322 - Tax Season Roadmap
On today's episode of the podcast I am going through the roadmap you need to get through tax season.
This is the perfect episode for you if you're worried you're missing something when tax time comes around or if taxes don't come second nature to you at this stage of business.
The Tax Season Workshop is back. During the workshop we will get you ready to file your taxes by wrapping up your 2023 bookkeeping, making sure the proper documents are collected and organized and getting prepped with video lessons from me and live Q&A sessions. At the end of the workshop you're ready to file on your own or hand your neatly buttoned-up package off to your tax preparer. Sign up at www.notavglaw.com/taxworkshop
Taking a look at the Tax Season Roadmap, there are six steps to getting ready to file and implement systems after filing.
1. Wrap up your 2023 bookkeeping - The IRS wants to know how much money you made and you need to know how much money you spent because these deductions are how you save money. We need these deductions summed up by category for when you file. For tax time, you need an annual total, but ideally you're keeping up with these monthly to understand where our money's going and where we may need to cut expenses. Separate your income and expenses by category.
2. Send out 1099s - These were due January 31st. If you haven't already sent them, there is a penalty of $50 per late 1099 if it's less than 30 days late, after which it does go up. Better late than not at all. If you paid folks by credit card you don't usually need to send a 1099. Get answers to your 1099 questions at notavglaw.com/1099s
3. Collect all your documents - As documents come in the mail, collect them in an envelope or drawer to prep for tax time. Be sure to keep them for 10+ years after filing in the event you are audited. Also be sure to keep receipts and any other physical documents that go along with your bookkeeping. For your records, you'll also need a digital folder of email receipts/documents to go with bookkeeping and information on your home office space - the square footage of your home office, your home square footage to calculate your deduction, and any household expenses such as rent, utilities, and general upkeep like housekeeping or gardening. This is because if you rented an office space your rent for the space would go to this upkeep so the same goes for these services for your home office since they're like 10% business expense, 90% personal expense. You also want a note of business miles driven. Ideally you'll make a note of your odometer every January 1st for what you start and end the year with and then a record of how many of those are miles driven for business purposes.
4. File your tax return - This can be done on your own or you can hire us to help (we'll be offering tax filing services you can join after the tax season workshop).
5. Review your return and create a tax strategy - Specifically you want to look at the percentage of tax paid compared to the money your household brought in. We use this number in order to tell people how much we should be saving for quarterly taxes. You can also use this to determine areas of opportunity such as things you missed out on and things you can take advantage of this year and next year. We also want to do an S Corp analysis to see if you should file for a late election this year (ideally you want to file in January) or would 2025 be the year for you. This is a little hard to do on your own if you're not super savvy with reading your tax documents. We do this 1:1 for our clients and if you're in our membership we'll do a group call to help our members with this part.
6. Implement strategy and continue bookkeeping - Now that everything is set up you will ideally be keeping up with this on a monthly basis.
To get into a good spot for tax season this year and moving forward, join the Tax Season Workshop at www.notavglaw.com/taxworkshop