Tuesday, February 7, 2012

Simple Tax Organizing for Small Businesses

As I noted on Monday, last week the ONLY thing I got done on my to-do list was gathering tax stuff. And truth be told, that is only because I had a meeting set up with my accountant on Thursday, and so it HAD to be done.

Let me start off by saying - I am not a tax expert in any way shape or form. I have these forms set up to help out my accountant who is the one who actually handles the taxes. BUT I do find that these 4 simple forms help tremendously to "keep the books" - and I can make a blank of them if anyone would like a copy.

And much like my home financial organizing system, I use google docs. (I have the form in excel though, so I can email it to anyone who wants it, and it can be opened up in google docs).

The four forms are:

1. Payments & Deductions (running tally)
2. Home Office Deductions
3. Bank Balance
4. Invoice Tracker

Working from home provides many challenges - uh - so I've heard. (My husband is the one who works from home, not me). Not the least of which is how to get any work done when there are two kids to take care of as well. But, for non personal challenges - how to keep the books when love of accounting is probably not the reason you set up a home business. (Unless you have a home accounting business. In which case, carry on - I'm sure your spreadsheets are much more complicated than mine!)

Using my tried & true method of mint.com to keep track of general expenses helps. We have a small business checking account and a specific credit card that is only used for business purposes. So when something hits one of these two accounts, I automatically update my sheet to include the expense. You wouldn't believe how much easier this is then tracking down a $12 ebay purchase 10 months later and trying to remember what it is.

When a payment comes through on either of these I note it in the "Payments & Deductions" sheet, and keep a running tally of the business that way.

The second sheet - the home office sheet - is for when you have a home office that is only for the use of your business. (The IRS has strict rules on what counts). Here I keep track of any monthly utilities, and the percentage used (square feet of office / square feet of house). Depending on your type of business, you may be able to deduct more. I also include some items like phone bills and internet, which I count at a higher usage (based on estimated percentage of usage for business / not business). Finally, it also has a miles tracker for you to input how many miles you drive each month, as well as an input for any tolls you pay. This automatically spits out a number as to what can be deducted at the end of the year. I usually just print off this sheet to hand directly to my accountant. If you have a business where you drive a lot, you may want to add an additional sheet with dates, locations, and miles to calculate for each month in case you get audited. We don't drive that much for the business, so its easy for us to remember.

The third sheet is just a basic bank balance. (Note - this is different than the deductions / payments tally because with the deductions & payments I count each individual item and what it was, whereas the bank balance will just show "credit card payment"). This one is pretty self explanatory, but works great as a double check when comparing with the actual bank balance.

Finally, I have an invoice tracker. Now, we have a much more sophisticated system for the invoices that allows for credit card payments, electronic billing, etc., however I keep a running tally just for my own purposes in this same sheet.

I hope this helps anyone who is running a small home business! How do you keep track of any of your business tax write-offs? Do you do a mad-dash at the end of the year, or have a system set up?

Edit: Linking to

1 comment:

  1. I just found your blog and I love it! I have a small cleaning business and I spend some time the first week of every month calculating the income and expenses occured over the last month so I know how much tithing to pay, and then at the end of the year I go through and check everything and add in expenses like estimated mileage etc. Works pretty well!