At first glance, taxes and accounting are the least sexy part of running a business. Most of us want to run and hide at the thought of getting our stuff organized for filing our taxes. Making tax time less stressful can feel impossible. Figuring out how to file small business taxes for the first time can add even more weight on our shoulders.
How to Make Tax Time Less Stressful
What can we do to make tax time less stressful?
Embrace the system.
First, recognize that you are not alone.
There are literally thousands of entrepreneurs just like you having the same feelings and fears. We are bombarded with tons of horror stories that make tax time sound like an annual death march.
Let me reassure you, the IRS is not out to get you. The number of people who are audited each year is minuscule compared to the number of people who file. And it’s even more unlikely that you will go to jail over taxes.
According to the IRS, of the nearly 141 million individual returns filed for the fiscal year 2011, 1.1% were audited. Those odds are definitely in your favor!
Take the time to learn the basics.
Once you kick your fear of the IRS to the curb, it’s time to learn some basics. We are programmed to fear the unknown…the more we familiarize ourselves with a topic, the less scary it becomes.
Does that mean I want you to spend hours researching taxes for small business? No way! You should, however, connect with some reliable sources and get a good overview. This post is not meant to be a complete handbook to tax time is a great place to get started!
Designate your home base.
Pick a system that you’re familiar with and stick to it.
If Trello is your jam, then start a Taxes board and attach any and all tax-related documents to that board.
The same thing goes as an Evernote junkie: Open a notebook and create new notes for each document or important information. If it makes you happier to create a beautifully designed document in Canva or Illustrator, go for it!
You can even set up automation using IFTTT or Zapier to move existing items into your home base. I do this to take all those receipts sitting in my Gmail and move them over to a folder in Google Drive as PDFs.
Working in a place that is already comfortable for you will immediately relieve the pressure of using something foreign to you.
If you do want to use a tool tailored for organizing finances, then find a course or training guide on it. You do not need to be scrambling to figure things out on your own. You can even hire someone for as little as an hour to show you how to use the system. They often know the simple shortcuts to make the job must faster.
Make a game plan.
If you didn’t track anything from last year’s tax time and you’re overwhelmed by the thought of catching up, it’s okay!
I remember the first year my husband had a business (long before I started mine). I had to print out 12 months of bank statements, pop them into a binder, and bust out my mad highlighting skills to find all the income and expenses. It took a while, but I did it. And it felt so good after.
You may have all your income tracked in one spot like PayPal, Stripe, or your invoicing software. That will make the step of adding up all your income relatively easy.
The business expenses are often the transactions that can be all over the place.
If you’re pulling your hair out because sifting through mixed accounts is making you nuts then here are two easy steps you can take now in your business to make your life oh so much easier in the future.
- Open a separate bank account for your business (this also applies to PayPal accounts if you use PayPal).
- Set up a tracking system. This could be a simple spreadsheet or an online accounting program. Use the system that works best. If you’re looking for a free online system then you might want to check out Wave.
The hardest step to take is the first one? Let’s make this even easier for you. I want you to put on your most happy music. Now open you homebase system and go for it!
If you need to organize the whole year, just take it one month at a time.
Take a break and give yourself a little reward for finishing each month’s (or quarter’s) worth of work. Don’t expect to bang it all out in an hour, but the longer you put it off the more the stress will build.
Tips for finding all the expenses:
Start with the things you purchased on subscription and the really big-ticket items. Next, go through those email receipts for the one-off purchases. Finally, bust out the bank and credit card statements to find the missing items and make sure you counted the correct amount of recurring monthly expenses.
There are two other places I often find hidden/missing expenses: my amazon order history and my iTunes account (or Google Play if you’re using Android). Those types of accounts have a purchase history with a mix of business and personal, so they won’t always pop into your head at first.
It may suit you to hire help if you keep putting off your tax filings. Sometimes having another person to walk with you through the process can alleviate a huge amount of stress.
If you’re wondering whether you should just file your tax return on your own, here are some questions to ask yourself:
- Was there a change in my financial life during the last year?
- Did I get a tax form that I’m not sure what to do with?
- Did my business make a profit?
- Do I have a home office?
- Did I make some big purchases this year?
- Am I finding more questions than answers while I file?
Seeking the guidance of a tax professional might be the next best step.
Set up a call. See if you guys would work well together. Find someone to partner with you on your journey.
One of the most surprising facts that people discovery is that hiring a professional is not as expensive as they thought.
Taxes do not have to be stressful for you. Whether you decide to DIY the whole process, or add some help, know that it will all work out.
It doesn’t have to be scary learning how to file small business taxes for the first time. Now you know what to do in order to get started.