Tax tips for last-minute tax filers

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Tax tips for last minute tax filers - Amy Northard, CPAIt’s human nature to put off things that don’t fire you up. I usually put off cleaning my house until we have guests over and if you’re reading this, you probably put off doing your taxes until the last minute. No judgement here. If I wasn’t an accountant, I’d probably be in the same boat.

I’m sharing three tips to keep you sane while getting your taxes filed.

Don’t start using a new bookkeeping software.

At this point in tax season, you will only cause yourself piles of stress by trying to start using a new bookkeeping software to record the entire past year’s worth of transactions. Instead, open up a blank Excel spreadsheet and just start dumping all your income and expenses into it.

The spreadsheet doesn’t have to be super fancy. It just needs to have all your income totalled up, and all of the expenses totalled up by category. If you’re not sure what category something goes in, make one up! For example, if you’ve paid to attend a conference, put that in the “Education” category.

Creating categories for your expenses might feel weird, but remember: the IRS cares less about what something is called, and more about people over reporting their expenses and not having proof of them (receipts).

Put all your tax docs in one folder.

Don’t let your tax documents float around your home. As soon as a tax document arrives in the mail, stick it in a designated folder. When you go to do your taxes, you’ll have everything in one place.

In addition to the forms you get in the mail, there may also be forms you have to download. This is common for Health Savings Accounts, student loan interest, brokerage statements and even W-2s from your employer. Either print these out and stick them in your folder, or create a folder on your computer and save the PDF forms there.

Consider filing an extension.

If it’s just not possible to get your taxes accurately filed by April 15, you always have the option to file for an extension. Keep in mind, this extension isn’t an extension of time to pay your taxes, just an extension of time to file the forms.  Try to get as much info as possible into the tax software to get an estimate of what you’ll owe, so you can pay that amount with your extension.

To file the extension, you’ll use Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. This form is available on IRS.gov or through most online tax filing softwares. Most states accept the federal extension, but some require a state-specific extension form so check with your state’s department of revenue on this.

You’ll have the option to pay in an any amount you want with the extension. To avoid being charged underpayment penalties and interest, it’s better to send in a little extra, if you can. Any overpayments will be paid back to you in the form of a tax refund.

Make Your Financial Goals Happen This Year!

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How to make financial goals happenI’ve already heard from so many small business owners that finally taking control of their business finances is one of their New Year’s resolutions. They recognize that this stuff has been a huge source of stress in their life and they know it doesn’t have to be that way.

Just like trying to lose weight or reaching a fitness goal, having accountability and guidance can make a huge difference in the results.

Accountability

So, you probably know where I’m going with this. If you haven’t been able to make yourself keep up with bookkeeping on a monthly or quarterly basis, it may be time to reach out for help. Start by finding an accountability buddy.

For me, it’s my husband. He’s interested in how my business is doing, so I like to have my books up to date when he checks in. For you, it may be another business friend who you report into once you’ve finished your monthly bookkeeping.

Money Date

In addition to finding an accountability partner, schedule a money date with yourself each month. It could be the first Monday of the month where you knock out your bookkeeping and review your business’s income and expenses. Check in with your financial goals to see if you’re on track to meet them.

If you’re looking for a little kickstart to get your finances in order, I’d love for you to join me in a 4 day challenge that starts Monday, January 9th. We’ll end the week with a video workshop packed with things you can do now to start the year off on the right foot.

Challenge workbooks will be sent out prior to the start (and they are so pretty!).

Sign up for the challenge HERE!

Business Travel Deductions & Tips

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Travel deductions for conferences - AmyNorthardCPA.comAs I get ready to head out to The Savvy Experience in Arizona, I thought it would be fun to chat about how to expense all the things that go along with attending a conference and business travel.

Travel Deductions

Pre-conference Shopping!

As I was in the Anthropologie dressing room looking at the price tags of all the pretty things I found, I was REALLY wishing the IRS allowed us to deduct clothing we plan to wear at conferences (that we attend or speak at). Unfortunately, they’re pretty straightforward in the IRS Publication 529 (search “clothing”) that any business clothing purchased that can also be worn outside of work functions are not deductible.

