Let’s Talk Taxes

“But wait…it’s November…” You bet it is! Why wait until April to start reconciling the past year and gear up for taxes? Unnecessary stress in my opinion! I have a few tools and strategies I use all year long to make that mid-April deadline a little less intimidating, and I thought it’d be fun to share them with you! While I know that the holiday season can be one of the busiest times of year, it’s worth it to carve out an afternoon to look back on the year while things are still fresh. And once you have these systems in place, you’ll be able to slowly chip away at the prep and stay organized for tax time all year long.

Quick disclaimer #1: I AM NOT A TAX PROFESSIONAL. Or an accountant. Or anywhere close to those things. Please take this post as one person’s perspective and tips for staying organized for taxes. THIS IS NOT A POST ABOUT HOW TO DO YOUR TAXES. If you have tax questions or concerns, please, please please go pay a professional!

Quick disclaimer #2: This post is written through the lens of a small creative business in Oregon. If you don’t live in Oregon, and don’t run a small creative business, this may not apply. :)

01 - Create a money system

Create a system for tracking your business income and expenses throughout the year. I have a separate bank account for my business in order to easily track all business related finances, and at the end of each month I categorize all expenses within a program called Quicken. “What categories do you use?” Great question! I created categories within Quicken for each line item of a standard Schedule C tax form that applied to my business (with a short description of what falls into that category, so that I don’t forget), and then at the end of each month, I assign a tax-specific category to each expense. That way, come April, when I need to log how much money I spent in each category, all I have to do is run a quick “Category Summary Report” from the year prior and then write in the totals!

This can also be accomplished in several other programs like Quickbooks, Mint.com, or even a simple spreadsheet! I’ve used Quicken since high school and it works the best for me.

Be sure to save your receipts as well! I usually take a photo of mine and attach it to the expense within Quicken. Doesn’t hurt to save the physical copies as well if that’s more your style.

02 - Track that mileage

There are two way to be reimbursed for miles driven/car expenses/etc. and the most financially beneficial for me is to track my business related mileage throughout the year. I have a spreadsheet that I call the “Braevin Mileage Tracker” where I log ALL business related driving. I record:

• Date

• Event

• “From” location (usually my house)

• “To” location (the city where I worked)

• Total miles driven (don’t forget to count the way home!)

• The County + Zip Code of the city I worked in (this may not apply to other states, but is important for Oregon)

• The amount of time I spent working in that place

At the end of the year, I add up the necessary columns needed for tax time, and tuck it away until April.

03 - Quarterly payments

I (do my best) to make quarterly payments throughout the year to the IRS and state government. It’s easy to forget, but can be really helpful! Your tax payment will be reduced by the amount you’ve already paid throughout the year, so it’s a nice way to pay gradually instead of writing a few very large checks in April.

04 - Donations

Ministry giving, tithing, Goodwill drop-offs, you name it! All of it is tax deductible. Most ministries or charitable organizations will send you “giving statement” at the end of the year for tax purposes - don’t throw that away! And for each Goodwill or Salvation Army drop-off that I do, I always take photos of the donation pile beforehand (clothing, home goods, etc.) and itemize out a rough estimate of what it’s all worth. Then I print out the photos with the cost estimate, and save that for tax time. Make sure you get a receipt when you drop everything off to attach as well. This is always a good incentive for me to clean out the house every couple months and get rid of stuff we don’t need. Bonus!

05 - Keep it all in one place

Are you a “pile” person? Maybe there’s that corner of the kitchen or your desk where you stack “important things”? That’s a recipe for misplacing important documents and receipts needed for taxes. I have a file folder titled “Taxes” where I collect all documents throughout the year. My quarterly payment envelopes are in there, donation information, big business purchase receipts, etc. If it’s related to taxes, it goes in that ONE folder. Maybe for you it’s a letter sized box, or a designated desk drawer. You have to do what’s best for you, but trust me, that pile next to the microwave is not going to be your friend in April. It sounds silly and elementary, but it’s so important! I also follow the same structure on my computer. I have a designated folder on my computer and an email folder specifically for Tax related items. So no matter how life throws tax info at me, it’s always in one of those places.

There are tons and tons of resources out there for how to prepare for taxes, many of which have been helpful to me on my business journey. So if this doesn’t resonate with you, keep searching! I’ve been following this system for the past three years, and I’m always surprised with how painless tax time can be. Don’t hesitate to write a comment or send me an email if you have questions, I’m an open book!

Enjoy this FREE printable reminder sheet of how to stay on track for taxes!