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How to Make Tax Time Less Stressful by @Pamela_Lund

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How to Make Tax Time Less Stressful

by Pamela Lund | Featured Contributor

Tax time just passed so you don’t have to think about income tax again for a year, right? Sure, if you like being stressed out and cash strapped every April. 🙅‍♀️ If you always scramble to get all of your records together, have to frantically pull together cash to pay what you owe, or haven’t set your business up to maximize deductions you should start making changes now so next year goes more smoothly.

I’m not a CPA or an attorney so the advice here is based on my decade of experience owning a business, originally as an independent contractor then as an S-Corp. You should speak with a professional before you make any major changes but these tips will help you ask the right questions when you do so you get the most benefit.

Make Bookkeeping a Habit

Until I became a business owner I never balanced my checkbook or budgeted. Every month I’d sit down to pay my bills and cross my fingers hoping there was enough money to cover my expenses. If there wasn’t? Well that’s what credit is for, right? 🤦‍♀️ When it came time to do my taxes I had a pile of receipts and no organized record of deductions. Not only was this time consuming and stressful, I know I missed out on deductions which means I wasted money. While this might work for a salaried employee with one income stream, it’s not ideal for a business.

Basic bookkeeping will make tax time less stressful by consolidating all of your information in one place. Use an accounting program, such as QuickBooks or FreshBooks, to categorize your transactions so it’s easy to find deductions. Accounting programs also make it easy to send your CPA the financial reports they need to prepare your tax return. Even if you don’t know anything about financial reports, all you have to do is click a few buttons to run the right reports. No more gathering receipts, trying to remember which credit card you used to buy your laptop, or worrying about what you’ve forgotten.

Speaking of credit cards, keep your business and personal expenses completely separate to make bookkeeping as streamlined as possible. Once a week or so simply download your transactions and classify them, pay your bills, and reconcile your accounts so you never have to worry about your balances.

Consider outsourcing your bookkeeping if it’s difficult for you to stay on top of or if it’s particularly stressful for you. You should spend your time doing what you’re good at so you can maximize your productivity and profitability.

Hire a CPA

As business owners we wear a lot of hats (and we wouldn’t have it any other way) but there are some things that are best left to a professional. Business taxes are one of those things. A good CPA will advise you on more than just taxes but the peace of mind that comes with knowing your taxes are done correctly and with the maximum deductions possible makes the expense worthwhile.

Ask other entrepreneurs, your lawyer, or people in your networking group for a recommendation to find someone you can trust. It helps if they are familiar with your specific type of business but it’s not usually necessary.

Pre-pay Estimated Income Taxes

If you’re a salaried employee of your company you should already be paying the bulk of your income taxes with each payroll. If you’re a salaried employee but you’re not using a payroll service, consider using one so you don’t have to calculate payroll taxes and can automate tax payments to reduce the time you spend on payroll. There are numerous payroll services you can find with a quick search or QuickBooks has one that you can add on if you use their bookkeeping software.

If you have a pass-through business, like an S-Corp, you’ll need to estimate how much additional (distribution) income you expect your business to have beyond your salary and pay quarterly estimated taxes so you don’t have a big tax bill at the end of the year. Your CPA can help you estimate how much you should pre-pay but in most cases you should pre-pay what you paid the prior year unless you expect your income to change drastically.

If you aren’t paying yourself a salary and you expect to be profitable, you still need to pay income taxes before you file your return with quarterly estimated tax payments. Not only will you avoid penalties by pre-paying your taxes, you also won’t have the stress of a large tax bill.

Maximize IRA Deposits

You already know that you can and should deposit the maximum (currently $5500 for people under 50) in an IRA to reduce your tax liability. But, as a business owner you may qualify to have a SEP-IRA instead to which you can deposit an amount equal to up to 25% of your salary. As long as your salary is over $22,000 annually that’s more than the standard IRA limit so it’s worth looking into.

Keep in mind that you may have to give other employees, current or future, the same SEP-IRA benefits that you have. Check with your CPA before moving forward so they can advise you on the legal and financial impacts.

If you do set up an SEP-IRA, make sure to set aside 25% of your salary each month for the deposit or actually deposit it with each payroll so you don’t have to scramble at the end of the year to come up with the money.

Incorporate (or Don’t)

Depending on your state, business type, and income level it may make sense for you to incorporate as an S-Corp or LLC. Doing so may offer tax advantages by reducing the self-employment tax you pay on the distribution portion of your income vs. the salary portion.

