Just one more week to get it done…
Have you filed your return yet?
Or are you struggling to finish it over the next few days? If so, you’re not alone.
The majority of returns come in during the last 14 days before the due date; in part, because many people feel uneasy about filing their taxes.
But perhaps you’re different… and tax season causes you no distress whatsoever? If that’s the case, Good For You!
Unfortunately for most, tax season comes with a dose of overwhelm and anxiety.
Too many people have this irrational fear of making mistakes with their return that might get them in trouble with the IRS.
Just the word “IRS” brings out a degree of fear in most… and it doesn’t matter that they’re law-abiding, honest, tax-paying citizens.
Why…? Well, that’s another story, for another time.
But now, let me ask you this.
What happens when we’re afraid of something?
- We avoid…
- We stall…
- We procrastinate…
At least that’s how it works for most of us.
While some anxiety and fear are understandable and even useful (keeping us on our toes), too much of it is counter-productive.
If you too are caught in this conundrum, there are simple steps you can take to move past it; they apply both to your business and personal taxes.
So here are the five steps you can start implementing, today:
- While it sounds so simple, it turns out to be a challenge for most of us. Make a commitment to get organized once and for all; it will make all the difference in the future.
- Dump the shoebox approach… stop throwing all your receipts and statements in a box or folder. Or worse yet, stop putting your receipts in random places. If you can’t back up your deductions with the proper receipts, you might as well not take them.
- Create a filing system that makes sense to you, and you will use. It doesn’t matter what it is… physical folders… online folders. Stick with what’s familiar and easy for you to use. Avoid new gadgets and tools with steep learning curves, unless you’re committed to making them work for you.
- Create categories within your folders that make sense to you. Be consistent with putting receipts into the correct folders or scanning in your receipts into the proper online folders.
- Decide which format to use for your records. Will it be all paper or all digital? Or, will you use a combination of both? It doesn’t matter what you decide, as long as you’re consistent with the format of your choice.
- If you want to switch your record keeping system, from paper to digital, consider implementing the change at the beginning of a new tax year.
- Do you maintain a separate account for your small business? Even if you’re starting out in your practice, make sure you open a separate account. Do not mix personal and business funds. If you have more than one business, do you maintain separate accounts and checkbooks for each? It makes your life much easier when you track income and expenses for each business in different accounts.
- How many credit cards do you use for your business? Do you charge business and personal expenses to the same credit card? If you do, stop at once. If necessary, get a new credit card for your business and try to stick to the one card. While it’s not illegal to do, it’s not in your best interest to mix and mingle personal and business funds. Sure, from a bookkeeping perspective, you can sort it out later. But it will cost you time and money to separate the charges; so why not do it right from the start?
- Do you consistently track your income and expenses by recording all numbers? Think about your practice… Don’t you track vitals for your patients? And don’t you do this every single time someone comes in to see you? How else would you know if a key metric had changed? The same applies to your business. Unless you track the numbers, you won’t know if you’re meeting your goals or if there is enough cash flow to pay the bills. And one more thing… it’s been said, that you can’t improve what you don’t measure!
Establish a Schedule
- Do you keep up with your records on a regular schedule, religiously? If you don’t, it’s time to set up a schedule for yourself, one you can live with and stick to. If you set aside time now, let’s say thirty minutes to one hour every week or every month, your records will be in good shape come tax time. Don’t allow yourself to fall behind, because once you do, it’ll be hard to catch up.
Hire it Out
- If you find that you just can’t keep up with it all, hire it out. Let someone else do it for you. First of all, in all likeliness, a professional will take far less time to do the work than you would. Second, even though someone else does the actual recording, it still forces you to keep up with the paperwork. You still need to collect and either forward or scan receipts and statements.
- If you hire it out, make sure you get regular reports and take the time to review them. Unless you do, you won’t know how your business is performing and whether you’re on track to reach your goals.
When you implement the small steps outlined above, you will stay on top of your records and bookkeeping.
Not only will you be better prepared for next tax season, but you’ll also experience far less fear and anxiety, unleashed by pulling everything together so you can file your taxes.
As with everything else in life, it seems success is not the result of one big action we take, but instead comes down to the small steps we take, consistently!
We’d love to hear from you…
Tell us what you do to get ready for taxes and how you handle anxiety around taxes…
By Johanna Hofmann, MBA, LAc; regular contributor to the NPBusiness blog and author of “Smart Business Planning for Clinicians.“