That Magical Date

As I’ve mentioned in the past, I work as a full time web developer at an accounting school. We have training courses on how to start and grow tax practices, accounting and bookkeeping practices. One of the funny little things we do is ask our students this question: “What’s the difference between tax planning and tax preparation?”

The Answer: December 31st. Hilarious right!? The truth is, all the bookkeeping/tax work you do before December 31st of any given year is meant to have things in order for the new year when you file your taxes. What can you do before the last day of the year to be ready? Here are just a few simple tips that will help.

Don’t be a receipt hoarder

First, don’t hoard your receipts. The moment you get one, put it into your “system.” Whether your system is QuickBooks or a paper check register is irrelevant. Just make sure it gets recorded right away. In our seminars, we ask the audience if they’re familiar with “The Small Business Owner’s Filing System.” We then hold up a shoebox. Everyone laughs. Don’t let that be your filing system. On December 31st all of your receipts should have been entered where they belong.

Put your receipts in a box without the box

I just told you not to hoard your receipts in a box . . . I meant it. In this second tip, I’m not referring to shoeboxes. I’m referring to metaphorical boxes . . . categories. Make sure your system keeps track of various expense categories. Your travel costs. Prop cost. Marketing/advertising costs. Again, at the end of the year, everything should be recorded in your system with the appropriate category

Remember that you make money too!

Of course, it’s crucial that we keep track of our income too. Make sure that every paycheck gets recorded in your system as well. On December 31st, you should be busy watching a big shiny ball dropping in Central Park instead of worrying about recording transactions.

Put it all together

Finally, let’s put it all together. I personally use Microsoft Excel. However, if you don’t have that, you can use Google Docs. They have a spreadsheet application, and it’s free. Then you just need to create a spreadsheet that captures very simple information. Something like this:

Something like that. Then at the end of the year, you can sort and total everything by category. The bottom line is that you need to be prepared so that when you hand everything over to your Accountant/Tax Person/H&R Blcok), everything will be ready.

Of course, the other question that comes up a lot is what stuff should I record? That’s a discussion we had back in 2008. Written by non-other-than my good friend and Taxman, Bill Brough:

• Taxes For Magicians Part I
• Taxes For Magicians Part II

Until Next Month . . .