practice to check to find out the latest tax cuts, deductions, and incentives.
3. START EARLY AND BE ORGANIZED
While taxes are easy to put off, try not to wait until April to start the process. If you do, you’ll feel stressed and pressed for time. Do yourself a favor and get your taxes done as soon as your statements arrive. If you use an accountant or tax professional, don’t wait to schedule your appointment. Ideally, it’s best to meet during the off-season to get a jump start on your tax planning and avoid catching your accountant during the busy season. Since we’re now in February, the next best thing is being as organized as you can be. Take your cue from Mary Tyler Moore.
Now that you feel relaxed and ready to tackle those taxes, remember, it’s not too early to start thinking about next year. The best way to have a de-stressed, anxiety-free tax season is to have an organized year leading up to filing your taxes. The number one thing to do is save all your receipts throughout the year. Whether you have them in a file cabinet, binder, or you use one of those nifty mobile apps I just discussed, keep on top of filing each new receipt. If you can, categorize your receipts to heighten organization. Apps will do this for you. If you also save the paper originals, keep groupings of different receipts, bills, and charitable contributions in separate folders.
When it comes to expenses, keep a spreadsheet on your computer with each one. Note the date, payment amount, and name of expense. This information will be very helpful to have in one place when tax time comes around.
Lastly, it’s important to be honest. The last thing you want is to be audited, so avoid any possible red flags by being honest about your income, deductibles, and the nature of your at home office space, if applicable. Here are more tips from TurboTax on how to avoid a tax audit. Besides, you’ll sleep better at night!