6 Things You Can Do Now for a Stress-Free Tax Season

You don’t want to get to March or April and get completely stressed and overwhelmed because you’re not ready to file your taxes. Hopefully you haven’t experienced it, but if you have, it. Is. The. Worst. At the end of November, we’re in the thick of the Holiday season and in your biz you’re gearing up for the New Year. Keep reading for 6 things you can do NOW to go through the holidays stress-free, while getting ready for tax season.

1 | Have a Tax Preparer

If you don’t have a tax preparer lined up already, take my word for it and go get one. If you need a recommendation, email and let us know. Whether you’re filing as a sole proprietor or LLC, and especially if you’re an S-Corp, you want a tax preparer. The sooner, the better. A lot are already filling up for the 2023 tax season, and the best ones are probably completely booked.

Reminder: your bookkeeper IS NOT the same as a tax preparer. We’ll help you get things ready to send to your tax preparer, for sure. And having a bookkeeping will make the process with them so smooth and seamless.

2 | Prepare 1099s and W9s 

Determine if you need to file any 1099s or collect any W9s. With a W9, you’ll need your client or contractor’s EIN (or SSN, if that’s what they use). These forms are required to be filed by January 31st, so the sooner you can get these ready, the better. Make sure you have all of the forms ready so you’re not nagging everyone mid January to get those forms filed! Helpful Note: when you first sign on with a contractor, get that info as part of your onboarding process. Saves you the trouble down the road!

If you pay via bank transfer, cash or check, you need to file a 1099. Now, if you pay your contractor with your credit card or PayPal (goods and services, via Honeybook or Dubsado) they send out a 1099k if it hits the threshold. If that’s the case, you’re not required to send one out. You ONLY NEED TO FILE if you pay by cash, check, or bank transfer.   

3 | Get your Bookkeeping Up to Date

If you haven’t been keeping up with your bookkeeping this year, it probably feels really overwhelming to do a whole year all at once. But take a couple hours to sit down and go through one month at a time. Whether you’re in a spreadsheet or accounting software like Xero or QuickBooks, take a night and do January and February. Then another night, tackle another month or two. Get that month accurate, you can do it! Take 30-60 minutes, and do a month for the next 10 days. However you need to do it to get caught up.

You want to make sure all your transactions are categorized, all your cards and accounts are reconciled, and reach out if you want help! We do also offer a 60-minute consulting call. As you go through, let’s say you went on a trip and you’re not sure how to categorize it. Should it be all travel, do I split out meals? If you’re not sure, give your accountant a quick call now before things get busy with tax season!

4 | Run Payroll Before the End of the Year

If you’re filing as an S Corp, be sure to run payroll before the end of the year. As an S Corp owner you’re required to pay yourself as a W2 employee and you’ll withhold payroll taxes. This goes back to our point to get a tax preparer to support you through this, because filing as an S Corp does change things up a bit.

If you’re not filing as an S Corp, then you don’t have to worry about this 😉 And if you have no idea what an S Corp is or why someone would file as one, check out this blog post. But basically, if you file as a sole proprietor or LLC then you don’t have to worry about payroll. You just pay yourself through transferring from your business to personal checking.

5 | Lower Taxable Income

Depending on where your profit is, determine if you need to prepay anything to lower your taxable income. Your taxable income is your net profit, your sales - expenses. That’s what’s going to be taxed. If you have a really high taxable income, consider paying down that payment plan from a course you purchased. Maybe you’re planning to redo your website in January or February. See if you can pay ahead of time and book your spot now (you might not be able to do this, depending on if they want to report your deposit as income this year or not). However if you don’t have the money, don’t spend it. It’ll hurt your cashflow and you’ll see the repercussions later.

Keep in mind that while you can and might want to lower your taxable income… it’s to an extent. Don’t try to write off everything (or make last minute purchases to lower your taxable income) just because you have a higher tax bill. A higher tax bill could mean that you’ve doubled your income. Paying more in taxes isn’t necessarily a bad thing. Note: if you’re paying estimated taxes throughout the year, you won’t get hit with a huge tax bill at the end of the year. If you haven’t paid estimated taxes, consider it for next year!

6 | Don’t Forget Your Home Office & Mileage Deductions

Let’s start with mileage. A lot of people will track their miles AND put their gas as an expense on their business account. Now, If your car is owned by yourself personally and not your business, you need to track your mileage ONLY. Your gas shouldn’t be going through your business account, use your personal instead. What you can do is raise your pay to compensate for your gas station charges.

For your home office, the simplified method is $5/square feet of your home office with a $1,500 cap. For it to count as a deduction, it needs to be a separate room solely dedicated to your office. So your upstairs landing, nook in the living room, makeshift office doesn’t count. The actual method would be taking the square footage of your home office, and a percentage of your utilities you can write off. For the sake of this post, I’m not going to really get into the “actual” method. Personally, and for my clients, I’ve found the simplified method to work best.

I hope you found this helpful! I know that tax season can be really stressful for some, and I’m here to tell you it doesn’t have to be. Prepare now, get support where you need it, and you will be good to go. Reach out if you have any questions!