If you choose to incorporate, try to do it on a date such as the first day of a new quarter or the first of the year to make accounting, and therefore taxes, as easy as possible.

If you’re only incorporating for a tax advantage, keeping mind that those advantages may go away in the near future, that there is paperwork to be filed regularly, and that there are annual fees associated with incorporation that may not make it worthwhile for your situation. Speak with a business lawyer and your CPA to determine the business structure for your situation.

As a business owner you’ve got enough stress. If you implement a bookkeeping process, maximize your deductions, and pre-pay your income taxes, tax time shouldn’t involve more than a bit of paperwork and will definitely be less stressful.

Tax Deductions You Might be Missing Out On by @WhaleyBookkeep

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tax deductions

As the end of the year draws to a close, taxes may be the last thing on your mind.

However, filing season is just around the corner in the US and I think you should know about some tax deductions you might be missing out on as a business owner.

  1. Home Office Deduction – In years past there has been a taboo about claiming a home office deduction. However, in 2013 the IRS introduced a new way of claiming this deduction called the “Safe Harbor” Office in Home deduction. This allows self-employed individuals to deduct $5 per square foot of space in your home use exclusively for business use. The key word here is exclusive, it cannot be your kitchen table or bedroom that you work out of. It can be a corner of a room that you only use for business purposes, but you need to be able to prove the exclusivity of the space.
  2. Business Mileage – Often if we are working from home,  we are also traveling to meetings, local events, or co-working spaces for business purpose. You can now use apps like MileIQ (https://www.mileiq.com/) to track these business miles and claim them on your tax return. The new standard mileage rate for 2016 will be 54cents a mile (that can add up quickly). To claim this deduction you need to record the starting and ending mileage for the year on your car, total miles for each business trip, reason for trip. Most apps do much of this for you. If you put a lot of miles on your car then you can purchase a product like Automatic (https://www.automatic.com) that actually plugs into your car and records all your driving data.
  3. Credit Card Processing Fees – If you accept Credit Cards or PayPal then you can deduct all the fees associated with their services. Just make sure that you actually are claiming the total income you received (how much was invoiced) and not the amount the company deposits into your account (usually after fees are taken out)
  4. Credit Card and Loan Interest – If you have a dedicated business credit card or took out a small business loan then you can deduct the amount in interest you paid over the calendar year. This doesn’t work if you bought a few business things with a personal credit card.
  5. Health Insurance Premiums – If you are Self-employed and paid health insurance premiums for yourself, spouse, or dependents; these are a deduction on your tax return.
As with any tax advice, these are general tips and may not apply to your specific tax situation. Please take the time to consult with a tax professional to review your own tax situation and see what deductions you might be missing out on.

Want some guidance on getting more organized for tax time? Download my Free Guide to Reducing Tax Time Stress.

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Melissa WhaelyHello there, I’m Melissa Whaley, owner of Whaley Bookkeeping.  I specialize in virtual bookkeeping and tax preparation for entrepreneurs. It excites me to help people understand and take control of their finances, especially in their businesses. I believe that anyone is capable of success if their passions are accompanied with the right tools. I love working with new business owners to help them set-up systems that will take the stress out their finances.

I am a licensed tax preparer in the state of California and have been helping small business owners since 2009. I am a Wave Accounting Pro, Quickbooks Online ProAdvisor, and Freshbooks Bookkeeper.

You will often find me drinking a cup of coffee while hanging out in  Facebook Groups, or on my YouTube channel making videos to help Etsy sellers with their bookkeeping. In my personal life I am married to a wonderful husband, have a 6 year old daughter and a 1 year old son.

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12 Tax Return Organization Tips for Filing Your 2012 Tax Return by @StickelCPA

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47086911_cf26774c99by Lisa Stickel, CPA | Featured Contributor

The majority of your tax documents that you will need for your 2012 tax return are required to be mailed out to you by January 31, 2013. What this means is a lot of extra mail in your mailbox either on the street or on your computer. Based upon my experience, people will fall into two basic groups when it comes to filing their tax return. The first group is super organized, always on top of their tax returns, including planning throughout the year, and wants to get their return filed as early as possible. The next group procrastinates as long as possible either because they don’t want to face how much they will owe or they are not organized. Regardless of what group you fall in, it always pays to make sure you are organized in order to not overlook any deductions or income in case Uncle Sam comes knocking in a year or two after you have filed your return. Here are 12 tax return organization tips to make this filing season your best yet.

