Many people find business tax stuff difficult, and for the most of my clients it is a matter of organization.
Using these four categories of information, you can set yourself up to make taxes in 2021 stress-free.
Track all of your income this year in a single place.
Some people like to use software, some like excel sheets, some get reports from PayPal for example, and some use good old-fashioned pen and paper. You need to account for every dime coming in, and it’s best to look at it month by month. I meet way too many entrepreneurs who don’t actually track the money coming in. They just set expenses up on auto pay and use a credit card to cover any negative cash flow. The issue with this approach is that you can’t track trends or opportunities to make more money. It further makes quarterly tax deposits a pain. I recommend to my clients that they take 10-15 minutes every week to figure and track that gross income number.
2. Keep your routine expenses organized.
You need to keep everyone and everything you pay every month in one place. This serves two purposes. First, you don’t forget to pay something, and you have all of the info at your fingertips if we need to contact a creditor. You can get a free expense organizer from me by visitinghttp://entremoneycoach.com and you will have everything ready to go in about 30 minutes. As a bonus, complete the Breakthrough Number worksheets, you will also know the minimum amount you must make every month to breakthrough to profit. That B-Number has the added bonus of reducing stress and frustration around your expenses.
3. Organize your other receipts by month.
Just take an envelope and write the month on the front. Every expense receipt for the month goes into the envelope. Then the receipt amount and purpose of the expense goes on your monthly tracking sheet. If you buy ink for the printer, for example, write “ink” on your tracker, and put the receipt in the envelope for the month. That’s it! At the end of 2020 you will have 12 envelopes with every expense and 12 months of tracking. This can be used to spot trends in costs and other things that you can use for business planning, as well as for filing taxes.
4. Enroll in EFTPS and deposit your self-employment taxes online.
Take the time now to enroll in the Electronic Federal Tax Payment System at https://eftps.gov Once you are enrolled you can log in every time you write yourself a paycheck and deposit your taxes. Rather than making quarterly deposits (and perhaps accidentally spending the money), make your smaller deposits, perhaps every time you write yourself a paycheck. For tax time 2021 you will just print out a summary of payments to the IRS and include it in the documents you give your accountant. Easy peasy.
By taking these few actions above, and consistently tracking your income weekly and your receipts once a month, you will be organized and ready to provide everything to your tax pro in 2021.