3 Steps You Can Take Now for a Pain-Free Tax Season
With tax season recently behind us (and the agony still fresh for some), it’s a good time to reflect on how we can improve our process and make next year easier. Here are three steps you can take now to help take the pain out of next year’s tax season.
- Organize your receipts. Whether you opt to store or scan your receipts, you need to establish a system for organizing them. Since the IRS can audit you up to six years after you file, scanning is probably your best option. Taking a picture with your smartphone is a good start, but you may want to look into apps like ShoeBoxed, Itemize, or Smart Receipts (all available for IOS and Android) to help make the process even easier. Evernote, a closed source suite of software designed for note taking and archiving, is another possible option. Evernote allows you to store information in different “notebooks” so you could create a “Receipts” notebook in and upload pictures of your receipts as attachments. Evernote syncs across all your devices and its premium version, which is only $5 a month, allows you to search text in office docs, PDFs and other attachments so they’re easy to find when you need them.
- Use accounting software. Business accounting software like QuickBooks can save you hours of time (and possibly tears) next time tax season rolls around. Popular features include expense tracking, invoicing, payroll, and automatic backups. However, some business owners find Quickbooks to have a steep learning curve, so you may also want to check out Freshbooks, which offers many similar features. Freshbooks is particularly useful for business owners in service-related industries.
- Create a proper business filing system. An organized business filing system can assuage the stress of tax season by helping you quickly locate necessary documents. A good rule of thumb for a filing system that works? You should be able to locate any document in 20 seconds or less. Your filing system should contain clear, simple, and appropriate categories for the subject matter. Consistency is key! You don’t want some customers filed under their business names and others filed under the contact person’s name. That’s how you end up with duplicate files and a disorganized mess. Keep the most frequently used files closest to you and store files you use less frequently in a less accessible place. If you store your electronic files on your computer (as opposed to in the cloud, like Google Docs), make sure you have a backup system like Carbonite in place to protect them.