1.      Start organizing your 2013 documents NOW. No better time to get a head start on your 2013 taxes than at the beginning of the year. As you go through your 2012 documents see where your current system needs to be improved or develop a system for organizing your documents as you go through the process of filing your 2012 tax return.

2.      Decide if it is time to outsource the preparation of your tax return. I distribute tax organizers to my client’s for them to make sure they have everything covered to prepare an accurate tax return. With the complex tax code, it is easy to overlook things.

3.      Do you normally have a large tax refund or owe more than you would like to by April 15th? If so, make changes to your Form W-4 to make sure you get as close to break even as possible. Never a wise idea to give the government your hard earned money earlier than the due date.

4.      Double check your year end tax documents by comparing to your pay stubs, mortgage statements, bank statements or investment statements. Errors do occur and it is easier to correct before your file your tax return than afterwards. Do not assume anything.

5.      Make sure your budget takes into account your taxes. For instance, I would always start with your gross income and have your income taxes, Social Security taxes, etc. as part of your expenses so you know how much money you are paying into the government. It is your money and the current system acts like it is automatically their money.

6.      Determine how long you need to keep documents and destroy old ones accordingly. There are great resources for this at www.irs.gov or you may always contact me.

7.      Outsource your accounting for your business if there are not enough hours in the day to devote to the reason you are in business. This may be tough financially if you are just starting a business, but this makes the most sense as you grow your business. Extremely important for your business to have a accurate financial statements at all times.

8.      If you are delinquent on filing tax returns for prior years, make an appointment to get them filed today. The fear of the unknown causes more stress than is necessary. Deal with it and move on.

9.      Look back at prior year tax returns to make sure you didn’t miss anything for the current year.

10.  If you decide to use TurboTax or similar software, understand what you are sending to the government and keep your tax documents for support. Also print out a hard copy to put with your documents or scan and back up to a secured source. Not fun trying to get a copy from the IRS if your computer crashes with the only copy on the hard drive.

11.  Get organized in other areas such as your retirement goals, insurance goals, etc. since they all have an impact on either your income or estate taxes.

12.  If you can’t get everything organized by the due date, file an extension. It is better to have everything than to estimate numbers. However, do not wait until the due date of the extension. Get it done as soon as possible.

This can be a stressful time of the year for most people as they settle with the government. Hopefully these tips will reduce any stress and give you a fresh start this year. As always, contact me if you would like to discuss in more detail.

Photo Credit: Penumbra via Compfight cc

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Accounting & Tax Expert – Lisa Stickel CPA – Nashville, TN

Lisa StickelLisa Mays Stickel, CPA serves as President of Stickel, CPA, PC. She started the firm in May 2005 in order to provide the highest quality of accounting and tax services to small businesses, individuals and nonprofit organizations at reasonable fees. Her goal is to make a difference in the lives of her clients. Her vast experience includes working at a Fortune 500 company when she started her career after graduating from Western Kentucky University, to being a partner in a local accounting firm and working at a regional accounting firm. Lisa is also a member of the American Institute of Certified Public Accountants and the Tennessee Society of Certified Public Accountants.

While providing accounting and tax services to her clients is a high priority, she also believes in giving back to the community. Lisa served the accounting profession for six years as a member of the Tennessee State Board of Accountancy with  two of these years as the Secretary. She has also served on several NASBA committees. Speaking to college and high school students about a career in accounting and mentoring are also ways she enjoys giving back. Her past community roles have included serving as the V.P. of Finance and Treasurer for the Junior League of Nashville, board member for the White House Chamber of Commerce and All About Women and President and co-chair of the PTO at her childrens’ schools. In 2005, she was appointed as the first female Alderman of the City of White House.

The one distinctive service that her firm offers is that Lisa has 20+ years of accounting and tax experience so you receive partner level service at lower fees that you would normally spend at other accounting firms. The foundation of her success is from referrals from clients, family and friends who have been built on trust and respect. Allow her passion for accounting and tax services to serve you with your needs so you can focus on your passions.

Outside the office, Lisa enjoys spending time with her family and friends, running, reading, going to movies and traveling.

You can connect with Lisa on Twitter, WordPress or Linkedin.