Tax season only happens once a year, so it can be really easy to spend a ton of time handling it all at once, and then forgetting about it until March or April comes back around the next year. To only worry about it when the deadline is approaching. But what if you could spend less time on your taxes each spring?
I do! In fact, my tax season is a piece of cake. (Or, a scoop of ice cream ….) All because I’ve created a streamlined system that keeps my numbers organized in minutes. And I am going to walk you through how to create a game plan to organize your tax numbers in a streamlined way so that you can spend less time during tax season.
I want you to be able to spend less time prepping during tax season, and the best way to do this is by already having your numbers organized when it’s time to send them off to your accountant.
A great starting point is understanding the different tax categories your expenses can fall into. So, I created a free guide for you. In this guide, I’ll walk you through the 15 most common tax write-off categories and what expenses fall under each of them. Plus, I’ll give you a few caveats for a few of these categories that you should know about.
Step One: Set Up a Tracking System for Income and Expenses
The first step to creating your game plan is setting up a tracking system for income and expenses because tracking those numbers is crucial for filing taxes.
You need to know your income and expenses so you can correctly pay the right amount of taxes that you owe at the federal, state, and local levels. It’s not something that you can just guess. Correctly paying your taxes is based on the income that you’ve made throughout the year, minus the expenses that you’ve paid. That net profit should be used as your basis for what you owe in taxes.
Paying an incorrect amount can lead to fines or just in general lead to you paying more in taxes than you really owe, especially if you aren’t tracking your deductions correctly and you’re missing out on savings that you could have in your taxes. So I recommend having a spreadsheet where you can easily input your business income and expenses and categorize those expenses based on the tax deductions they fall under.
With the freebie that I mentioned before, you can easily see what the most common tax deduction categories are, so that you can reference them as you’re going through your different expenses and categorizing them into those categories.
In your spreadsheet, I would create the first two columns as your income columns. The first column can show who paid and what the session or the payment was for. And then the second column can show the amount that they paid.
Then the following three columns can be all about your expenses. The first column can be for what the payment was for. The second column can be the amount that you paid. And the final column can be where you put down what tax deduction category it falls under.
If you’d like, you can snag my tax prep spreadsheet to get you started with tracking your numbers. It will already have a space for income and expenses for you to start filling in with your own numbers and make it even easier for you.
In addition to that, you could also take this a step further and outsource this entire process by using accounting software such as QuickBooks or FreshBooks. With this software, they’ll connect with your bank account and be able to track your income and expenses and organize them behind the scenes. All you would need to do is go in and make sure things are showing up correctly and then run reports at the end of the year for each of your months (and annually) so that you can send it over to your accountant or CPA when it’s time for taxes.
My biggest tip, though, when you’re working on this is to stay on top of it. You want to track these numbers right when they go through your bank account so nothing is missed or forgotten. At the end of the year, it can be really hard to recall an expense that you made in February to know exactly what it was for and who you paid it to.
So make sure you’re doing it as it comes in. This leads me to step two.
Step Two: Implement Regular Record-Keeping
Step two is all about implementing a regular record-keeping practice into your weekly flow. Doing this can cut down on your time spent organizing your numbers at the end of the year. It allows all of those expenses and income to be top of mind.
That way, you can easily make sure you’re categorizing things correctly and no income is missed within your spreadsheet. It should only take you about five minutes a week.
If you work this into your weekly schedule, I recommend either doing it on a Monday or a Friday. So that it bookends your week, it can either kickstart you into a week with already getting tasks done, or it can wrap up your week to make sure your weekly tasks are finished and your business is set before you head off to the next week.
When you are doing this in that weekly rhythm, just open up that spreadsheet and have your bank account opened in a separate tab. Then make sure that everything that either went out or came in in your business is recorded in your spreadsheet. And for any of those expenses, make sure you’re categorizing them based off of what kind of tax deduction it is for your business.
All you have to do is go through and add them each week and then by the end of the year, everything will be organized so that all you have to do is just total up the numbers at the bottom. If you set it up so that it totals it throughout the entire year as things are being added, then you’ll be able to know a pulse point on your business finances every single week and allow you to know if your business is profitable at any given time.
So with that, you are going to be cutting down the amount of time at the end of the year that you’re going to need to spend organizing understanding figuring out, and even finding all of the numbers within your business that you made throughout the year. Doing it when it’s top of mind will cut down on the time and make sure you’re not missing anything so that you’re correctly paying the right amount of taxes that you owe.
It also will make sure you have all of your numbers ready when you’re meeting with your accountant or CPA. So I highly recommend implementing this system into your business. It’s going to give you a game plan to streamline and organize your tax numbers.
Have questions about the game plan or business taxes? Ask away in the comments below!
Few things make me more excited than getting the chance to help another photographer prepare for an easier tax season. So, don’t forget to snag the 15 Business Tax Category Breakdowns.
Let’s Prep for Tax Season – Together
Make tracking your numbers easy with my Tax Prep Spreadsheet and ensure that tax season is a breeze.
Transform your passion into a thriving business and unlock success for your photography business with my free guide to setting goals for the first year of your photography business.
Want taxes to suck less? Learn how to correctly prepare your taxes for your accountant with the Photographer Tax Course – and say hello to a confident and calm tax season!
Don’t know what you don’t know? You’re just 90 minutes from a custom tax prep system with my 1:1 Tax Prep Mentoring sessions!
XOXO ~ Heather Marie
Other HMP Tax Blogs:
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