Finished my taxes this weekend! I’d always dreaded it when I was younger (in fact, I had my mom do it every year, even when I only had to fill out an EZ), but since I got married I’ve been on the bloody ball. It helps when I know that I’ll probably have a refund, and quite frankly, I was tired of the frantic calculations as I counted down the minutes to midnight, April 15th, every year. This way is so much better.
Since my freelance income has increased each year the last few years, I’ve had to really be more careful with my tax forms, organizing my paperwork, keeping track of receipts, etc. Last year was a minor disaster, as I kept almost no receipts from any of my expenses and of course forgot to track my mileage. HOWEVER. This year, I’ve already put together an OpenOffice Calc spreadsheet with invoices and queries, and I’ve also put a notebook and pencil in the car dedicated solely for mileage notes. So far, I’ve been doing pretty well. I expect to make at least five times what I made last year (which wasn’t much anyway), so I’ll definitely need the deductions. Also, with my going into freelancing full-time, there’s really no excuse for me to be dickering around anymore with the business end of the, well, business.
If you haven’t done your taxes yet, you should definitely consider getting Turbo Tax if you don’t already. I got the Home & Business package, which is a little pricey at $75, but if you’re like me and don’t have the luxury of spending hours and hours wading through lots of paperwork and Schedule this and that, you’ll find the $75 to be money well spent. Since I started using it three years ago, I’ve averaged about 1 hour doing my taxes, not including gathering the paperwork (which is really just pulling out the folder marked 200x Taxes from the filing cabinet). I also pay the $30 extra for the State package. Considering that my average refund the last couple of years has been about $3,000, I’d say that $100 is a pretty good bargain to get it all done in an hour, with the refund in my bank within 2 weeks.
If you’re just starting to organize for the 2008 tax year, here’s some handy tips I’ve found to be of great help:
- Make a manila folder titled 2008 Taxes. Put a big mailing envelope in it, and whenever you generate a receipt for a purchase related to your business, stick it in there. Take 2 seconds to write down the purpose of the receipt so that you don’t have to rack your brain a year later trying to remember what that $12.95 charge was for at K-Mart. Putting it in a mailing envelope helps to keep receipts from falling out of a loose folder.
- Clean out your wallet/purse/pocket at the end of every day and remove all receipts, both personal and business-related. File the business-related ones in the above envelope. Once you have your system in place, it’ll take no more than a few minutes at the end of each day to organize everything.
- Whenever you get any kind of correspondence related to your taxes (quarterly statements, W-2’s, 1099’s, etc.), stick it in the folder. When you get ready to do your taxes, you’ll have everything in one place.
- Keep a small notebook and pencil in the car to track your mileage.
- Keep a spreadsheet in your laptop/PC listing all your invoices, listed in chronological or invoice # order. That’ll help you keep track of which invoices you still need to send out. Mine is combined with my assignment spreadsheet so that I know exactly what’s still pending and how much I’m due. If you don’t have Microsoft Office, check out OpenOffice.org’s full suite of office applications, including a spreadsheet app that I swear is more stable and as easy to use (if not easier) than MS Excel. Plus, best of all, it’s FREE.
That’s it! It should be super easy to do your taxes next year, now that you have a basic system to capture all of those financial bits and pieces required by the IRS. Obviously, as your needs change, your income grows, and your business expands, you’ll want to revisit your accounting needs and may need to consider hiring a professional to do your taxes. If you’re like me, however, and have pretty straightforward income from freelancing with the usual deductions, Turbo Tax’s Home & Business package should work well for you.