Phew. Another busy tax season. Scrambling for statements, searching for lost receipts, and trying to make sense of that random $52 charge during a conference 5 months ago.
For entrepreneurs and accountants, tax season is one of the most stressful times of the year. Inconsistent record keeping leads to confusion as to whether an expense can be written off or it was an accidental personal expense that slipped through the business bank account.
Were all of your conferences accounted for? What about the taxi rides paid in cash during the trip? Or the random café meetings with potential clients.
Did we capture all of the business expenses? And have they been categorized correctly?
For many entrepreneurs, accurate bookkeeping is pushed to the end of the to-do list until tax season hits. Even boutique businesses with a bookkeeper on staff sometimes fail to keep accurate records.
And although we fear that the IRS show up at our doorstep to audit the not so tidy area of our business, this isn't what we should be most concerned with.
I sat down with Kelly Phillips Erb, Forbes Contributor and Tax Attorney (and founder of Tax Girl) to learn about her advice to businesses. Much to my surprise, Kelly revealed an interesting fact.
"The #1 mistake I see entrepreneurs make is paying too much in taxes."
According to Kelly, most entrepreneurs know how much they make. But, they fail to keep tabs on their expenses throughout the year. These expenses add up and it is within our right to write them off.
For example, those lattes you buy every time you work at your neighborhood café are a tax write-off. Anything you pay for in cash during a trip to a conference is an expense.
If you don't maintain a program to track these expenses, the likelihood of you forgetting about it during your tax filings is...well...almost an absolute certainty.
And since most of us just want to get our taxes in before the deadline and just be done with it, we overlook these expenses and just submit our file. And end up paying more than what we actually owe.
What are 3 things you can do stop overpaying your taxes?
- The first thing you need to do is find a money tracking program that works for you. I recommend an online based bookkeeping program. Click here to read which programs I like and why.
- The second thing you need to do is to set up a regular bookkeeping date. Calendar a weekly time that you will sit down and review the previous week's transactions and categorize them (also known as reconciling). If you have a bookkeeper, set up a regular weekly or monthly meeting with her to go over the transactions.
- Use an app to keep track of your receipts. As soon as you purchase an item, snap a pic and save it to your bookkeeping program.
Which bookkeeping program do you use and how has it helped your business?
Please share in the comments below. Your insights could inspire another business owner.
Danetha Doe is a cloud accounting expert. A business coach and former NFL Cheerleader, she is on a mission to bring sexy back to the world of accounting.
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