With the ending of one year comes the beginning of another. It also means it’s time for everyone’s favorite – tax season!
I used to freak out every tax season. Before I had an accountant I was trying to do it all on my own. And, while I tend to be a pretty organized person when it comes to this kind of stuff, the reality was I didn’t have any systems in place. My tax season organizational skills also have their limits.
Now that I’ve been working with an accountant for a couple of years (while also having some additional organizational support from my virtual assistant), I know what to expect come January when people start shifting their focus to tax season.
Here are some of the things you need to start doing now in order to start preparing for tax season.
Reconcile your bank statements.
You should be reconciling your bank and credit card statements throughout the year, but if you haven’t now would be a good time to do it. Reason being that you’ll need to know exactly how much money came in.
One way tax season makes itself known is when you keep getting tax forms in the mail (or electronically if your clients and financial institutions roll that way).
Lots of freelancers fill out W-9s for their clients, particularly if they are corporate clients with their own hefty accounting departments. Now is the time when those 1099s start coming in the mail.
Additionally, you may get tax forms from your financial institutions. If you qualified for subsidies under the Affordable Care Act then you’ll be getting a form for that as well.
In other words, watch your mail like a hawk in the next few weeks and keep everything organized for your accountant.
Credit card statements.
Remember how our writers have mentioned the importance of keeping your business expenses separate from your personal ones? You’re about to find out why.
If you’ve done your due diligence, then you’ve likely used the same credit or debit card for your business expenses. You’ll want to get those out and organize them for tax season so you can claim the proper deductions.
Taxes you’ve already paid.
Since you’re self-employed chances are you’ve been paying quarterly taxes throughout the year. Tax season is when you find out whether you owe more money or if Uncle Sam owes you money. In order to know the answer, you need to know how much you’ve paid throughout the year.
The good news is these payments will show up in your bank or credit card statements depending on what you used to pay your quarterly taxes.
In addition to business documents for taxes, there may also need to be some personal documentation depending on your situation. These things include alimony, accrued interest, investment income, adoption costs, charitable contributions, education costs, etc.
While tax season usually invokes images of people buried under paperwork, the reality is you have time to gather all the documentation you need. Now that you know what to expect, you can start setting it aside for your accountant.