As we all scramble to get our financial lives documented and organized by the looming April 15th, I thought I’d share a few things that have made the process easier for me personally. Here are five ways that you can get ahead of the game and soften the blow for yourself so that next year’s tax season is a breeze. Well, maybe not a breeze – but at least hopefully not a crippling wind. These tips come equally from the wisdom of my friends and colleagues, as well as from (sometimes painful) personal experience.
1) Pay quarterly instead of yearly.
Instead of paying your taxes all in one chunk every April, look at your yearly earnings, look ahead, and make an estimate as to what you’ll have to pay in the following year. Then you can sign up with the IRA to send in checks four times over the course of the year. Making your payments is far easier when you don’t have to do them all at once. For detailed instructions, CLICK HERE.
2) Set aside a portion of your income throughout the year.
This great tip came from a friend of mine a few years back and I’ve been doing it ever since. Open a savings account and then when you deposit your checks, always put 30% into your savings account. If you can get into the habit of doing this and commit to leaving that money alone, it will be right where you need it when it comes time to make that tax payment, making it far less painful to say goodbye to that money!
3) Use an app for receipt saving and reports.
I use FreshBooks for all my client invoicing, and it has some fantastic tax-time-related tools such as receipt capture, profit and loss statements, and lots more. Highly recommended!
4) Open a business bank account.
I can’t tell you how much easier my life has been since the day I opened a business bank account and credit card all for my two businesses (web design and also music). No more sifting through my expenses at tax time because they are all already separated and either on that credit card or coming out of that account. So easy. Not to mention this also gives you enormous protection should someone ever sue you. You want to have your business money completely and totally separate from your personal money so whatever happens, no one can touch your personal assets.
5) Remember that you can deduct more than you think
Do you really know EVERYTHING you can deduct? I found this fantastic article that gets into the nitty-gritty of everything you can deduct from your income so you can save money on your taxes.
6) Hire someone to do this stuff for you!
I’ve been having someone do my taxes for 10+ years now, and every year I feel it’s completely worth the money. No matter how smart you are, a professional tax filer will know all the loopholes and tricks to both save you money and make sure you’re not putting up any red flags.
