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Title: Making Tax Time Less Taxing: Part One - Keep Good Records!
Written By: John M. Hanevy
Web Site: http://www.ezinfocenter.com/8386234.407/AffiliateProgram.vstore
© 2005 John M. Hanevy
If you're like most people you rank doing taxes very low on your list of favorite things to do--right above cleaning the bathroom fixtures, if not lower! Unfortunately, taxes are a necessary evil--so how can you make the process less painful?
Start by keeping good records of your business. Make a spreadsheet, if you don't already have one, to help you keep track of each expense as it occurs. Set up your spreadsheets in "quarters", since you will have to know your quarterly income to determine whether or not you need to make estimated tax payments to the IRS. If you'd rather avoid this, then make an estimated payment for the full year based on last years' income, or a reasonable estimate. However, you will still need to verify each quarter, that this estimate is still valid. If you overpay estimated taxes you get it back at the end of the year. But, if you underpay you will pay a penalty--so be careful here!
Track any income you receive from your business on the same spreadsheet, or a separate one. If you track it on the same spreadsheet it may make it easier for you to keep track of your current profit/loss situation--but this is a personal choice.
Make a separate category for each known expense, and leave room to add more--usually not a problem if you're using a spreadsheet program. Some suggested categories to start with: advertising, shipping costs, rent, computer costs, ISP services, phone services, and mailing costs. These are just suggestions, you may have more or less than this depending on if you claim part of your home as a business office. (Talk to your accountant!)
Keep all of your receipts! Make a separate folder for each month of business expense receipts. If you use a credit card for all business expenses label each expense with a description, if needed, when it comes in--you may not remember at the end of the year! If you have a scanner, scan and save your receipts to your hard drive, or to a CD-R or CD-RW. Store your online receipts in an "offsite" mailbox folder--this is a good backup if your computer crashes and you lose your local copy. Back up all information that is pertinent to your business at least once a month.
Consider maintaining a separate checking account and/or a separate credit card account to make it easier to separate business expenses from other non-business expenses. If you keep your online receipts and then match them up against your credit card statement (something you should do in either case) than you may be able to get by without doing this.
Keep a separate spreadsheet of all inventory that you purchased, and its associated cost. This is CRITICAL if you are a Direct Seller--meaning you buy in bulk, then resell at a mark-up. If you are an Independent Contractor of an affiliate program, and only use their websites to make sales, you are not a Direct Seller. Direct selling can be very profitable, but you must keep very good records!
Before doing your taxes--get all your documents and receipts together FIRST! Your State Return uses information from your Federal Return, so do your Federal Return first. Consider buying one of the many tax programs available, or using one of the online services. The IRS website has links to several programs--some are free--that you can use. Most of these programs also offer efiling, for a fee. The programs vary in ease of use--the ones that use an "interview" technique are the easiest to use--you just answer questions and follow the instructions. In most cases you will save money over paying someone else to do it for you--they may be using the same program!
These programs are adequate for most tax situations, but if your situation is very complex than you may be better off using a professional service. Check to be sure that your state accepts returns from your chosen program if you decide to do your state taxes this way too. If you purchase a program make sure that it automatically carries information from your Federal Return over to your State Return--this will speed up the process quite a bit, this is a common feature.
Make notes for next year! You will most likely be facing the same tax issues next year. Write down anything that gave you trouble this year so you don't end up retracing the same problem next year! Finally, make sure you keep a copy of your return and any notes you made, so you can refer to it next year. If you follow these suggestions then you will need fewer aspirins next year!
About the Author
John M. Hanevy is an affiliate of SFI, Strong Future International.
SFI markets many products for business and personal use: IAHBE memberships, business training, wireless plans, multivitamins, Purjava coffee, environmentally-friendly cleansers, and more! Become an affiliate for free, no fees. Training, websites, support provided. https://www.ezinfocenter.com/8386234.407/AffiliateProgram.vstore
Today's article was originally received for publication in March 2004. The author has given full permission to publish it either electronically or in print, free of charge in its entirety as long as the article content remains unchanged as is published here today and that the authors copyright with resource box are included.
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