One of the biggest concerns for self-employed people is how to handle the paperwork. These days, it’s not enough just to be good at what you do; you also need to know how to deal with all your finances and taxes appropriately. You may think this sounds like a lot of work, but it doesn’t have to be difficult if you start organizing early and take care of things as they come up. That way, you’ll be able to concentrate on the most crucial aspects of your business: generating money and growing it!
Simplify the Process
Keeping digital copies of your paperwork, including corporate records such as shareholder agreements, company bylaws, etc., tax returns, and forms for various deductions/credits means using modern technology in your favor. There are many services and software, like document scanning services, that can help you keep your receipts and documents in a simpler and more organized way. You can also sign up for a cloud-based storage system, which will give your access to the same pieces of information from any device connected to the internet.
This will make it easier for clients to sign contracts and get them back quickly, as well, as you only need internet access and the convenience of a web browser or mobile device application.
Organization
One way you can do this is by labeling different folders according to the expense categories they fall under. If you’re using an electronic filing system, then you can even arrange each file into subfolders for easier access. The exact category name isn’t important here; what matters is that it should be clear enough so that anyone looking through it will know exactly where they are. For example, business travel expenses go into one folder while home office deductions go into another one.
You can standardize your receipts by using the same color, font style, etc. It may not seem much when you’re just saving a receipt here and there, but when it comes to finding and filing your taxes later on in the year, this will help simplify things.
Keeping Records
You must keep track of all business expenses and incoming revenue to calculate taxes properly. It will help if you group all of your receipts in a folder or envelope for an organized storage method. You can even set up a simple content management system where you enter them into an Excel or Google Docs spreadsheet.
If you’re using an application to track expenses, then it will generate all the necessary forms for you so that filing your taxes will be easier. If not, then make sure to do it yourself so that you don’t forget anything important. Knowing what each document is makes everything much easier when trying to find a specific item. If you’re filing your taxes on paper, then make sure to put your expenses and income in separate piles or folders for easier access later.
Automate Expenses
Expenses such as credit cards, bank fees, and phone bills can be automated to save yourself time and effort in the long run. Just set up automatic transfers from your bank account to these services so that you don’t forget about them when payday comes around.
If you’re using a cloud-based storage system for all your documents, then just attach any receipts or documents related to these resources to simplify things further. It’s best if you can get everything done at once, including receipts for business expenses. This cuts down on the time needed later on when filing taxes or other income reports.
Some services will even file tax returns for you after receiving this information from you via an online form or by email. This can be pretty convenient so long as you don’t leave it for too long but always double-check the results to make sure everything is correct before sending out your tax return or paying any taxes you owe.
Rules and Regulations
Get familiarized with IRS rules and regulations regarding deductions such as home office and mileage allowances. There is no excuse to be ignorant when it comes to this; if you read about what kind of deductions the average person can make, then you could benefit from them as well.
You should also familiarize yourself with tax filing and payment deadlines. For example, in the United States, your 1040 form and any accompanying schedules and forms must be sent out by April 15. You’ll typically receive a refund check because most people overpay throughout the year due to exemptions and withholdings, but this is still an important deadline so don’t forget about it.
When To File
Depending on whatever nation you live in, you must file professional tax returns in accordance with local requirements. Each state may have different regulations, so check with your local government office before doing anything. Self-employed business owners must pay taxes quarterly for federal income tax purposes.
Quarterly filing deadlines depend on your business type too, so be sure and check with the IRS website to find out more information. Hire an accountant or utilise a software solution that can assist you if you don’t know how to do it yourself. Most of these take into account your location and filing status when determining the amount you owe since everyone’s situation is different.
Working From Home
If this applies to you, then there are additional deductions you could claim if applicable. You can deduct some costs for your home office, but not for your entire house or apartment. You can use a percentage of your rent or mortgage to account for this deduction, provided that you meet all the criteria set out by the IRS. Some people rack up thousands of dollars of deductions using this method, which is always good news when filing tax returns every year.
All you have to do now is make sure you manage your documents as properly at home as you would at work. Luckily, there are options to help you do this in the best and simplest way!
Using cloud-based services for data storage and expense management will help simplify things when you’re self-employed. You could also consider automating some costs, such as frequent bank transfers, to save time in the future. When it comes time to file your taxes, label folders based on their purpose and familiarize yourself with what each form is used for.
And remember, always keep backups in case something should happen to both your computer and other devices containing electronic copies of important documents.
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