Flight and Luggage Fees

This is pretty straightforward – any expenses related to your flight, including luggage fees, can be expensed through your business. Driving? Check out this post on car and truck expenses.

Taxis, Ubers, Lyfts

Whichever one you choose, this travel cost between the airport and your hotel is deductible. If you’re sharing a ride with another attendee, Uber and Lyft allow you to split the fare so you each get a receipt for the expense!

Meals During Travel

If you’re traveling away from your “tax home” (city or area where your main place of business is located), you can deduct all meals eaten while away, not just meals where you talk business. If you don’t want to keep track of all the receipts while you’re gone, you have the option of using a per diem rate (a flat rate based on the city you’re in). You can use this link to find the per diem rate for the location of your travels. The Scottsdale, AZ meals and incidentals rate is $59/day.

Tips

Any tips you pay related to deductible meals, lodging, or travel can also be expensed. If they are paid in cash, keep a log that shows the date, amount of tip, and reason (ex: server tip at dinner).

Dry Cleaning and Laundry

If you’re gone for an extended period of time and need laundry done while traveling, these expenses can be deducted.

Record-keeping While Traveling

Keep receipts of all your expenses OR take pictures of the receipts and upload them to a Dropbox folder or your bookkeeping software. In the Quickbooks app, you can upload receipt images directly to expenses on your phone! Xero and Wave also have this capability. I like to keep paper copies as well, just in case, so I usually bring along a zippered pouch or wallet (like this one) to stash receipts in.

5 Big Misconceptions About Your Business Finances

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Running your own creative small business is no small feat. You might be a one person show or have a small team of people, but either way, all-of-the-things are your responsibility. And getting it all right is impossible. Oh, you didn’t know? No one has all-the-things figured out. It’s true. Each and every one of us have our own set of strengths and weaknesses, things we love to do and things we don’t, areas of business that come naturally and ones that we have to work really hard at. That’s why we’ve got to be in this together!

5 Big Misconceptions About Your Business Finances. Sign up for the free webinar here: http://bit.ly/hotmesstosuccessworkshopThis is why I’m so happy I crossed paths with Brittany Griggs of Simply for Creatives.We both work with clients on the financial part of their business but our strengths and specialties are very different. While I’m a CPA (Certified Public Accountant) and focus on taxes and bookkeeping, Brittany is your lady when it comes to pricing, profit, and understanding what your numbers mean for your business. Together, we geek out over business numbers, excel spreadsheets, budgeting and bookkeeping. There aren’t too many of us that enjoy that kind of convo over a virtual coffee date. And we totally understand you, as a creative small business owner, would rather sit through a documentary in a foreign language than to talk about those things.

Which is why we’re teaming up to help set the record straight on the 5 biggest misconceptions we hear from our clients. Make sure you read all the way to the end for the best part. (Not-so-subtle-hint: we’re having a free workshop next Tuesday!) Our goal is to help give you clarity if you’re struggling in this area of your business. We want you to move forward with the right information and confidence. So here goes!

5 BIG MISCONCEPTIONS ABOUT YOUR BUSINESS FINANCES

1. Owing money at tax time is a bad thing or your CPA’s fault.

The Truth – When you owe money at tax time, that means your business generated a profit and a profit means your sales were higher than your expenses. A lot of business owners I talk to want to spend all their profit on equipment or other not-so-necessary expenses before the year-end so they don’t owe any tax. The problem with this thinking is that people end up forgetting why they went into business in the first place! You didn’t work all those long hours just to end up being no better off financially than you were at the beginning of the year, did you?

Let’s start to think about owing tax in a different way. Set aside funds throughout the year to pay in each quarter or just have ready when you file your annual taxes. This will make the year-end payment a little easier to handle and will help you fight the urge to spend away the profits on things you may not need.

