Ah, taxes! They are the single greatest stressor of owning my business,
especially during these early years when revenues tend to be lower and less predictable. What makes planning for them so tricky for me is the perception that the obligation is delayed, so it’s easy for me to put them off and trust that things will come together. I’m still working on making a consistent monthly deposit strategy, but for now I’m winging it (which makes me really uncomfortable). In the spirit of getting more organized with my taxes, I’m starting a tax preparation schedule for the entire year. My plan for the first four months is:
- Make my fourth quarter estimated tax deposit (1040-ES) from last year by the 15th (DONE!).
- Make a folder to collect tax documents as they roll in (mortgage interest statements, W-2’s/1099’s, health insurance 1095-A, donation receipts, medical expenses, etc.).
- Complete any bookkeeping from last year (keeping up with it monthly simplifies this) and print an annual income statement, which lists my gross sales and all business expenses.
- Start completing my 1040 and Schedule C forms.
I use Turbo Tax (this isn’t necessarily an endorsement, just what I’m used to using). After sitting down with an accountant a couple of times, I realized all she was doing was plugging in information I provided for a hefty fee. Filling my taxes out early lets me work on them in smaller chunks (keeping frustration to a minimum), reveals any missing deductible expense documentation, and gives me an early idea of how much will be owed so I can plan spending for the next couple of months accordingly.
- Increase revenue and reduce spending (if needed).
My fees will increase in March (I’ll write about that soon). If a price increase didn’t feel right, I’d create some kind of promotion to drive up sales for the month. If an expense can be delayed until after tax day, I’ll let it wait.
- File AND make my first quarter estimated tax deposit for this year by the 15th. (Time will tell if the second goal for April is achieved; I’ll keep you posted.)
I wish I could say that I’m completely on top of my taxes, but in my third year of business I’m still juggling. The IRS is not known for its leniency and compassion, so it’s my responsibility to figure this out. Not only does my livelihood depend on it, but I owe it to the clients who rely on the service I provide and want to continue being a part of this practice that I love!
Do you have a successful tax management plan or advice? Please share it in the comments. Thank you!
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If your adjusted gross income is $62K or less, you can file your taxes for FREE! Click here for that link.