Is it just us, or does time seem to accelerate as we move into the fall season? It’s like the time between summer ending and the beginning of the holiday season turns into a busy blur, and before we know it, we find ourselves at the end of the year in a mad rush to get ready for tax season.
Fortunately, we know there are small, practical steps you can start taking this fall to have your business ready for the end of the year, so you don’t find yourself scrambling in January. That’s why for the rest of the year, we’re going to be focusing on “Getting Ready for Year-End,” sharing our most constructive ideas on how you can best support your CPA, bookkeeper, and business before the next tax season.
Separating Personal Expenses
Your greatest priority before the end of the year is to have clean books by January before processing documents for taxes. Separating your personal expenses from business expenses is a great place to begin, as it can be a time-consuming job – especially if you get a late start!
Many business owners have separate cards for their business and personal expenses, but sometimes the wrong card gets used. Sometimes larger personal purchases are put on the business card because it’s the one that gives back the most points or discounts with certain vendors. These switch-ups may not happen frequently, but that makes them easy to miss or lose track of.
Where to Begin
As you go through your books to separate the personal expenses from the business expenses, start large and work towards small. Identify the substantial expenses first, like travel and purchases of equipment or assets. Once those are appropriately categorized, move on to the smaller expenses, like meals and office supplies. Just like breaking household chores down room by room makes the work seem less overwhelming, breaking up this expense categorization into different sections makes a potentially overwhelming task much more manageable.
Home Office Deductions
If you are one of many business owners working out of a home office, you can deduct a percentage of your home utilities based on the square footage of your office compared to your house. This is another tedious task that can be easy to forget until your CPA is asking for the numbers in the middle of tax season. As you sort out your personal expenses, take the time now to figure out these square footage percentages before the end of the year. Your CPA or bookkeeper will thank you!
The best way to ensure you don’t miss essential deductions, big or small, is to make personal expenses clean up a monthly rhythm. Much like the dust piles up when you let too much time pass between sweeping your house, your books get “muddier” and more confusing the longer you let them pile up without separating them. Unfortunately, the muddier the books get, the greater the chance is that you’re going to make a costly error.
At the very least, we recommend making a fall month like October your yearly reminder to comb through your books. Avoiding the mistake of waiting until January will save you time, peace of mind and ultimately, dollars.
