4 Tips For An Organized Successful Tax Filing

Rich Dad Advisors Entrepreneurship, Reducing Taxes, Taxes 1 Comment

It’s almost hard to believe that we’re more than halfway through the year! Which means, before you know it, a new year will be here and it will be tax time yet again.

I’m sure we can all agree that it would be more than wonderful to have all of your tax documents and business records compiled, organized, and ready to go at the start of the new year? Because then you have the freedom to spend your time crushing those 1st quarter income goals, instead of scrambling to close out the previous year.

The truth is that we all think we have plenty of time to prepare for the tax filing season, but that’s only true if you start now. And we have a handy checklist of tasks that will help you be proactive in organizing it all – sooner rather than later. Here are 4 tips for an organized successful tax filing:

1. Grab a Copy of Your Prior Year’s Tax Return

The easiest place to start with gathering this year’s documentation is to start with last year’s tax return.  What information or documentation was requested by your tax professional last year?  Chances are, he or she will need the same information again this year, just updated.  So, pull out that folder or download that digital file, and get started there.

2. Generate Financial Statements and Schedules

– Profit and Loss Statement and Balance Sheet

If you’re using accounting software and have reconciled all of your transactions, this will be a walk in the park.  You’ll need a profit and loss statement (or income statement) for the year and balance sheet as of December 31st.

– Schedule of Assets

You’ll also need a schedule of assets detailing any assets your business bought, sold, or disposed of during the year.

Get a head start on making sure you’re categorizing transactions properly and that you’re on track with your income goals by generating financial statements now and doing a quick review of them.

Your tax professional will mainly be concerned with the profit and loss statement, which is where business income and expenses will be shown.  Business income and expenses will be categorized on your profit and loss statement according to the chart of accounts you created within the accounting software.

–  A Chart of Accounts

Set up your chart of accounts to mirror the categories used on your Schedule C for taxes (if your business is a sole proprietorship or single-member LLC).  It saves a chunk of time computing and re-categorizing when it’s time to prepare your tax return for the year.  All you or your accountant will need to do is record the balances in your schedule, and keep it moving!

Do you already have a chart of accounts or need more descriptive accounts for decision making and strategy than the Schedule C categories allow?  Well, you can do both! Use the Schedule C category for the first portion of your account name plus “- your specific detailed account name” as a sub description.  Here are a couple of examples – “Advertising – Printed Materials” and “Utilities – Electricity.”

3. Add Up Your Business Mileage and Home Office Expenses

– Business mileage  

Some find it easy to record mileage in a notebook.  But, you already know there’s an app for just about everything!  You should be tracking date/time, distance driven, and business purpose. A great app for mileage is MileIQ.  It’s easy to set up on your phone and tracks your mileage while the app is running in the background on your phone.  So, that means even if you forget to turn it on specifically for your trip, it still has you covered.

– Home office deduction

If your home is your primary place of business or you frequently meet with clients there, then you may qualify for the home office deduction. Obtaining adequate documentation means finding the square footage of the space you occupy plus your annual utility bills, repairs and maintenance, and year-end mortgage statement.  Using this documentation, you or your accountant can determine the proportion of your home expenses related to your business.

4. Compile Support For Estimated Taxes Paid, If Any, During The Year

– Estimated taxes

Estimated taxes are amounts you withhold and send in to the IRS quarterly to offset your year-end tax liability.  It’s important that you make a fair estimation using one of the criteria established by the IRS, or you could be charged a penalty for underpayment. You should have cancelled checks or bank statements and copies of your payment vouchers to support estimated taxes paid during the year.  Your tax professional will need these amounts to offset your tax liability for the year.

And, there you have it – a quick checklist of 4 unbelievably easy tasks that will get you organized and leave you feeling stress-free when it’s time to file your taxes!

Want more accounting tips? Check out Rich Dad Advisor and CPA, Tom Wheelwright.


If you want free weekly tips and inspiration sent straight to your inbox, Click here!

Comments 1

Leave a Reply

Your email address will not be published. Required fields are marked *