Steps to Take Before Filing Your Taxes
As a Certified QuickBooks ProAdvisor, Ben Shor has had extensive training on how to use QuickBooks and Quicken bookkeeping software, and has applied this knowledge in training more than 300 individuals over more than 20 years. In addition to training individuals to use QuickBooks and Quicken, Ben has also helped his clients by organizing their bookkeeping records, resolving QuickBooks issues, and doing bookkeeping cleanup.
Separate your business expenses from your personal expenses
Have separate personal and business checking accounts, credit cards, and PayPal accounts
Have separate personal and business Amazon accounts, or use a personal credit card to charge your personal purchases, and a business credit card to charge your business purchases using one Amazon account
When personal purchases are mixed with business expenses in a checking account or on a credit card, assign the personal expenses as Owners Draw
Use a bookkeeping software program such as QuickBooks or Quicken
Quicken is okay for personal bookkeeping and also for a simple business
Sometimes there are bank and credit card downloading issues, and the program is not good at creating rules
Costs about $65 to purchase, and needs to be upgraded every year in order to continue downloading
QuickBooks is excellent for personal and business bookkeeping
Costs $35 a month to purchase the Simple Start online version, $65 a month for the online Essentials version, and $99 a month for the online Plus version
To track profit and loss for multiple locations, sections, and grants, use classes in QuickBooks and tags in Quicken
On a regular basis, download and categorize your expense and income transactions for your bank accounts and credit cards
When you download and categorize often, it is easier to remember what you purchased, and it is not overwhelming
Use rules to categorize transactions faster
Download at least once a month, and reconcile these accounts monthly
Enter business transactions into your bookkeeping software program that were paid by cash, checks or debits from a personal checking account, and charges that were made using personal credit cards
Set up a Cash bank account, or use Owners Investment, or Owners Draw and Investment, to record expenses that were not paid from your business checking or business credit card accounts
Keep paper or electronic receipts for all cash purchases and all check and credit card purchases over $75
You can attach electronic receipts to the matching transactions in QuickBooks
Paper receipts can be scanned and attached as well
If you file paper receipts, file them in date order for easy access
There is no need to file receipts by vendor or by expense category
If you need to find a filed receipt, which is rarely necessary, you will have a record of the purchase date in QuickBooks or Quicken, which makes it easy to find the receipt
Make sure you know the total interest you paid on all business loans
You should receive a document from the company that you borrowed from, which shows how much interest you paid on your loan during the previous year
You will need to make a journal entry in QuickBooks to record this interest, or just provide this document to your accountant
Keep track of your mileage for each business trip
You need to track mileage for all business related travel, or track all automobile or truck expenses
Tracking mileage usually gives you the biggest tax benefit, but some people are not organized enough to do this effectively
You can enter the mileage and destination directly into QuickBooks
There are phone apps available to track mileage, or just jot down the mileage in a small notebook
Keep track of all utility costs, rent, and home insurance if you have a home office
Determine which room is your office, and what percentage of your home’s total square footage is your office square footage
You can deduct this percentage of your rent, utility costs, and home insurance as office expenses on your tax return
Keep bank and credit card statements in paper or electronic form
You need to keep business records for four years
Don’t count on your bank to have copies of bank and credit card statements because you may have changed bank accounts or replaced a credit card, and then the statements are no longer available online
Use a cloud backup service to protect your computer files
A cloud backup service automatically stores your Quicken and QuickBooks backup files every day outside of your home
Backing up to your computer or to an external hard drive or flash drive is not as safe or efficient compared to using a cloud backup service
