Last updated: May. 6, 2013
The April 30th tax deadline has come and gone and you did it. You filed your 2012 taxes on time. Congratulations! You deserve a pat on the back.
OK. Now let’s get back to work.
If you’re like many taxpayers, your tax season was chaotic, disorganized, and stressful. How can you make future tax seasons smooth sailing? Start today with these important but simple tips.
Look Back to Plan Ahead
While taxes are fresh in your mind, now would be a great time to start tax planning for next year. An important step in planning ahead is looking back at past tax returns. An experienced tax professional will be able to review past tax returns and offer suggestions to optimize your tax situation for future years.
Stay Current With Your Bookkeeping
It’s easy to put off managing your finances especially when there’s no looming deadline.
Deadline or not, there are some compelling reasons to stay current with your bookkeeping. Trying to remember all of the expenses you incurred as long as 16 months ago is virtually impossible. Why risk missing deductions? Record as you go.
Conducting a monthly bank reconciliation allows you to catch any anomalies with your finances before it’s too late. Regularly assessing your cash flow helps you take corrective action before potentially hitting an iceberg.
Get Out of the Shoebox
If you’re like many taxpayers, when tax season arrives the usual routine of digging receipts and other documents out of a shoebox or your wallet or purse commences.
Before you’re too hard on yourself, remember, at least you’re hanging on to this paperwork.
To make things easier, why not take a photo or scan of each receipt (before it gets into the shoebox) and register the transaction in your bookkeeping system. One and done. And, nowadays, there are plenty of bookkeeping and accounting systems for your small business, including apps that allow you to capture the receipt on mobile devices like your smartphone or tablet.
Keep Business Separate from Personal
Keeping business and personal finances separate is an important component of your tax planning. By not doing so, you risk overlooking a legitimate business expense or claiming a personal expense as a business deduction.
Take the next step now so you don’t have to untangle a mess next year. Open a separate bank account for your business and apply for a new dedicated business credit card.
Stop Loaning the Taxman Your Money
If you have a big refund coming your way, fantastic. But, hold on a minute.
Did you just give the government an interest-free loan this past year? If you have an employer, they’re withholding a portion of your income for taxes.
You might be able to apply to have less of your income withheld at source. That means instead of your money stuck in the hands of the government for months, you get to hang onto it and put it to work for you sooner.
Take a Wholistic View of Your Financial Planning
Effective tax planning is more than simply claiming your basic deductions. Take some time to ensure:
- You’ve chosen the most appropriate business structure for your company
- Each of your investments are tax-optimized
- Your retirement and your estate are protected
- Your children’s education is planned for
- And more
This list may seem daunting but with help from experienced financial and estate planners, you’ll be in good shape for next tax season.
Don’t delay, take the steps now to ensure you have your books in order and keep them up to date to make next year’s tax season pain-free.