The sights! The sounds! That magical feeling! It comes once a year and can only be one thing… tax time! Okay, maybe not. Tax time is no one’s favorite time of year, so what I’m about to suggest may sound loopy, but hear me out. What if instead of “doing” our taxes once a year, we spread out the joy and “did” them every month?
MJ’s Tax Tip for Sole Proprietor and Single Member LLC Businesses: Using Excel, list the categories from the Schedule C tax form in a single column—Income categories are Sales, and Returns and Allowances and are found in Part I. Expenses such as Advertising, Rent, etc. are found in Part II, and Cost of Goods Sold are in Part III. Next, in the top row, list the months of the year. Enter an auto sum formula at the end of each column (for monthly totals) and row (for category totals). Using an accounting software instead? No problem, match the Chart of Accounts to the Schedule C. Sole Proprietors and Single Member LLCs also file Form 1040, and Schedule A (because you are taxed through the individual return) so the categories on those forms can similarly be managed in an individual Excel sheet or personal accounting software file.
Keeping up with the monthly recordkeeping will make managing tax preparation a matter of copy and paste as the data is right there at your fingertips, already categorized.
So, technically, yes, it does mean thinking about taxes year-round. But once the setup is complete, it requires minimal effort to maintain and may save you time, money, and headache when the “real” tax time rolls around.
As your business grows, taxes may become more daunting, and you may want to explore a different business structure and tax strategy like S-Corp or C-Corp. In that case take plenty of time to interview a Tax Accountant or CPA that communicates well, is experienced with your type of business, and most importantly you trust.
If we can assist with bookkeeping, or a 1040/Schedule C tax return, call to discuss. We will help you find the right solution for your business.