2. You only need a budget when money is tight.

The Truth – A budget isn’t something you use or put in place when you’re just getting started or when money is tight. A budget is giving your money a purpose and plan. It doesn’t matter if you’re barely making the bills or bringing in $1 million a year. If you don’t put a budget in place for your money, you can easily overspend causing financial hardships in your business and personal life.

Brittany recommends setting an overall budget for the year then breaking that down by month. You should reevaluate your budget, at the very least, every month to make sure you’re on track or if you need to make some adjustments. A business bringing in $30,000 a month can just as easily be in jeopardy from mismanaged funds as one bringing in $5,000. It’s all about your budget and diligence to follow it.

3. Sales tax and Income tax are the same thing.

The Truth – These two taxes are easy to get mixed up, but they have a few distinctions to help you keep them separate in your mind. Let’s start with sales tax. This is a tax that your state manages and is assessed to your customers (not you) on taxable products and services (check with your state to see what qualifies). As the business owner, you are simply the collector of the tax. You’ll hold on to it until your sales tax return is due and then you’ll pay it in to your state.

Income tax is a tax you pay on the federal and state level, with the exception of the few states who don’t have an income tax. They are collecting tax from you, the business owner, based on how much income you made for the year.

4. You need a business degree to be good at business and understand your finances.

The Truth – This is so far from the truth, it hurts. Sure, it helps but, at the same time, everything is learnable. Neither Brittany or I were born with an a business degree. In fact, most of Brittany’s formal education was in the Corporate Finance space, not for small businesses. She learned most of that from experience starting and growing her photography studio. Our secret weapon is learning from those who’ve done it before us then putting our own spin on things.

None of us know everything so it’s important to invest time and money into education for the parts of business that are the most difficult for you. You don’t need to be an expert to be the kind of business owner you need to be. You just need the right information, skills, resources, and tools for your business. And that’s one of the reasons we put together the LIVE free workshop next Tuesday, so don’t miss it!

5. My business isn’t big enough to worry about setting up a bookkeeping system.

The TruthEven if you just have one client right now, putting a bookkeeping system into place is important. It doesn’t have to be a fancy program and in fact, a well-structured Excel spreadsheet will serve most businesses just fine. When you get into the habit of recording your income and expenses on a regular basis, it sets you up for success later on in your business when you have more transactions. If you put this off until your business is booming, you won’t have much time to spend on figuring out the best bookkeeping process for your business. Then you’ll likely put off your bookkeeping until your taxes are due, which can be very stressful.

TAKE YOUR BUSINESS FINANCES FROM HOT MESS TO BIG SUCCESS! {FREE Live Workshop}

We hope setting the record straight on these 5 misconceptions help give you clarity in your creative business. We know how confusing the financial piece can be and want to help you change the way you see and do your numbers in a simple way. Which is why Brittany and I are joining forces to bring you a jam packed hour for the ultimate free LIVE Workshop next Tuesday, June 28 at 11:00am Pacific | 2:00pm Eastern (You can register here).

WHAT YOU’LL LEARN

• 2 simple steps to get your business finances started on the right track.
• How to create simple systems to streamline tracking your income and expenses without the headaches.
• What you need to know about taxes to rock your business and what to leave to the pros.
• How to determine if your products and services are really priced for a profitable business.
• Live Q&AFree Workshop with Amy Northard and Brittany Griggs

Let us help you take the stress and mess out of your business finances so you can get back to what you love doing the most!

How to organize business receipts and paperwork

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How to organize business receipts and paperwork for your small business. - Amy Northard, CPA amynorthardcpa.comAs a business owner, receipts, copies of invoices, bills, and other paperwork can pile up quickly making our desks cluttered and offices messy. When you have a plan in place to organize all those papers, you can clear out quite a bit of office clutter and know where to find documents in case you get a notice from the IRS or your state.

I’m going to share what works for me and some tools you can check out to keep the clutter to a minimum. If you have a different method or app that you love, please share in the comments!

First, let’s get the timeline for saving business records out of the way. The IRS suggests saving your receipts and records for at least four years, but keep in mind that the IRS can still come knocking on your door if you failed to report more than 25% of your business’s gross income (income before expenses are taken out) six years after you file a return.

