Whether you’re filing as an individual or you’re a business owner, you need to start preparing for tax season now. As the end of the year approaches, it becomes time to collect all your documents and tally up your expenses. Preparing now means you’ll be able to get your taxes done on time and anticipate the amount that has to be paid.
Take a Look at Your Prior Year’s Taxes
Begin by looking at the last year of taxes that you filed. Most of the documents are probably going to be similar. W2 forms, 1099 forms, and everything on your schedule C — these will need to be tracked down for the new year. Your prior year tax return will also give you a fairly good estimate of how much you’ll be paying (or how much you’ll be getting back).
Make a List of Changes That Occurred In Your Life
Did you get married? Buy a home? Start a new job? Your accountant is going to need to know about any major life changes that you made throughout the year. If you’re an entrepreneur or a schedule C business owner, you’ll also need to consider any big asset purchases, sales, office openings, or inventory changes. Anything that altered your financial status or that lead to additional expenses may be relevant.
Start Sorting Out Your Expenses
With the right accounting software, sorting out your expenses can be a fairly trivial task. You can simply connect your bank accounts and credit card accounts to a cloud-based accounting system. The system will automatically categorize your expenses. If you have any cash expenses, on the other hand, you might have to go through your receipts. Get into the habit of saving your cash receipt regularly to make this process easier.
Estimate Your Payments
Once you have your expenses sorted and you’ve estimated your income from the prior year, it’s time to figure out how your payments are going to be made. If you have substantial payments, you may want to plan in advance to make a payment arrangement with the IRS. Payment arrangements are more common than you might think, but you should have a professional set one up on your behalf.
Consider Any Last Minute Deductions
Before the end of the year, you may want to consider any additional deductions that you can take. This is a great time to make any last minute charitable donations, as you’ll be able to deduct this from your gross income. Consider investing in a 401(k), IRA, education savings plan, or other tax advantaged account. You’ll be able to invest this money without being taxed on it if you are still under the annual limits.
Taxes are all about being organized and prepared. The better your organization skills, the more likely you are to file your taxes on time and get your maximum refund. And once you’ve created a system for doing your taxes, you’ll find it easier to complete each subsequent year. In the mean time, check out Easier Accounting to start organizing your information and preparing for tax season today.