A cliffsnotes version of my life as an entrepreneur at www.divvyinvestments.com and expressions of gratitude to those who make it happen.
Friday, February 3, 2017
7 Tips to Prepare for Tax Season
“In this world, nothing can be said to be certain except death and taxes.” – Benjamin Franklin
It’s that time of year again. No, no. I’m not referring to the time of year when people abandon their New Year’s resolutions, though that is probably true also. I’m not referring to the time of year when a new season of "Game of Thrones" is beginning…wait, is it? If so, stop reading this and commence binge-watching. I digress…
It is the time of year when accountants excitedly say goodbye to their families and begin crunching numbers into the wee hours of the morning. It is the time of year when some begin to get excited about what to do with their tax refunds while others repeatedly tell them that they are loaning money to the government. It is the time of year when receipts fill shoeboxes. It is the time of year when we realize we should have saved receipts (Doh!).
Don’t worry. The only thing to fear is fear itself…and perhaps going to jail for tax evasion…but mostly just fear itself. Instead, focus on these tax tips to help you get through the season.
7 Tax Season Tips
Don’t wait until the last minute. Get a head start. It is much more relaxing and gives you time to adjust to surprises if needed. Procrastinating could lead to mistakes. Mistakes could lead to fines. Fines could lead to jail.
Get organized. As with most things in life, the more organized you are the smoother things tend to go. Hopefully, you took a little bit of time periodically throughout the year to organize things. If not, just do it. Take a day and chalk it up as a loss. Get it done. Get organized yesterday. It will help clear your head and make your CPA happy (and probably save you money as a result). Remember to include all sources of income. Income, expenses, receipts…categorize them all.
Deductions. Take advantage of all the deductions you are allowed.
Stay organized. You took the time to get organized. Now keep it that way.
If you own a business, make sure to send out W2s and 1099s to your team. Here is a link to the IRS site which will help you figure out how to handle contractors. If you don’t own a business, gather all of your income statements for all of your income sources.
To DIY or not to DIY? That is the question. You know your business. CPAs know theirs. If your situation is easy and you understand what you’re doing, give it a whirl. There are several software tools out there to help you do it yourself. If you are hesitant at all, it is probably best to hire an accountant. Ask people you trust who they use. Find someone you like and trust. If you own a business it would help if the accountant understood your industry and your business.
Double-check your work or have your accountant walk you through it before submitting. It takes a little bit of extra time, but a lot less time than having to file an amendment.
“This is a question too difficult for a mathematician. It should be asked of a philosopher" (when asked about completing his income tax form) – Albert Einstein
Full disclosure: I am not a CPA, EA, or any other tax professional. In fact, I can barely spell tax. Asking me a tax question will prompt the response of a blank stare. I’m just an organized guy who likes to keep things simple. I’m also friends with a lot of CPAs and recovering CPAs. I’ve heard them complain and seen them stress out when people don’t do the things above. Raise a glass to a healthy and happy CPA and a less stressful tax season for all! (For more from this author, see: How to Deal With the Stress of a Small Business.