"In this world nothing is certain but death and taxes" – Benjamin Franklin
I LOVE SAVING MONEY don't you?? I am always looking for new tax tips and any new loop hole I can poke my head into.
Ok, so as I see it, we are divided into two main groups. Those who are super organized and sort their receipts and kinda do "tax-prep" all year long, and those who show up with a shoe box and shopping bag at their CPA every year. Well which ever one you are…..no matter. It all gets done in the end!
I sort of assume (eek) that most everyone uses some kind of accounting program like Quickbooks and I wanted to share some other things that you can use to make things easier on you, or if you are the super organized one already, perhaps you can take advantage of some new technology that is out there.
My friend Andrew over at Money Crashers is really into Shoeboxed and uses it to scan and track everything. A lot of companies are moving to posting everything in some sort of "Cloud" type thingy and giving remote access to files to their VA's, Accountants, and other employees that way. So many cool things happening in our lifetime now – I find it so amazing and e so lucky.
There are so many entreprenette tricks and tips that I called upon my experts to give you some out-of-the-box ideas…..check them out. There are some really cool ones that might help save you time and money.
1. Tax time-time saver!
My Best Tax Tip: I bought a small expanding file folder that is separated by month and fits in my bottom desk drawer. When I make a purchase, I place the receipt in that months section. This keeps my receipts organized and easily accessible at tax time.
2. A Sane and Serene Strategy
My Best Tax Tip: The only way to stay sane during tax-time is to plan ahead-just a little.
You've all heard the standard suggestions. Gather all your paperwork. Keep records up to date ahead of time. What I'm talking about is staying sane whether you've been faithfully organized or not!
Add into your calendar an hour-long 'tackle my taxes' appointment each week starting in early-mid January. This way you can work on catching up your paperwork and records a bit at a time instead of last-minute insanity!
3. Think Green and Save!
My Best Tax Tip: A tax credit that many homeowners and business owners often over look is available for installation of alternative energy products such as solar electric systems, replacement windows and wind turbines. If you've installed any green or energy-saving products for your home or office over the past year, be sure to ask your CPA about tax credits associated with going green. It can really add up!
4. Stay Semi Organized
My Best Tax Tip: Keeping up with donation forms, receipts and other business write-offs over the course of a year is one of the last things a business owner wants to do. Make it a point in 2012 to stay semi organized and at least keep a big box full of receipts that can be sorted through at the end of the year. You can even hire a college accounting major over winter break to organize them all for you at the end of the year for a nominal fee. It's a win-win.
5. Your Not Incorporated??
My Best Tax Tip: Even though you are a small business you should consider becoming an S or LLC corp for tax purposes. Yes, you have to file a second set of tax returns, but your savings could be 10X the cost. I was going to incorporate one of my business once it hit a certain volume, but didn't. Tax guy says, "You should have, it would have cut your tax bill this year by $1,700.00!"
Today all my companies are incorporated from day one. A side note, the legal protection is also very important.
6. Lower net income = less taxes
My Best Tax Tip: If you have cash in your business at the end of the year or beginning of the year, you can lower your net income by contributing to a SEP-IRA for employees, no matter if you're the only employee. You can generally contribute up to 25% of an employee's gross salary, and can make the contribution up until your tax filing date--March or April of the following year, I believe. Lowering your net income means you'll pay less in taxes--yay!
7. Find a brilliant accountant
My Best Tax Tip: Personally I hate tax time. I'm a creative so I'd much rather be painting or creating something with my time. So each year when tax time comes around, I found the best way to get the most out of it with as little time out of my day as possible is to have a brilliant accountant (preferably one with a legal studies background) do his creative tax stuff which will take no more than 20 minutes of my time. It's even better if he can do your book-keeping for you too!
8. Outsource it!
My Best Tax Tip: Yes, outsource it! I know it is not cool, and hype but that is what saved me a lot of trouble and money. Find a reliable person or firm close to you. The best way by reference from somebody you trust. Do your homework/recon/due diligence on top of that before you meet and contract them.
I have two companies and over the years I built the relationships with my accountants to the level that I can come overseas for 5-6 months and manage my companies from here.
