How To Organize Your Business for Tax Season

meg biram on computer

After 8 years of working for myself I’ve developed a system that works for me as far as bookeeping and getting things together for my taxes.

As much as I’d love to use an online program to do it all for me, I get paid via multiple ways and they don’t all sync up so I end up doing a lot of it by hand anyway. This also ensures that I see everything in every account which is good.

Getting a system together that works for you is the most important. If you don’t even want to touch doing this for yourself you can hire a bookkeeper to set it up for you, explain it all to you, and do it for you. I’m sure I’ll eventually do that or have someone on my team do it, but for now I do it all.

I do have an accountant who does my taxes, but I always provide him all the info and this year I was in his office for less than an hour and was completely done with my taxes — stress free.

Here are my best tips and how I keep track of everything. Also since I make money in different ways it’s a little complicated but I think nowadays a lot of people have different types of revenue streams so it’s not necessarily abnormal. If yours is simple, I envy you.

9 Steps to Organize Your Business for Tax Season

1 // Get your business documents in order.

What type of business are you? A sole proprietor, an LLC, and S-Corp? Do some research, talk to your accountant and your lawyer and figure out what entity is best for your business & finances.

Usually you will need to file this paperwork with your state and city/county. For example I have an LLC with the state (or Commonwealth) of Virginia, and two business licenses with the city of Alexandria, and I had to register for sales tax since I’m selling products (my art and art-related things).

You will also want to get an EIN so you don’t have to use your SSN for anything. It is super easy to get one online.

Make sure you have all of these documents and keep them in a safe place and keep them updated!

2 // Get a separate bank account and credit card for your business.

This may seem like business 101 but it’s REALLY IMPORTANT. And it makes everything so much easier. Even if you aren’t making that much money, you definitely want to separate it out from your personal accounts.

I also have a separate PayPal that is only for business. I actually never use my personal one anymore but have it just in case.

3 // Have an invoicing system.

Personally I use Freshbooks for invoicing. It’s easy. Clients can pay with a credit card online. You can request a deposit through the platform. It also has a lot of features I don’t use like time tracking and such.

​​​​​​​You can also hook up your credit card and bank accounts to it and it can be easy to sort of do your bookkeeping within the platform. I don’t use it for that currently, but you could.

But I like the system for invoicing. As soon as I have a client agree to a project in an email I create a draft invoice with my estimated cost and just save it as a draft, then I invoice them at the appropriate time. It’s an easy way to help me keep track of projects and payments.

4 // Create a project list.

Since I work on different types of projects from murals to custom art pieces, to sponsored posts for my blog or Instagram, to consulting — I need somewhere to keep it all straight. I do that in a Google Doc that I call my Project List.

I already did a post on this a few years ago with the specifics so you can see it here. But basically it’s a Google Doc with multiple tabs — one for projects that are currently going on (and I even put possible projects in there), and once they are completed I turn the project RED meaning the company needs to pay the invoice. Once they pay, I move the project to a different tab within the document. You can see all the details of how I do this in the post but it helps me see all the projects I’m working on, projects that I’m just discussing with clients (and maybe they don’t happen and I delete them), and projects I’ve completed and am waiting on payment.

Then I can go back through each year and see all the projects I did, who the contact was, what the fee was, etc. This is also really helpful because I like to send holiday cards to everyone I work with each year and this document has everyone listed right there!

5 // Income/Expenses Documents

Let me just say that Google Docs is my jam. Excel might work for you but I love Google Docs and have GSuite (Google it) so it all works together for me.

In Google Docs I have an Income/Expenses Doc for each year.

There are 5 tabs in each document year. So 2019 has 5 tabs, my 2018 document has 5 tabs, etc.

The 5 tabs are: Income; Expenses; Simple Expenses (for tax time to report to my accountant); Income Statement; and Balance Sheet.

This is just how I personally do things, it’s not based on any software or anything, I just made it up myself. I recommend you consult with an accountant or a bookkeeper to set this up for yourself at some point. Personally I have done a consulting session with Amy and I have an accountant and this is what works for me. BUT it will not for everyone.

The INCOME tab is just that — I input my income in this tab (these are made up numbers). It is separated out by the different income streams I have. For example I have a section for Murals, and in that section I will also have a notes column so I can add any additional notes about it like which mural it was and if it was the deposit or full payment.

I total the income at the bottom of the page for each month. This helps me see how much I brought in that month and I can easily add up my quarterly tax estimates once I add up my expenses.

The EXPENSES tab is the most complex for me. I want to know where every penny goes so I categorize it all out mostly by the categories you would use to report expenses on your taxes, but then I break it down from there. For example in Utilities you might have your cell phone bill, your Internet, and the electric for your office. In the SIMPLE EXPENSES tab, those would all be summed up into one number to report, but in the regular EXPENSES tab I like to see what they all are specifically.

​​​​​​​Above is just an example of the top portion of my Expenses tab. You should add whatever works for your business in your own. I total it at the bottom so I can see my total expenses each month.