Now, let’s talk about why you need to hang on to all this documentation. The biggest reason is in case you get a notice from the IRS or your state requesting additional documentation or notifying you that they want to audit your records. By having organized records that you can easily locate, you’ll cut down on quite a bit of the stress that those letters usually cause.

Receipts
On to the fun part, the organizing! As a service-based business, I don’t have a whole lot of expenses that produce paper receipts. Since that’s the case, I just throw my receipts into an envelope labeled with the month. Now, if I ever need to find a receipt for an expense, I can go directly to the month of the expense (found by looking in my bookkeeping software) and pull the receipt.

For emailed receipts, I’ve created a Gmail folder where I save my invoices to. If I need to find a receipt, I can search the folder to locate the specific receipt. It’s always a good idea to back up these emailed receipts in case an email gets hacked or shut down for any reason.

My challenge to you: once a month, print your digital receipts to PDF and save them in another location.

Bank Statements
When I do my bookkeeping for the month, I print off all my bank, credit card, PayPal and Stripe statements and when I’m done, I stick those in the monthly envelope as well. You can also save PDF copies in the cloud (ex: Dropbox).

Invoices
Copies of invoices are not commonly thought of as important tax documents to save, but keep in mind that as states search for ways to make more money, they’ll bump up efforts to collect sales tax that’s owed. To do this, they’ll look through a business’s invoices to make sure sales tax was properly invoiced.

Since all my invoices are sent through Quickbooks, I can access them virtually that way. It’s also a good idea to export invoices to PDF format and save in another location. This will save you a lot of stress if your bookkeeping software were to crash or your online account were to close.

Apps & Tools
There are so many different ways to keep your receipts and paperwork organized for your small business, but here are some top tools that I love recommending to my clients:

Shoeboxed – Starting at $9.95/month, Shoeboxed lets you use your phone to scan in receipts or mail in paper copies using their “magic envelopes.”  They use their scanning technology to grab information from your receipts and catalogue them in their software. Shoeboxed works with most popular bookkeeping software. Bonus: they have a mileage tracker, too!

WaveApps – If you use Wave for your bookkeeping, be sure to check out their receipt-scanning technology. You can upload receipts from your computer directly to Wave, scan them with your phone, and forward emailed receipts directly to your Wave account. For $0, it’s hard to beat.

CamScanner – While you can take pictures of receipts, sometimes it’s nice to have them in PDF format and that’s where CamScanner comes in. You can get by using their free scanner app and only need to upgrade if you need more cloud memory space for your documents.

Evernote – If you’re an avid Evernote user, saving copies of your receipts in the software along with notes about the expenses is a great way to keep things digital and organized.

I hope this has given you some ideas for organizing your receipts and business documents. If you have a process that works for you, please share in the comments!

New Business? Do these three things first!

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New business? Do these three things first! You'll save yourself from a headache later on.There’s so much to do when starting a new business and it can get overwhelming fast. Let’s focus on three important things you should do right now before business picks up.

Already in business? No problem. These can be implemented at any time, it’s just best to get them out of the way first, if you can.

1. Open a separate business bank account

It’s super easy to make business purchases out of your personal account and toss the receipt in your purse, but I promise you’ll thank yourself at tax time if you get rid of this bad habit. If you’re a sole proprietor (the default business structure), you can go to your bank and set up another personal bank account using your social security number.

If you’re any other form of business, be sure to take your business formation documents, federal ID number, and anything else your bank may require. Call the bank or check their website for a list of information you’ll need so you don’t have to make multiple trips. Once you have this account set up, only use it for business.

Click here to see NerdWallet’s list of free business checking accounts.

2. Decide on a bookkeeping tool

There are a bunch of bookkeeping software options available, but my top three faves are Quickbooks Online, Xero, and Wave. With these cloud softwares you can automatically import and categorize your transactions which is a huge time saver when compared to manual entry in a spreadsheet. Once the transactions have imported into whatever system you choose, assign them each an income or expense category. Then you’ll need to do a reconciliation (which is like balancing your checkbook).

