Let's pretend April 15th has come and gone. Your taxes are filed and the annual stress is starting to subside. Before you put all your tax documents away, take a second to evaluate how this year went. What can you do now to make April 2014 less stressful?
1) Keep your bookkeeping up to date
If you are self-employed, it’s very important to keep accurate books and records detailing the income and expenses related to your business. It’s easy to let the bookkeeping slide when you are busy with projects, but the scramble to get everything entered and organized by April 15th can be avoided by keeping your system up to date throughout the year.
Take the time to find an accounting software option you like so you will be more eager to keep up with this task. Bookkeeping will also be easier if you have a separate bank account dedicated to your business. This will keep you from mingling business and personal expenses and keep your books cleaner.
2) Start a filing system
Throughout the year, you will want to keep track of all receipts for large purchases related to your business. This can either be done in a file folder or by scanning your receipts and storing them on your computer. Either way is acceptable as long as you have the documentation you’d need, should you ever be audited.
It also helps to start a folder to keep track of all the important tax-related documents you receive throughout the year. This way you know where to look when you begin to calculate your taxes next year. Keep any property tax statements, confirmations of charitable donations, and records of health expenses. Knowing you have all the information you need before you start greatly reduces the stress of tax preparation!
3) Pay estimated taxes quarterly
To avoid penalties (and larger payments at year-end), you should be making estimated tax payments on income you earn from self-employment. Anyone who earns income from self-employment (i.e., anyone who is not an employee with wages subject to tax withholdings) needs to pay estimates each quarter.
4) Adjust withholdings at work
If you work for someone else and have federal, state, and/or local taxes withheld from your income, consider reviewing your withholding amounts if you had a large refund or owed a large amount of taxes this past April 15th. The IRS has a withholding calculator to help you determine the amount you should have withheld on your regular paycheck.
5) Consider working with a professional
Accountants don’t pack up their calculators on April 16th - they are available year-round should you have questions about your prior returns, your ongoing business, or your future plans. Many offer hourly consulting. Consider investing in professional help to streamline your bookkeeping and tax processes.