Soon everyone will be making plans for Thanksgiving, shopping for Christmas gifts, attending school functions, taking time off, and ringing in the New Year. With everything going on, small business owners tend to put off preparing for the new year and tax season. There is always time after the holidays.
Want to get ahead of the curve this year and stay ahead? Start preparing for tax season now by following the steps below.
office supplies
- Start collecting receipts for all office supplies and expenses. These can range from basic office supplies to postage and purchased services such as hosting, marketing, and copy services. Direct Sales Consultants may also include products, displays, tables, bags, and other party supplies in their expenses. If you don’t already have a credit card that you use for business expenses, get one as soon as possible to help control spending.
- Keep track of any software, office equipment, or furniture purchased throughout the year.
- If you use an accounting system, like QuickBooks, and haven’t entered your supplies and expenses for the year, start now. Fill in one month each week and you can have nine months entered before December 31st.
Home Office
- If you have a dedicated space that you use for your home office, collect mortgage interest, property taxes, homeowner’s insurance, electric, gas, water, and trash. You will need to determine what percentage your home office is based on the total square footage of your home.
- Did you make any repairs or improvements in your office? Then add them to your expenses. If you made any repairs to your home that benefited your entire home, you can claim a percentage of that.
Vehicle
- Whether you’re claiming actual mileage or expenses, be sure to keep a detailed record of your business’s mileage.
- If you claim mileage, look at all of your expenses and see which ones required you to drive. Create a list of the places you drove and your address, usually on the receipt. Then go to Yahoo Maps, put in your office address and the address you drove to and bingo, you have round trip miles for your taxes. To save time, create a spreadsheet showing these companies and round trip mileage for future use.
- If you claim actual expenses, gather all of your maintenance and gas receipts. Determine the percentage of business miles you drove based on your total mileage.
Telephone, Internet and Cellular
- Next, gather your company’s phone, Internet, and telephone bills. If you have a separate phone line for your business, you can pay the full amount. If you don’t have a separate phone line, be sure to check your long distance charges and see if any are business related. Also, gather all of your cell phone bills and determine how much you can deduct.
Contractors
- Did you hire any contractors to help you in your business? If so, look at how much you paid each contractor and if it’s more than $600, be sure to send them a 1099 for their taxes. If you have a tax accountant, they can do this for you. Don’t forget that you can claim money paid to older children for helping.
Continuing education and subscriptions
- Be sure to keep track of all the classes you take, books you buy, memberships, and monthly subscriptions. If your classes were live events, make sure you have receipts for parking, transit, tolls, and any supplies purchased at the event and meals.
- Did you hire a business coach or participate in a think tank? If you’re not sure how much you spent, contact your business coach and they can send you a list of services provided.
Travel, Entertainment and Gifts
- Did you take a customer or potential customer out to eat or drink? Were you in a restaurant and met someone interested in your business? Keep track of those food receipts.
- If you traveled out of town, you need travel receipts, such as airline tickets, taxis, car rentals, and hotels.
- What about birthday gifts, Christmas gifts, cards, closing gifts (for real estate agents), and referral fees? Be sure to gather receipts or check stubs for all of these.
Contributions and Sponsorships
- As a direct sales consultant, you can do a fundraiser for a charity, sports organization, or religious group and donate a portion of your commission to the group. Or sponsor a sports team in your company name and you can add it to your expenses.
Although the new year is not yet here, start putting together what you have and you will already be in the lead. As the last few months of the year roll by, make sure you have a central location for all your new receipts. Just think about it, on January 1st you will only have three months of expenses left to organize if you start now.
Stay ahead of the game next year by purchasing accounting software like Intuit QuickBooks or Peachtree Accounting. Enter expenses on a regular basis, such as weekly or monthly. Better yet, find a virtual assistant who can handle your bookkeeping for you. That way, you can spend time growing your business. Good luck!
