Alright mamas, we interrupt our regular routine for a very unglamorous PSA. April 15th is Tax Day. Are you ready? I know when it comes to taxes, many of us turn the other way and hope that they go away, but they don’t. But this year, we’ve got you covered. We reached out to Conor Barnes, accountant extraordinaire, tax guru and mama to two to give us some advice for getting started. So don’t worry, we’ve got 7 tips to get you the most out of your return.
- Use the Right Form
Know how you file your business’s taxes and know why you picked that tax form. A business has four main options for filing their taxes:
No one form is necessarily better than another and each has it’s advantages and disadvantages. Be able to complete the following statement: I file my business taxes on (insert your the name of your tax form) because (provide 2 compelling reasons for why you selected that form).
- Use an Accounting System
Accounting systems are like gyms; they are only useful if you use them. So, find an accounting system that you like (or at least don’t hate!) and use it. Find a way to manage your income and expenses that does not make you frown. QuickBooks, Xero, FreshBooks, Excel, and pen and paper are all options. Choose what you’ll use.
- Open a Business Bank Account
The IRS gets itchy when business and personal expenses blend together. Word of advice, you do not want to make the IRS itch. Open a business bank account and use it exclusively for business items. If you have one account that’s solely business, it’ll make using your Accounting System mentioned above much easier. There will be no mixing of business and personal expenses.
- Know how to Differentiate Between Personal and Business Expenses
Groceries, clothes, and pets are personal expenses. Yes, there are exceptions. But, in most cases, these expenses are personal expenses. Do not list them on your business return. Do not pay for them using your business account. Please. Just don’t.
- Spouses Matter
If you are married, I hope you realized this point long before you sat down to file your tax return. In tax, marriage shifts your situation significantly. If you are married on the last day of the tax year, the IRS considers you married for the entire year. Depending on how you each earn income and your overall income levels, the tax adjustment from two single individuals to one married couple can be surprising.
- Woohoo for Kids!
Children change your life life and your tax life. In order to take advantage of child care expenses on your return, you will need to include the tax ID and address of the child care providers you paid. If your children attend camps or other enrichment activities over the summer so you can have the time to work, please ask the providers for this information. Who knew?
- Tax Planning is for Everyone
Taking the time to learn, understand, and optimize your tax situation can be just as beneficial to your bottom line as landing a new client. Taxes can seem confusing, annoying, and random because they often are exactly that. Do not let fear get in the way of improving your business.
Conor Barnes is a Certified Public Accountant with Egan Tax and Books. She advises businesses and individuals on tax and finance issues. Her kids make her dream about deducting Legos and Shopkins.