9. Spend the Money Honey!
My Best Tax Tip: Zero your checkbook balance as close as possible. Invest in something you wanted, pay yourself that bonus, and pay the bills down. These moves lead to a zero balance, shaves profit and that means less taxes paid. This is a tax strategy and if you are looking to look profitable for a business loan then your accountant can adjust your financials to look more appealing for the investors.
10. Cloud tools
My Best Tax Tip: I use a number of cloud-based tools for tax prep and lots of other things, which give me access to my data anywhere, and allow me to stay productive everywhere.
Google Voice (and Skype, though Google Voice is free)
EchoSign (for digitally signing documents)
FreshBooks (for time tracking, invoicing, accepting payments)
Basecamp (for project management)
GoToMeeting (for online meetings & demos)
11. Don't wait for 1099s to arrive
My Best Tax Tip: Soon after the new year I start on my taxes. Getting the grueling part of it done BEFORE the 1099s come in. Like many of us, I have loads of work to do to tally numbers, get those property tax figures, get my 1099s out etc... So don't wait for your 1099's to arrive before starting on taxes and come April 15 you can already have your refund!
12. The government rewards you
My Best Tax Tip: The US government likes the idea of business so much that it lets us subtract our expenses from our taxable income. Remember that if you are using items you pay for in your business, you should deduct them. For instance, I constantly use my daily newspaper to prospect, congratulate clients and prospects, write articles based on info I find...and I deduct my subscription cost.
13. Keep it Simple
My Best Tax Tip:
The best change I ever made was having a dedicated business credit card. No more muddling through receipts and transaction lists. Also, I go in once a week to upload the bank info and reconcile the account. That saves lots of time at month end.
As a professional organizer I've seen first hand the dangers of procrastination! Don't wait until the last minute. It won't be any easier, and it will be much more stressful.
Worst case scenario? Move to Dubai where there are no taxes!
14. Write On! Saving Your Receipts
My Best Tax Tip: As you accumulate receipts for your expenses throughout the year, make sure to document in ink the date, amount, and reason for the expense. You will find that years later, the ink will fade on certain ones and you will not remember what or when the expense occurred, or why, rendering the receipt useless at a time when you may need it most.
15. Scan and Toss - Go Paperless
My Best Tax Tip: The IRS is encouraging taxpayers to scan their documents and receipts and save them to an external hard drive, mail them to a relative, or write to a CD.
The hurricanes in the South destroyed thousands of tax records that can never be recovered. Why not use the current technology and go paperless?
Use a scanner to save receipts, contracts, and other documents in one place to avoid that "Oh, my Gosh" (or whatever expletive) moment.
16. Don't Forget Tax Deductions!
My Best Tax Tip: For my small business, I have three major categories: job-related expenses, unreimbursed medical expenses, and home-based business write-offs. Knowing these on the front end will help you categorize your receipts as they come in throughout the year, which will streamline the process of paying taxes. Remember that deductible job-related expenses are things like dry cleaning bills and travel costs, while deductible home-based business expenses involve hardware such as personal computer expenses.
17. Get a Big Tax Break For Saving
My Best Tax Tip: As we near the end of 2011, now is the time to be thinking about opening up and contributing to a tax friendly retirement plan now or before April 16, 2012 (April 15th is a Sunday). The cheapest option is to open a Solo 401(K) Plan granted you don't have any employees other than your spouse. You can personally contribute up to the lesser of $16,500 or your earnings plus 20% of your net self employment income for a total of $49,000 and if you’re older than 50, your limit is $54,000.
18. Tax Time Secret: Be Organized!
My Best Tax Tip: One year, I decided to file my own taxes using Turbo Tax. I learned a lot about various business deductions that could apply to my business that my CPA at the time never told me about! So since then I've created a spreadsheet of all the possible business deductions that apply to my specific business and record my expenses monthly by category. Being organized saves me valuable time and makes it easy for me to send my tax files to my CPA.
Rekha Krishnamurthi of Divine
19. QuickBooks' Insides
My Best Tax Tip: Press F2 or Cntl-1 within QuickBooks to bring up a window with all sorts of information about the inner workings of your QB file. This window will tell you the location of the file on your computer (if you want to copy or send the file), the total number of accounts, names, vendors, and employees, the size of the file, your latest release version, and your license and product number.
