Tax season sucks. It sucks even more if you have your own business because you have to give away lots of your hard-earned dough, but you also have to pay taxes on your first quarter’s estimates for that year. It’s like adding insult to injury. Or more money to more money.
Plus, you have to compile all of your earnings, 1099s, and W2s, collect receipts and look back and wonder how on earth you spent that much money. As a new entrepreneur or a first-time freelancer, the process can be really, really overwhelming.
So, I’d like to offer some advice on how I coped this year to help you out in the years to come. A few tips, from one entrepreneur to another.
Have a separate section of your wallet where you keep receipts that you can write off. Take them out periodically and record them in an expense Excel spreadsheet and then file them in envelopes by month.
Put all of your expenses on one business credit card so you can look through the statements and add them all up at the end of the year. Same goes for your business checking and savings account. When you have all of your expenses organized in just a few places, it makes collecting everything very simple.
Also, write down everyone you’ve given a 1099 to or received one from. This can be really stressful and time-consuming to do all at once, so it’s best to do it while it’s happening. Set up a taxes folder and put the papers in immediately.
You should definitely not be going at this alone. Taxes are complicated, and if you have employees and investors and investments, it’s that much more confusing. Frankly, unless you’re an accounting entrepreneur, you should stick to what you’re good at.
Ask around to find out who your entrepreneur friends use, and then interview a few people. Really take the time to talk to them and find an accountant you like.
You must budget for tax season. Know roughly how much you’re making -- in fact, overestimate -- then subtract the varying taxes from that amount and have it directly deposited into a savings account. And have a lean first quarter, spending-wise. You’re going to have to fork over a bunch of money, and it can take a while for your contracts for new business to roll in.
The good news is, if you’re in a pinch and can only pay part of what you owe, you can set up a tax plan online with the IRS that allows you to pay the total amount over time in installments.
If you’re organized, doing your taxes really shouldn’t take as long as you think they will. In fact, I bet you’ve spent a lot more time worrying about your taxes than it actually takes to do them.
So just do them, and then go buy yourself a bottle of champagne because you’ve done one of the hardest things out there. No, not taxes -- starting your own business.
[via The Daily Muse]