Lots of people just finished their extension tax filings, but it’s time to think about next year’s taxes already. Especially if you are a small business. Especially if you are historically not as organized as you’d like to be.
Getting ready for tax season starts now, even before the end of the year.
The goal of good records organization is that it should take less than an hour to find and organize all of your receipts and records in preparation for your meeting with your tax preparer.
If you spend more than an hour on tax prep, you probably need a better system.
At its most simple, have a file, envelope, or box where all receipts, statements, and tax mail goes. Make sure it doesn’t go anywhere else! Even the busiest, most disorganized business owner or homeowner CAN do this much, especially if it saves you thousands of dollars in fees and deductions.
Actually, make that two folders. While you are closing out the old tax year, you’ll be starting the new one, so keep records separated now and save time later.
One of the most important things a business owner can do is meet with their tax adviser or CPA before the end of the tax year, preferably not during the busy season, review their general business operations and plans with their adviser, and see what records might be needed to maximize deductions and credits.
This step will also help answer the question of what papers and records need to be kept and for how long. The general rule of thumb is to keep tax records for 7 years, but it may be as little as 3, or as long as 10 years or more for IRS purposes. There may be other requirements for human resources payroll records that vary according to your state.
Most business owners have two problems with their records: they don’t know how long to keep their records, and they don’t like to file. My favorite tool is the FreedomFiler. While not everyone needs an instant color-coded system, it really does accomplish the goal of helping folks easily set up files that actually indicate right on the file tab what to keep and for how long. It has the added bonus of keeping all tax records in a single place, identified by color, which makes tax prep even easier. There is no one system that works for everyone, but the FreedomFiler solves many problems for most people who implement it.
And yes, there will always be paper, even if you are trying to move to a paper-less system. Staples.com offered a good review of the Pros and Cons of Digital vs. Printed Documents.
Our next Filing Freedom class will be on Thursdays starting Feb 26, 2015. If you want to be on the list to get the registration information, please leave a comment below or email me at Darla@HeartWorkOrg.com.