On today’s episode of the Unf*ck Your Biz podcast I discuss bookkeeping basics and how your bookkeeping can set you up for tax season success.
It’s not too late to register for the Tax Season Playbook! Sign up at www.bradendrake.com/playbook to finalize your books, organize your tax documents and get ready to file your 2021 taxes.
On last week’s episode we discussed tax deductions. In order to get these deductions you must have record of them, and be able to provide proof of them if you are audited. That’s where bookkeeping comes in. Your books must show your gross income, expenses, deductions, credits, and a record of your business transactions. You can use any record keeping system. You don’t need anything fancy or paid, a spreadsheet works great. Certain business entities require more specifics. For example, a partnership agreement or operating agreement, this is especially important if you plan to offer stock in your business.
My bookkeeping suggestions based on stage of busines ownership:
Stage 1 - $0 - $30,000 in revenue - Spreadsheet bookkeeping
Stage 2 - $30,000 - $70,000 revenue - I would upgrade to software. I recommend Xero
Stage 3 - $70,000 - $150,000 - Consider hiring a bookkeeper
Stage 4 - $150,000+ - Hire a bookkeeper
In the Tax Season PLaybook I share how to create your books and a spreadsheet to get that set up.
One of the popular questions I get is “do I need receipts for every deduction?” The answer is maybe. The more you have, the better but if you’re not there yet there is flexibility re: travel, cost, meals, vehicle mileage, and depreciable cost. If you’re ever audited you must do your best to provide a logical explanation for the deduction. Sometimes bank statements will suffice, but for certain examples, including the ones mentioned above, they will not.
Tips for organizing your bookkeeping:
Keep your receipts, especially from travel. Save them in a folder or upload them using an app like Shoeboxed
Save all electronic invoices/email receipts in a folder in your email. Export at the end of each year and save in a Google Drive folder
Use MileIQ or a similar program to log your miles
Get your books in order and set-up for this year’s tax season with the Tax Season Playbook.
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You'll learn: what the three mistakes are; how to fix them; and also how to work with me to get your legal & tax shit legit.