The SIMPLE EXPENSES tab is where at the end of the year I add up all of the expense categories and put the final total numbers in the SIMPLE EXPENSES tab so I can easily send those numbers to my accountant before I go in for my tax appointment. He inputs them in before I even get there to save time during our appointment.

​​​​​​​Read more about the different tax deductions in this post to help you form your categories and your own documents.

The INCOME STATEMENT and BALANCE SHEET aren’t necessary for everyone if it’s just you in your business and you are just starting out, but it’s good to get in the habit of having them. If you go to buy property the mortgage company might ask you for these documents so they are good to have readily available. Plus they show you a different take on your business.

I’m not going to begin to try to explain what they are, but you can read about each one and see an example on Amy’s blog: Income Statement and Balance Sheet.

​​​​​​​If you use a program for your books it probably does this for you automatically, but I can do it fairly easily by hand in my Google Docs. My business isn’t complicated enough to make it a headache. Plus I like to see where everything stands and this forces me to have a close look at everything.

6 // Consistent Updating

Now that you have all of these docs set up, you just have to be consistent with updating them!

I input my income, expenses, income statement, and balance sheet the first week of the following month. I have time blocked out my calendar (I use Google Calendar) for this. I just set it to repeat for the first Friday morning of each month, so I’ll input all my numbers for March the first Friday in April.

The simple expenses sheet I do at the end of the year.

Another thing to remember is to put a notice on your calendar to report and pay quarterly taxes. These taxes are due April 15, June 15, September 15 and January 15. I calculate these numbers the first Friday of that month when I’m doing all of my other numbers, then send them off to my accountant.

If something comes up and I can’t do it on that Friday then I just move the block on my calendar to another time when I can. I like to have a set time for things but then be flexible with it.

Keeping all of these things updated monthly will help you see how you are doing and if you need to ramp things up or if you can take that vacation you were wanting to book.

I also put a day on my calendar the first week in January to do all of my final numbers for the year. Then I can just sit back and wait for all of my 1099s and tax documents to come in by mid-February, and get an appointment with my accountant on the books for late February or early March and be done with it.

7 // Tax Documents

If you employ anyone or work with contractors (if you pay them more than $600 in a year) you will need to file a 1099 for them. To do that you will need them to fill out a W9 and send to you. I then send those W9s to my accountant, he send the 1099s out or sends them to me to send to my contractors. Make sure you to this in January of each year.

I try to get a W9 from my contractors in the fall so I already have it on file for when January comes around. You don’t want to be waiting on them to get back to you to send out your 1099s.

All of the tax documents you receive you need to put in a safe place. Nowadays some people send them via email. I don’t know about you but my inbox is a black hole so I find that printing them right when I get them and putting them in my binder (binder explanation below) is the best way to stay on top of them.

Don’t put these documents in different places, you don’t want to be tearing your house/office apart on April 14th looking for all of them!

binder for tax info

8 // Have a Tax Binder

In addition to my Google documents, the one thing I’ve been doing the longest is my tax binder. It’s just a non-fancy white binder. I have 3 of them going at a time because I only need to keep 3 years of your taxes. Check here to see how long you need to keep yours.

So what is in the tax binder? It’s simple really. On the spine I label it with the year (with my label maker of course), and inside I have a bunch of plastic sheet protectors that are labeled, again with my label maker, with all the documents I need. Once I get those documents, I slide them in the sleeves.

Any other documents I like to have on hand I have in the front pocket or I’ll make a sleeve for them too.

Since I file with my husband, the plastic sleeves will be labeled with our names if needed, as in “His Name W2”, “Meg W2” and so on. Then I have our mortgage documents labeled, our investment documents labeled, etc.

The great thing about this is that I never forget what documents I need because the sleeve is already there and labeled from my previous taxes. Sometimes I’ll glance at the previous year to be sure I didn’t miss anything.

For my expenses, I print out my Simple Expenses Google Doc and put it in the labeled sleeve, even though I already emailed the numbers to my accountant so he can get started.

9 // Have a Place for Your Receipts

box for receipts

I keep all of my receipts in a black box. And again, I only keep 3 years of them so I replace the oldest box with the newest receipts and a new label with the new year on it. I don’t do anything with the box, sometimes if I have an intern I might have them separate the receipts by month and paperclip together, but it seems unnecessary. I just have them in case I need them for anything and after 3 years toss them.

Final Thoughts

I think the most important thing is setting up a system that works for you and staying consistent with it.

I like doing my numbers in Google docs, I like having it scheduled on my calendar to do once a month, I like having a simple binder with labeled plastic sleeves and a box for receipts. It’s easy to keep things straight and the system works for me with how my business is set up. Your situation might me more complicated and I recommend talking to your accountant and learning how to do all of these things yourself and deciding what works best for you and if you should hire someone to do your bookkeeping or not. There are a lot of virtual bookkeepers and a lot of accountants also do bookkeeping or someone on their staff will.

I am not a bookkeeper or accountant so all of this information is just from my own experience and how I personally do things. But if you are serious about your business you need to educate yourself and stay organized with all of your business documents and finances. Then you have less to worry about!

If you have any great tips or stories to share, please do in the comments!