The 2018 tax deadline is barreling ever closer, which means that you are no doubt laser-focused on filing for the year, if you haven’t already. The fact that it is still early in the year means it is also the perfect time to reassess your organizational methods to help make 2019’s tax season a bit less stressful.
Know your dates
While April 15th is the tax date that rightfully gets the most attention, it is just one of four dates on which you will need to submit your quarterly taxes if you are self-employed or a small business owner. This might be a surprise if you’ve been used to the once-a-year tax deadline, but with the right preparation, it is a system to which you should be able to adapt quite easily.
According to the Internal Revenue Service, individuals will need to file quarterly taxes if they are an independent contractor; a sole proprietor in trade; a member of an LLC or other such business partnership; or run their own full- or part-time business. Once every quarter — specifically, on the 15th of January, April, June and September — you will need to estimate your expected tax payment for a full year and pay one fourth of it. This makes it all the more imperative to have your necessary documents easily accessible and conveniently located the entire year.
Have an effective filing system
No greater necessary component exists for keeping your business organized than having a dedicated filing system for your important documents, both tax-related and not. A successful filing system will have clearly labeled and coherently organized folders, containing everything from current business receipts to tax documents spanning the past seven years.
A good filing system, however, is about more than just keeping your papers in folders. Marjorie Adams, business process and systems expert at Fourlane and member of the Forbes Finance Council, recommends using accounting software to keep copies of all necessary receipts. Intuit adds that the potential for paper receipts and documents to wear down or become damaged should be encouragement to scan everything and save it as a PDF file. These should then in turn be backed up on physical external drives or in a protected cloud. Still, if you prefer physical documentation, you can apply the same logic by printing off secondary copies of all important paperwork.
Mark J. Kohler, CPA and author of “The Tax and Legal Playbook,” writes for Entrepreneur that the importance of saving all receipts related to your business “cannot be overstated.” This refutes the ideas of the “Cohen Rule,” which allows business-related expenses to be deducted if there is no receipt present so long as you have “other credible evidence,” and IRS Publication 463’s exception that documentation is not needed for any expense other than lodging that is less than $75. Keeping every receipt — no matter how great or small — is the one surefire way to guarantee that the IRS do not come calling over any perceived discrepancies.
Taxes can be and often are sources of great stress for individuals and business-owners alike. If you feel like your grasp on your obligations is more tenuous than you would prefer, do not hesitate to seek out the help of a tax professional. They’ll give you all the insight you need to improve your organizational skills for the years ahead, and they’ll provide the peace of mind that allows you to focus more of your energy on the growth of your business.