Making Taxes Dyno-Mite!

by Karrie Kohlhaas on March 6, 2007

in Newsletter,Organization,Taxes

jj

Are you the reason the post office stays open until midnight on April 15th?

Is your idea of logging your miles, basically, not to log your miles?

Do you dig through piles to find everything you need at tax time?

Do the letters I R S give you the willies?

If so, you are not alone. Most business owners have anxiety about the IRS – not because they’ve done anything wrong, but because they haven’t consistently documented what they’ve done right. Below is a strategy for making tax preparation easier and less stressful. Clients who set up this system report feeling more in control and relaxed at tax time.

Sesame Street – “One of these things is not like the other.”
First, list every single category of tax information you need to gather during tax time. Our brains like categories, so this is easy. Be specific and make sure every category is separate: don’t lump two categories together. Co-mingling different types of documents or items from different years makes work for you later when you have to un-mingle them. Then list all of your receipt categories (equipment, supplies, marketing, professional development, car, travel, meals/entertainment, postage, etc.). If you’re unsure, ask your accountant what categories would help get your taxes done most efficiently.

CSI Your Office – Collection and Documentation Systems
Does your office look like a crime scene at tax time? You may need a smarter system for collecting and documenting your tax data. Take the list you created on Sesame Street and bring it over to CSI Your Office. Every type of paperwork, bill or data you collect deserves it’s own file. For receipts, I recommend getting a large, 13-pocket expandable file each year. Label the pockets according to each category of receipt you will collect. Label the first pocket “to be filed” so when you are in a hurry you can accurately sort them later. Keep the expandable file out and easily accessible. Make a habit of sorting receipts directly from your pockets or purse into the receipt files and you won’t need a forensics team to sort them for you in April.

Back to the Future – Help Save Your Future Self
Most time spent on tax preparation is in gathering and searching for papers. Make life easier for your future self by setting up your collection system, in advance, to catch and accumulate papers throughout the year. To avoid the madness, create your collection system early in that tax year, not April of the next tax year. As you prepare your 06 taxes, mimic the entire collection system for 07, so it’s already in place to catch papers all year long. If you use a software program that automatically tracks your expenses and bill payments, create categories that will make the most sense for preparing your taxes.

The X-Files – “The File is Out There, Somewhere”
Is your filing system mysterious? Fragmented? Partly here and partly in another realm? A smarter strategy is to keep all taX files, receipts and paperwork in the same place–not mixed up with non-taX files and paper piles. The goal: one section of files that can be pulled from one location at tax time. Keep all of your evidence together. Just like Scully, the IRS requires you to prove the facts and make them believers.

Erkle – You Think You’re So Smart
If you’ve already prepared your taxes this year, then you are pretty smart, and a rare breed. Now it’s time to get super nerdy and prepare for next year in advance. Look at everything you gathered this year, while it’s fresh in your mind, and create the system I’ve outlined above, using the categories, files and receipts you’ve just gathered.

Law and Order – The Verdict is in!
If you don’t have a CPA, get one. A good accountant will save you money. With everything you have going on, do you really want to keep up with ever-changing tax laws and deduction red-flag amounts? Avoid companies who set up temporary offices around tax time–you want your accountant to be available to you throughout the year. Hire a small firm or individual who specializes in small business taxes. Comparison studies of accountants have shown that the small independent ones tend to be more accurate and save their clients more money.

The Green Mile – Save Money by Logging
Let’s be honest, have you ever logged your miles? Most people don’t because it seems like a tedius hassle. But remember, logging your miles supports your vehicle tax deductions. I found a tool that automatically beams your miles and destinations from your car to a satellite and then to your office computer. It’s expensive. The other option is to keep a notebook in your car. Simply make a habit of writing down: the date, any business-related destination (client meetings, bank, post office, stores for supplies, professional classes), and your start and end miles. Tip: Attach a pen to the logbook with velcro and leave the book on your car seat so it’s ready and waiting for you.

Good Times
I’ve heard all of these words to describe taxes: scary, stressful, annoying, sleep inducing, stupid, unneccessary, confrontational, and satisfying. Yes, satisfying. Once you set up smart, articulate collection systems and use those systems thoughout the year, April 15th will be a piece of cake, and for some: dyno-mite!

© 2007 – 2010, Karrie Kohlhaas. All rights reserved.

Related Posts Plugin for WordPress, Blogger...

{ 1 trackback }

Bizjam Principal SponsorshipMassageFreek
April 12, 2007 at 2:30 am

{ 2 comments… read them below or add one }

Bonnie Story February 6, 2008 at 12:49 am

This article is fabulous. Makes me want to break into puns! But, seriously, I know a shocking number of small biz people who say they “don’t have time” to do tax prep – and instead bring a shoebox full of tattered receipts in to their tax man’s office – now how much time did it take to pay that person to rummage through all those mixed up slips? So, I say just take it “One Day at a Time” and “Gimme a Break!” — Bonnie

Reply

Karrie Kohlhaas February 6, 2008 at 3:23 am

Bonnie,

I hear you! There are those who say keeping receipts and other records organized is a “hassle.” To them I say, “the hassle of an IRS audit will trump being organized any day!” Thanks for the comment!

Karrie

Reply

Leave a Comment

Previous post:

Next post: