When it Comes to Tax Time, Here’s How to Avoid the Panic Like a Boss

April 15th strikes fear into the hearts of many entrepreneurs, and for good reason -- once we’ve worked hard at becoming profitable, the last things we want to think about are tax payments, CPA prep fees or (gasp!) being audited.

I see that glazed-over look of “tax-time horror” on the faces of my coaching clients often. But based on my background as an accountant and auditor, I can attest that tax time is much less stressful if you’ve already conquered half the battle: having organized documentation. On April 14th, you don’t want to be scouring the depths of your purse for a receipt from that one expensive bill paid way back in January.

Now, tax time may have come and gone for this year (phew), but there’s no time like now to start making things easier for the next go-around -- especially because the panicked search detracts from your peace and can be circumvented easily.

Even better? Getting your documents organized can be fun, manageable and save money. So, if you’re cringing at the thought of calling an accountant, staring at piles of old receipts or just putting it all off until the last minute (again), I have a few simple, actionable tips to get your critical items in order so you can get on with the business of being a solopreneur #bosslady.

Ready? Let’s do this.

Make organizing fun and manageable

Some of us love to be organized, and some of us don’t. But here’s the key: The more organized you are during the year, the smoother your tax season can be. Whether you’re already behind, with your receipts piled up in a drawer for “later,” or you’re just getting started in biz, approach it the same:

  • Pick up colorful file folders and use your favorite Sharpies/pens to label them with descriptions of the file contents (cable bills, pay stubs, bank statements, etc.)
  • Grab a pile of receipts/invoices/forms and start organizing them into the appropriate folders

Are you all about digital file-keeping? Google Apps or Dropbox are great options to hold your documents. Both have free versions, offer file-sharing to others (like your accountant), can be used on your mobile device and can even be color-coded, just like those handy, physical file folders.

If you’re looking for a service that does more than simply house shareable documents, Shoeboxed offers IRS-accepted receipt organization, automatic archiving of invoices from Gmail and even a GPS-enabled app to track your vehicle mileage. This option has a free 30-day trial with subsequent payment plans currently starting at $9.95 per month.

Organizing your receipts and files can be accomplished while watching TV or listening to a podcast if you have a larger chunk of time, or gradually over the course of a week if you only have a few minutes each day. Breaking it down into a few minutes each day or combining it into another activity (hello, Netflix!) helps it feel more manageable.

Bonus points: Keep both a hard copy of all documentation and an electronic copy in at least two places. Proving income and expenses to the IRS could be a mini-nightmare if you lose the only copy of your detailed receipts. (Editor’s note: Scan your receipts in with your phone using a handy app like CamScanner!)

How to organize receipts + files within your folders

For the most user-friendly filing system, group your files into categories that would mimic your financial statements (revenue and expenses). For example, a revenue folder might contain sub-folders containing documentation for:

  • Commissions Earned
  • Income from affiliate programs
  • Tips Earned
  • Advertising Income

Similarly, an operating expenses folder would contain sub-folders for:

  • Payroll and Related Fees
  • Vehicle Mileage and Maintenance
  • Meals & Entertainment
  • Advertising Expenses
  • Software and Technology Service Fees

Grouping files into categories allows an accountant to more easily and accurately find what they need to file your returns. And in the event of an IRS audit, it could save you many stressful hours of digging through a stack of uncategorized files.

Organizing saves money

Another reason to organize your records: It can save you money. Having a brief summary of the year’s transactions can work as an excellent bargaining tool for reduced tax prep fees because most CPAs prefer getting a neat, concise schedule instead of a shoebox full of coffee-stained receipts. (A quick reminder: An accountant compiles the information; the IRS audits it.)

I highly recommend my clients regularly export their online financial account activity and maintain an electronic copy. Then, when tax time rolls around, they can easily summarize the year’s financial data to hand off to their accountant.

To do this, you can use budgeting or banking apps, or if you want to get nerdy with it:

  • Export online checking/savings account activity to Excel
  • Add a pivot table to the data in Excel (learn how to do it here or here)
  • Set up the pivot table to summarize by type of transaction, vendor, etc.

I am in love with using pivot tables on my exported Excel-format banking info because it provides 1) a quick summary of income and expenses by type for your accountant to use in tax filings, and 2) the underlying detailed transactions you would need if audited by the IRS.

If you use Freshbooks, Wave, or other bookkeeping apps, you can export reports, as well.

Getting your records organized can not only work as leverage for a potentially reduced tax prep fee but also illuminate forgotten expenses that help offset some of the year’s income, effectively helping to reduce your tax liability.

You can do this (really!)

The simple take-away: Organizing your tax records is 100% manageable, can save you precious dollars to reinvest in your business and can even be enjoyable when approached creatively. Give it a try and see if it provides some ease to your process. Happy tax season!

What were your greatest tax season pains this year? Leave them in the comments!

PS -- Feel like it might be time to learn more about those solopreneur finances? Check out Solopreneur Finances, a course we co-created with Carrie Smith of Careful Cents -- that just happens to be included in the One Woman Shop Bundle!

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Ash Kennedy

Ash Kennedy fought through the trenches of the finance community for 10+ years before gratefully becoming a holistic lifestyle warrior and founding her writing & wellness coaching platform, Attitude of Wellness. She helps women heal themselves holistically, improve their own financial wellness, and then sits with them as they excitedly breathe into a paper bag after getting their first tax refund as an solopreneur. Email her a question (or some love if you liked this article) or find more of her work on Levo.
  1. JMT says:

    Attitude of wellness helped my business immensely through teaching me simple steps in order to simplify my busy work life and gave much needed confidence in being prepared. I was able to give my CPA my entire P&L statement in one sheet of paper.

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