For the last few years I’ve shared an
annual tradition with you: getting financial records organized for year-end.
This entails gathering up receipts, identifying deductible expenses, updating your accounts, running reports, and possibly pre-paying some 2017 bills. Whew!
Fight the Urge to Procrastinate
With all the responsibilities that vie for our attention this time of year, it’s easy to push aside the task of gathering, organizing, and updating financial records. Don’t succumb!
Getting organized for year-end is an absolute necessity – especially for the sole practitioner.
Step 1: Get Started
If needed, begin with a little background reading from the experts:
General Tips on Tax Preparation
Tax Deductions FOR SOLOS AND HOME-BASED LAW PRACTICES
Step 2: Learn How to Organize Tax Records
- How to Get Business Receipts Digitally Organized for Tax Season
- Six Steps for Better Tax Organization
- How to Create a Tax Organizer System
Step 3: Begin the Process by Chipping Away at Organization and Prep
I don’t recommend a marathon session of tax organization and prep. The only time it makes sense to do this is if you’ve procrastinated and you’re up against a filing deadline. The point here is to avoid that. It’s too stressful! And as we all know: when you’re up against a deadline the odds of making a mistake rise exponentially. Let’s not go there.
Instead, open your calendar and schedule some dates to start gathering and organizing records. 30 or 60 minute appointments will allow you to chip away and make progress:
First appointment
Assuming your accounts are reasonably up to date (income and expense entries are current), do a quick check. Does it make sense to pre-pay 2017 expenses [bar dues, professional liability coverage, rent] or contribute to your IRA/retirement fund? Make this assessment early to take advantage of 2016 deductions.
Second appointment
Prepare to organize your records. Physically gather receipts. If necessary, schedule follow-up appointments to finish the process. If your records are digital, use this time to pull all receipts into one 2016 expense folder. If you have unscanned receipts, catch up on your scanning.
Third appointment
If you are paper-based, label a manila envelope “Personal Expenses.” Start sorting your paper receipts. For now, anything that is a personal expense goes into the “Personal Expenses” envelope to be dealt with later. If your records are digital, create a file folder labeled “2016 Personal Expenses” and segregate personal receipts. Once you’ve achieved this basic separation, start organizing your business expenses. This can be done a variety of ways – see the reading above. While date order is good, it is preferable to sort by expense category first, then by date. If necessary, schedule follow-up appointments to finish the process.
Future appointments
You get the drift. Even the most robust procrastinator can generally commit to increments of 30 or 60 minute appointments. Keep moving. Anything you do helps advance the cause.
Step 4: Jumping Ahead to the CPA
If you already work with a CPA, hallelujah! If your CPA is like mine, he or she will automatically send you a tax organization packet, which will go a long way toward helping with the steps above.
You Do your own taxes?
I know some of you are stubbornly independent, as I once was, and you prepare your own taxes, as I once did. Please: at least contact a CPA for a ballpark estimate of what it would cost to delegate this task. What can it hurt? You can still prepare your own taxes if you prefer.
But my taxes are simple!
Kudos! Guess what? The cost to prepare your return will be nominal. If your taxes are complex, anything you pay a CPA will be well worth it.
I have used CPAs for business, personal, and trust-related tax preparation and have never been sorry I did. The prep work is enough for me! Try it at least once and see what you think. I’ll bet you free admission to one of my future CLEs that you won’t go back to doing your own tax returns. Select the Contact page on the menu above to take me up on this offer.
A Quick Thought About Apps
The tech-savvy among may you may be curious about apps, so here are two suggestions: 7 of the Best Apps to Scan, Track, & Manage Receipts and Best Free Finance Apps for the iPhone and iPad. (The latter is my list of favorites.)
Parting Thoughts
Get started now by scheduling those appointments on your calendar! I promise you that doing a bit here and there makes the process less overwhelming. Good luck!
All Rights Reserved – Beverly Michaelis [2016]
Oregon Law Practice Management 