Tackle Taxing Tax Tasks

Tax day is less than a month a way. It has been my experience that tax filers come in two distinct groups: 1) the group of people who are up at midnight on January 31st, when the online filing sites open up for business; file and spend their return before Valentine's Day; and 2) the rest of us! Tax Season can be overwhelming and getting ready for you tax appointment can be time consuming. However it doesn't need to be! Here are some quick and easy tips to make it easier.

Track Your Expenses All Year Long I have met many small business owners who state that they usually take one to two days every February or March to go through all their receipts, expenses, and deposits for the whole year. This process is usually accompanied by a certain amount of dread. Not only can this process be mind numbing; it can leave you open to errors. You may forget about a charitable donation you made last July; or an expense you incurred in March; you saved that Lowe's receipt, but why? While it may feel this approach may save time, I typically find that it can 30-50% longer than tracking your expenses throughout the year. The best rule of thumb is to update and maintain your financial records each month. Consider using a simple software suite like Mint or Quicken for households, or QuickBooks or Xero for small businesses. Each of these services allow you to track and maintain your expenses all year long. Update monthly; then in February you can simply print a report and move on!

Separate Business from Personal You've heard this before; and you are about to hear it again: don't spend for your business out of your personal account and vice versa! While this is a best practice for lots of reasons, co-mingling funds can make prepping for taxes a logistical nightmare! You may find yourself spending hours going through all of your personal spending to ensure that you capture business expenses. You are also left with the daunting task of remembering: was that August expense at Staples for your office or the kids back to school supplies? Save yourself time, and simply keep a good separation of funds.

Start Scanning Managing paper receipts can be time consuming and messy! You put them one place, then move them to another; in January you start with a envelope that starts to overflow, so you move to a file....it is too much! It is time to go digital. It is universally accepted that you don't need the original receipt, a scanned copy will work just as well. Scanners come in all shapes, sizes and capabilities. Some have sophisticated software that will create a detailed log of each receipt, while others simply capture an image. Some sit on your desk, while others are phone applications. Don't get caught up in lots of bells and whistles. You need your scanning to accomplish one major task: create a digital copy. The key is to scan the receipts shortly after you get them. I typically clean my wallet out once a week; standing by my desktop scanner. I scan the receipts I need and then throw all the paper away. Figure out what process works best for you and stick to it! No matter how you accomplish the scanning; be sure to create a back up copy of all your receipts on an external hard drive/cloud service/usb drive.

Use a Tax Prep Checklist You are not a tax expert; therefore it is unreasonable for you to remember from year to year every document and piece of information you need to file your taxes. To save yourself time, and avoid going back and forth with your CPA regarding the documents he/she has, needs or doesn't need, ask for a checklist. The one here was created by H&R Block. As you can see it lists out the most common forms, documents and data needed. Your CPA's list may look different, but it has been my experience that most seasoned CPA firms will provide you with some sort of check list. Use it! This way when you drop of your documents, you lower the risk of there being a request for more data!

Use a Professional Dozens of websites offer electronic, do it yourself tax preparation and filing. These sites are great if your taxes are simple and straight forward. However, if you have own a business, have rental properties, have a large amount of investments, lots of deductions, or even had a significant change in the last year (i.e., marriage, divorce, sale of a home etc,) you may actually save time by hiring a professional. My rule of thumb is, if you can't file your taxes on one of these sites in a few clicks; or if you are having to read lots of tax law explanations while processing your taxes; it is time to hand it over! While a professional may be more expensive than an online site, the ROI is high! You are no longer wasting time on becoming a tax expert. 

So this tax season, start prepping for April 2017 by tracking, scanning, and separating! Then, come January hire your professional and get your checklist!