Use this time to get organized and prepared before tax season rolls around, and also to get ready for next year’s bookkeeping. Spending a little time getting everything in order now can save a lot of hassle later.
If you have any questions about how to prepare for the upcoming tax season, be sure to ask your tax preparer.
1. Follow up on invoices
Now is a good time to go through your records from this year and see who still owes you money.
Like many freelancers, there’s a good chance you still have an outstanding invoice or two.
Check the terms of your contracts to see when each outstanding payment is due and, if they’re late, reach out to those clients. Sometimes it takes a little time to track down your money, so it’s a good idea to start soon.
2. Find your receipts
What do you do with your receipts for tax-deductible expenses?
Do you carefully file them away the day you make a purchase? Or do you cram them in your junk drawer, wallet, purse, or car and figure you’ll just deal with them later?
Now is the perfect time to gather all those receipts and sort them out for tax time. Check with your tax preparer if you’re not sure what you can and cannot deduct.
Take a few minutes and go through your credit card and bank statements for the year to make sure you’re not missing anything.
Don’t forget about digital receipts. Sort through your emails and maybe even take a quick look at your order history with your favorite online retailers to make sure you don’t miss anything.
3. Organize your tax deductions
Once you have all your tax-deductible receipts gathered in one place, go ahead and start sorting them out.
It is usually helpful to organize them by deduction category. Look at your taxes from last year and, if you have similar types of expenses this year, you’ll see what categories of deductions you may have.
Then sort the receipts out. File folders are often helpful. Paper clips also work. Avoid staples or anything that may damage the receipts or make them difficult to separate. Some people also like to scan their receipts to have a backup digital copy.
Next, make a spreadsheet for your expenses and organize it by category. This will help you have everything ready for your tax preparer. Include information like the date of purchase, vendor, business reason for purchase, cost, method of payment and anything else that might be helpful.
4. Prepare to receive 1099s
At the end of the year, while you’re preparing for your end of year review, you’ll want to know how much money you earned this year. It makes sense to tally up how much you received from each client so you can evaluate each one, but also so you can prepare to receive your 1099s in the new year.
Throughout the year, be sure to keep records of all your income. Keep your paystubs or photocopy checks if you don’t receive a pay stub.
Be sure to go through bank statements and note any direct deposits. Look at PayPal and other payment systems and check these records. You’ll likely want to print these all out for your tax preparer (or provide a digital copy).
Once you have all your income records together, make a spreadsheet recording the payments you received from each client.
You can use this information to double-check your 1099s when you receive them and to be able to file your income accurately if you do not receive a 1099. If your records and the 1099 you receive do not match up, double-check your records and the client for a corrected 1099 if the one they initially sent is inaccurate.
5. Start next year’s folders and spreadsheets
Pretty soon, the new year will roll around and you will start receiving checks, contracts and other important information for the new year. Be sure to prepare your organizing and filing system ahead of time so you’re ready to go as soon as January arrives.
Make the physical folders you’ll need and set up your digital ones as well. Create next year’s assignment and income spreadsheets and be ready to hit the ground running in the new year.
6. Ask questions
If you have questions for your tax preparer or accountant, take advantage of the slow season to ask them or set up a meeting.
As soon as January arrives, people will kick into high gear and they will likely be quite busy, but it might be easier to ask a few questions when things are slow.
The end of the year is a great time to get organized, catch up and get ahead on accounting for the new year. So when January rolls around, you’ll be ready to focus on your writing.
How do you prepare for the end of the tax year?