Tax day is in less than a week (Monday, April 18th to be exact). If you’re behind on your tax prep, here’s what you need to do now to get on track and file before the April deadline.
Do you have all of your tax documents fairly organized? Are you about finished collecting and organizing all of your payments and itemized expenses for the year? If you answered no to one or both of those two questions, you’ll want to seriously consider filing a tax extension. “If you need to hire someone or your stuff is a mess, I would file an extension,” echoes attorney, tax professional and creator of Profit RX Braden Drake. “Get that in and then take your time getting everything set up.” And there’s nothing wrong with doing so––it’s far better than filing late and paying fines. Filing an extension is entirely free and when you file, you’ll get an additional six months (October 15 to be exact) to finish your taxes without incurring a penalty.
On the other hand, if your books are in fairly good shape, then here’s what you will want to do next:
This is an obvious one but also mission critical for tax day. By now you should have received all of your 1099s and W2s. Had a complicated year with a lot of moving pieces? Set aside an hour or so to sit down and make sure you have all the necessary forms in one spot.
“If all your bookkeeping is already done and you’re doing your taxes yourself, as a single member LLC or a sole prop on a Schedule C, then I would just go ahead and get them filed,” suggests Drake. Your business books are key for filing successfully because they hold the necessary information to report income and expenses. This means all of your expenses are properly logged and categorized, you have receipts or other documentation to back up your expenses and all of your income is tracked.
Knowing your categorized expenses is necessary for itemized deductions and getting the most out of your tax returns. Tracking your revenue gives you the whole picture of your taxable income for the year, information that is especially helpful if you find you were not provided with a necessary tax document.
If you’re feeling completely lost, it may be time to hire a tax preparer that can file for you. Understand that this is their busiest time of year and at this point, there is a highly likely chance they are fully booked and will require you to file an extension.
All set for this year? Here’s what to do next:
Once you’ve filed your taxes, set aside some time the next day to get your next year systems in order. Better to take an hour or two now to organize it all than to go through the entire process again next year. Tip: Make all of your payment requests through one platform (like Maroo, ahem!) and sync it with Quickbooks so that every payment request you make on our platform automatically syncs with your Quickbooks.
Beyond getting organized with the basics, you might want to also consider investing in a bookkeeper, new bookkeeping software or a combination of both. If you don’t already have Quickbooks or some other way of tracking your expenses, now is the time to consider it so that all of your accounting sits in one spot. And if this year is looking super overwhelming with clients and events, enlisting a bookkeeper who can actually keep on top of your expenses may be the necessary next step.
Did you owe money this year? If you did, was it only a little or was it all of your tax dollars for the entire year? The fact is that if you expect to owe $1,000 or more in taxes for the next year, you should be paying quarterly estimated taxes. “You need to pay your taxes four times a year – typically on the 15th of April, June, September, and January,” says attorney and founder of the The Artist’s Lawyer Magi Fisher. “And it’s important to be on time with payments.” If you are not paying quarterly estimated taxes, or if you are but those quarterly payments add up to less than 90% of what you owe come the end of the year, you will be charged an underpayment penalty upon filing. So avoid that and make sure you have a plan to get those quarterly payments made.
If you’re going to hire a tax preparer for next year, consider incorporating that future cost into your business savings plan now. That way, the money is there and ready to go when you need it come next year’s tax season. Prefer to do your own filing? Invest in tutorials or an educational course now to help you get better prepared.
It may not feel like the most urgent tax to-do but getting in the habit of healthy financial routines is SO important. Operational tasks like bookkeeping, filing your business expense receipts, setting aside income for quarterly tax payments and paying yourself may not be the most exciting part of running a business but they’re crucial to your financial health. Our suggestion: Pick one day per week (mark it on your calendar!) to sit down and run through your finances. Come tax time next year you’ll be glad you did.