20. Automatic Pilot Cash Receipts
My Best Tax Tip: Mobile warriors have a lot of cash receipts. To save time, in my car have a mini-plastic file labeled with receipt categories such as food, tolls, advertising, facilitation, etc. Cash receipts are immediately filed. Each quarter, I tally them, enter dollars into accounting system and file them away. During the last 10 years, I have saved hundreds of hours in sorting and organizing not to mention saved accounting fees. Once the habit is established, automatic pilot takes over.
21. Make the Most of Credit Cards
My Best Tax Tip: If you use a credit card in your business, make sure you record the expenses when you make the purchase, not when you pay your credit card bill. This will help make sure you get all the tax deductions you are entitled to for the current year. The best way to do this would be to set up a credit card account in QuickBooks. If you go to your Chart of Accounts, and click on "Account" and then "New", choose "Credit Card" as your account type, and QB will lead you through creating the account.
22. Make Two Appointments
My Best Tax Tip: Make two appointments with your accountant or tax preparer — we all have the usual one some time after the first of the year to get your taxes done, but I also make an appointment early in December to run my numbers by my CPA and see if there are any last minute steps I can take to improve my tax situation, such as investing money in a retirement account, before the end of the year.
23. Taxes on Cloud Nine
My Best Tax Tip: The whole world is moving to the cloud, why should your taxes be any different? Instead of collecting all of your financials in various folders and desk drawers all year and then panicking in early April, scan your receipts, bills, and invoices into the cloud over the course of the year. Then, around tax time, shoot that digital data to your favorite online tax prep service and you're done! Plus your scanned data will be saved in the cloud in case of audit, which could occur up to 7 years after.
24. Tax time saving tip
My Best Tax Tip: Outsource your bookkeeping and taxes. Plain and simple.
25. Bookkeeping Made Easy
My Best Tax Tip: My two favorite tools to prepare for tax season are Freshbooks and Outright. I use Freshbooks for invoicing and collecting payments from clients and managing my expenses. Then Outright integrates with Freshbooks and other accounts like my bank, Paypal, and credit cards to import and categorize all of my transactions automatically. Best of all, Outright always shows my gross income and the estimated amount of taxes I will need to pay so I won’t be caught off guard when tax season comes around.
26. Organize a Filing System
My Best Tax Tip: You can make tax time super easy by putting together a filing system. Using a tool like Dropbox, all you need to do is simply scan and "file" away all your tax-related paperwork into a folder titled, "Tax". Then, when the time comes you don't need to hunt for anything. Just open the folder and print away. You can do the same using a traditional filing cabinet. However, remember to schedule time to review it. A weekly date with your filing cabinet will ensure a happier, stress-free tax season.
27. The Secret Is Neat Receipts
My Best Tax Tip: The best tax tip we have for any entrepreneur is to always have meticulous records of your receipts. For me, I make sure that I scan any important receipts or documents so I will have multiple copies (physical and computer files). With so many items paid for in a single year, you need to keep everything in order when you are either doing your own taxes or handing the paperwork over to an accountant. Keep it organized and you won't have a problem.
28. When In Doubt, Save It!
My Best Tax Tip: Most Entrepreneurs eat, sleep and breath their business. In many cases there are so many possible deductions and business expenses that suddenly become 'mundane' and are easy to let slip on the expense sheets and the daily tax filing. What I've found works best, is to literally keep every single receipt even, those that are 'personal' and later take the time to go through the receipts (both printed and digital), it's amazing how many business expenses would have otherwise been overlooked!
29. Tax Start-Up Exps..Must Knows!
My Best Tax Tip: If you started a business, how you treat your initial expenses can make a big difference in your tax bill. You can not write off any of your expenses until you have your first customer. Then you can elect to write off $5,000 of start-up expenses once your business begins and the rest is deducted over 180 months beginning with the month the business starts. Careful tax planning is needed as it may be better (or not) to save your expenses. Remember, it is not now or never...it is now or later.