If the learning curve of a new bookkeeping software is too much, there’s nothing wrong with using a spreadsheet to organize your financial information. The key is to choose something you’ll do on a consistent basis so you don’t have to add everything up at the end of the year.

3. Research your sales tax obligation

As states try to round up funds, they’re turning their attention to sales tax as the solution. Many states are now requiring sales tax on select services in addition to tangible products, which in past years, had no sales tax requirement. Before you send your first invoice, get clear on whether or not your state wants you to collect sales tax on your products and services. This will save you an awkward conversation with a client later on if you need to add the sales tax and may also save you from paying out-of-pocket for the sales tax.

If you can’t find the answer to whether or not your product/service is taxable, you’ll probably save time by giving your state department of revenue a call. The best time to make this call is early in the week and early in the day. Because, let’s get real: no one answering phones is going to be super excited to get you info on a Friday afternoon!

Take care of business by finding out whether or not you should be collecting sales tax (even on services!)Tweet me!

Getting these three things crossed off your checklist will reduce your stress and set your business up with a good foundation.

The “Why” behind Be Your Own CFO

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New Years Promo Ad

As you may have seen in my mailing list and on social media, I’ve created a course called Be Your Own CFO. The idea for this course started back a few years ago when I was going to host an in-person class covering much of the same information. That in-person class never panned out, so all of my content sat in outline form, waiting to be made into its current format.

Because of my line of business, I’ve talked to hundreds of creative small business owners and heard many of the same questions over and over. This really pushed me to create a resource for business owners so they could feel empowered in their business and not held back by taxes and bookkeeping.

This past summer was my first 100% self-employed summer and the extra time available allowed me to finally put the work in to creating the resource. That extra time, coupled with my husband’s month off of MBA courses (he’s my web designer/developer) pushed me to stop saying “some day” to the course and get it finished and out into the world.

After seeing a student post that the course was the best investment she’s made in her 7 years of business, I know I’m on the right track and am excited to continue sharing it and spreading the word so that taxes and bookkeeping aren’t stressing people out.

If you’d like to learn more about Be Your Own CFO, click here.

As a celebration of the New Year and wanting to get this info out to as many people as possible, I’m giving you $75 off the price through this Thursday, January 7th at 10pm ET (my bedtime). Use code NEWYEAR16 at checkout.

And as a bonus, I’m sending a fun gift to the first 30 people who sign up by Thursday!

Creativepreneur Gift Guide

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entrepreneur gift guideI created this gift guide for creative entrepreneurs aka creativepreneurs because I LOVE OFFICE SUPPLIES. You may have noticed over on my Instagram that I have a thing for pretty calculators, so I’ve linked a few that are on my wishlist.

The paper shredder is the same one I use to discard sensitive financial documents. It not only cuts the paper into strips, it cuts those strips into pieces, too. It’s not the prettiest, but it works SO well.

My mom has a tradition of getting me a Rifle Paper Co calendar for Christmas every year. When I change the month over, that’s my cue to get my bookkeeping done!

No office is complete without a pretty notebook. I like to have one around for my daily to-do’s and to keep tabs of my goals (financial and business).

The last item on the list is a portable Neat receipt and document scanner. If you have a lot of paper around your office (receipts, invoices, etc.) this will be a lifesaver. It will quickly scan the document and can extract information to create helpful reports. I haven’t used this yet, but it’s on my Christmas wish list.

[1] Lilly Pulitzer Calculator

[2] AmazonBasics 17-Sheet Paper Shredder

[3] Rifle Paper Co Wall Calendar

[4] InterDesign Trash Can

[5] Bamboo Calculator

[6] Ban.do Spiral Notebook

[7] NeatReceipts Mobile Scanner

 

Amy Northard, CPA LLC is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Car and Truck Expenses: Demystified

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Auto expense deduction for small businesses [via AmyNorthardCPA.com]Unless you only work out of your home office, there could be a whole lot of driving going on for your business. All this driving can really rack up the expenses and if you track them thoroughly, you’re eligible to take a very helpful deduction.

