If you’re a freelancer, tax season can be a very stressful time of year if you haven’t been proactive about your bookkeeping. But even if you’re not a numbers person, it’s easy to stay on top of your accounting if you have the right systems and tools in place to help you out.
Here are seven bookkeeping tips to help you stay on track with your taxes and keep you calm during tax season and throughout the year.
- Save a Percentage of Your Income for Taxes
When you get a paycheck from an employer, a percentage of your income is automatically deducted for state and federal taxes. As a freelancer you have to make these deductions yourself. So by setting aside a certain percentage of your income you’ll have sufficient funds on hand that aren’t mingled with your other personal or business funds. To figure out how much you should be setting aside, there are many online resources that can help you estimate. A good point to start is visiting IRS.gov and download some 1040ES forms or read through IRS publication 583.
- Keep Track of Your Expenses
While this tip might seem obvious, many freelancers wait until tax return preparation to finally sort their expenses for the year, sifting out business items from personal items.
The easiest way to track and manage expenses is to open a separate checking account to use for business transactions. It’s not necessary, but it can help streamline your bookkeeping and help keep you organized in day-to-day spending. The same applies to credit card accounts. And with the convenience of receiving a year-end summary from pretty much any credit institute you have the expenses of the entire year listed and categorized at one glance.
- Document Your Receipts
Keeping track of your receipts is another aspect of managing your expenses. These records are important information if you happen to be audited or if you ever need to double-check or confirm an expense. The good news is that in 2016, you don’t have to hang onto your paper receipts; you can document them via your mobile phone. Apps like Expensify allow you to take pictures of your receipts and then recycle the paper so you don’t have to worry about it.
- Let Software Work for You
Using bookkeeping software can help you automate tracking for your income, expenses, and deductions without much effort on your part. If you’re already using Viewpost to send invoices and receive payments, you can easily sync your Viewpost account with your QuickBooks or Xero file.
- Don’t Fall Behind
Get into a routine that forces you to keep up with your books on a weekly basis. Even if it’s just a few minutes every day, or a few hours one day per week, developing this habit will ensure you don’t let your finances slide and will put you in a good place when it comes time to file your taxes.
- Get Your Clients to Pay on Time
When you constantly have to wait to get paid, it can be difficult to keep track of your income. Ensuring your clients pay on time can help you be smarter about your budget, your projected income, and above all, your cash flow.
- Hire a CPA to Help You
Sometimes it’s best to just hand things over to the experts. If you’re confused, your finances have become too complicated, or you’re making a lot less or a lot more money than you projected, it might be a good idea to hire a CPA. With their knowledge, a good CPA can help guide you through deductions and adjusting your withholdings to match your expected income.
If you have reached this point, we are here to help. Call us TODAY for a free consultation.
Adopted from “Accounting & Bookkeeping/Viewpost 2/19/16”