Today, we are so excited to chat with our friend Wendy, The Tax Muse and founder of The Tax Collective, a community of creative-minded individuals who share, discover, and connect with each other to navigate the complexities of taxes and accounting in a collaborative online space. As entrepreneurs currently navigating accounting ourselves, we are so thankful for Wendy’s advice – especially at year end when there is no more putting off our accounting related tasks!
Wendy specializes in working with creative entrepreneurs and with over 10 years of professional tax and accounting experience, we are thrilled to seek her counsel on questions that we hope will help all entrepreneurs. Here’s the inside scoop on our conversation with Wendy!
Set Yourself Up For Success
BT: With taxes, a lot of time in tax season business owners start to file and realize, ‘Oh shoot, I should have thought of X!” What is your best tip to set my business up for success ahead of time when it comes to filing taxes?
Wendy: One of the key things to ensure you are set up for success when it comes to taxes is: Organization!
If you are diligent about collecting and organizing tax info/data throughout the year, the stress and anxiety that comes with taxes will be significantly reduced when tax time comes around. One basic thing that every business needs is a tax folder – whether this is a physical folder you keep in your home office or a folder you keep in the cloud. You should have a file started for each tax year so you can put all your tax receipts, tax documents, and important looking tax records that come your way throughout the year.
Even if you don’t have time to organize everything, having all tax related info contained in one place will reduce the time you spend hunting down the info later. There are also lots of great tools and apps out there that can be used to make info/data collection easier: online bookkeeping software that links to your bank accounts, receipt tracking apps that allow you to use your camera to snap photos of receipts and upload to your tax file, mileage trackers to automatically track your business miles, and so much more.
Tips for That Year End Rush
BT: Timing wise, small business owners can feel strapped at year-end with closing the books. Any tips for avoiding the end-of-year rush with my vendors and clients?
Wendy: Make sure you’re caught up with your bookkeeping as you get close to year end. If you haven’t started, now is the time! Identify any questions you may have and ask your accountant, CPA or other resources to help. Create a timeline of tasks that need to be completed by year-end and through early January.
Whether it’s taxes/bookkeeping or operations, figure out the deadlines for each task, and then work backwards to make sure you can fit all this within the allotted time that you have. Keep in mind what’s most important to you for your business – many times that means prioritizing vendors, clients, and employees needs. Try not to let taxes or bookkeeping stress you out – as long as you have systems set up to keep records, the data and numbers needed to close your books will always be there.
Below are a few tax & accounting tips you can do now to help alleviate tax season stress as we get close to year-end:
– Identify payments you’ve made to contractors greater than $600 in 2018 so you can issue them a 1099-MISC. Have them fill out a Form W-9 to collect their name, address, EIN/SSN info if you don’t already have it.
– Reflect on last tax season. Identify issues you ran into last year that may occur again this year and find resources to help early on.
– Create a list of all tax items you gathered for your CPA/tax preparer last year so you know what to be on the look out for. You’l likely need these same items for this year’s taxes, if not more.
– If you sell tangible products, schedule a time on your calendar to perform an inventory count. Schedule it on the last day of shipping and receiving for the year so you can have an accurate inventory value as of 12/31/18 for your balance sheet.
– If you use your car for your business and deduct car expenses make sure you’re tracking your business mileage and schedule a reminder to jot down or snap a photo of your odometer reading on 12/31/18. This will be needed to determine how much of your car expenses are tax deductible.
Making Bookkeeping a “Habit”
BT: Great advice! Finally, what is any easy task that I can do daily or weekly that will save me a lot of time down the road when it comes to filing taxes?
Most people spend a lot of time at the end of the year preparing to file their taxes because they’re trying to catch up on a year’s worth of bookkeeping. This is stressful because of the volume of transactions you’re having to go through, and it’s also quite difficult to remember the details of what happened in your business a year ago. So, one of the most important factors to relieving that stress is to keep up with your bookkeeping throughout the year.
With all the great bookkeeping software out there, the bulk of “bookkeeping” really comes down to categorizing your expenses for most small businesses. I recommend new business owners dedicate at least an hour once a month (or more frequently, if needed) for bookkeeping and organizing tax documents.
The key here is to dedicate a specific time on a specific day so that you make bookkeeping a habit. Once you make bookkeeping a habit, the time involved in “filing taxes” is significantly reduced. A little really goes a long way here!
Thank you Wendy for spending your time in helping us navigate the world of taxes. We love that Wendy’s goal is to provide accessible resources to small business owners so they can be in control of the tax and accounting aspects of their finances, which will help them to make better business decisions and ultimately take their business to the next level.
Follow Wendy’s IG account @thetaxmuse for tax & accounting tips relevant to the creative small business industry and don’t forget to check out her new forum: www.thetaxcollective.com, a community of creative-minded individuals who share, discover, and connect with each other to navigate the complexities of taxes and accounting in a collaborative online space.