Now that I have your attention, read on… This deduction will help reduce your taxable income, which will reduce the tax owed at the end of the year. The downside: it takes a little work to track.

Here’s the skinny on the two options available when it comes to deducting car and truck expenses:

Option One
The first option is pretty obvious.  You start by tracking the actual expenses you incur to operate your vehicle for business purposes – hey, running out to get more latte’s won’t cut it!  You need to keep tracking only things like gasoline, oil changes, lease payments, insurance, registration fees, tolls, parking fees, tires, repairs, depreciation, and garage rent.  You can handle that, right?

This option does not include down payments or monthly payments for a car loan but you can deduct the business use of your lovely vehicle’s expenses listed above. So, grab a pencil and paper or your favorite spreadsheet program and let’s get a handle on how much is for business use.  It’s all in the tracking of your business versus personal trips and that can be figured out by tracking your mileage.  Stick with me and I’ll explain the details of how to do that in a minute.

Option Two
If you aren’t into all that tracking, don’t fret it.  Here is that second option I told you about:  Just take a deduction based on your mileage. One caveat… If you want to use the mileage deduction, you must use it in the first year of business.  After that first year, you can then switch between the two methods.

In 2014, the deduction is $0.56 per business mile.  The frosting on this cupcake is that you can also add on parking fees and tolls.  For example, you’re meeting a client at a local coffee shop downtown. You can count the miles to and from the coffee shop as well as money paid to the parking meter.

What should you keep track of on your mileage log? You’ll want the trip’s date, destination, business purpose, and mileage to and from your starting location. You can keep a log book in your purse or car, but I’ve found that using an app on your phone can be just as effective because it uses your phone’s GPS. You just tell it when to start recording mileage and when to stop.  My favorite app is TripLog and it works on Android and IOS.

All of this may seem like a lot of work, but it’s worth it in the end!

How to account for charitable donations

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charitable donations from businessYou just donated a portrait session worth $700 to the Red Cross. The donated session included $150 worth of prints that you generously paid for yourself.

When it comes to donations that involve service costs, things can get a little confusing. Your instinct tells you that you should be able to deduct the full $700 since that’s how much you would have been paid by any other client. Unfortunately, that’s not the case.

Any donations of your time, whether it’s to a 501(c)3 charitable organization or not, is not deductible as a business expense or personal tax deduction. It’s a huge bummer, but we all know there are people out there who would take advantage of the system if they were allowed to deduct their time by overestimating or overcharging what their time was worth. To check whether or not a company falls into the category of 501(c)3, check out this helpful page from the IRS.

There’s good news though! You can deduct any out-of-pocket expenses related to the session.  Let’s say you loaded up your car and drove 10 miles to the session site.  Your assistant also joined you and you paid them $50 to help out for the afternoon.  As mentioned before, you also paid $150 for the prints after the session. All of these expenses are deductible.

Any miles driven for charitable purposes can be deducted at $0.14 per mile (2014 rate) on your personal itemized deductions form (Schedule A). This is a significant drop from the business mileage rate, but if a lot of driving is involved, this can add up, so be sure to track it.

When you paid your assistant $50, even though it was for a service, you can deduct that amount as a charitable donation. You’ve had an out-of-pocket expense paid to another party, so it qualifies. Similarly, when you paid for the prints yourself, it was another out-of-pocket expense that can be deducted.

Now you ask yourself, where do I deduct these expenses?  The answer is probably not what you’d guess. For sole proprietors and single-member LLCs, the deduction isn’t lumped together with your other business expenses. It goes on your personal Itemized Deduction page of your tax return. To see if you use this form, check your previous tax return for Schedule A. If it’s not in there, that means you get a standardized amount for your personal deduction and your donation won’t affect your tax return.

Last, but not least, remember to always save any documentation related to your donation. In addition to receipts, try to request a donation receipt that shows the total amount of goods donated. In the case of an audit, you’ll need to be able to easily access these documents.

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