Are you tax-ready yet? In January and February, those W-2s will arrive, and 1099s will hit your mailbox soon. That’s usually the time a small business owner somewhere realizes it’s about to be the second quarter of the year, and the tax deadline is inching closer. My phone begins to ring, and emails asking for help start piling up in my inbox. Whether you’re gearing up to file personal or business taxes for the past year, late winter/early spring is the time to get your ducks in a row.

Maintaining Year-Round Tax Readiness:

Ideally, you’ve been keeping your records tidy all year, which should make tax prep a smooth ride. Yeah, right! If everyone did that, they might not need a local Bellevue bookkeeper like me. I’m a shoebox recovery specialist. I don’t care how your backup data comes to me as long as you have what I need to help you. If you don’t have someone like me, and your paperwork is in a bit of a tangle, what I’m about to share in this article is intended to help you sort it out.

Step-by-Step Guide to Getting Tax-Ready:

1. First Chat with Your Tax Pro to be Tax-Ready: Kick things off by touching base with your tax professional to check what else you might need. You probably got a checklist or a questionnaire from your CPA—fill it out.
2. Reduce Overwhelm: Take It One Step at a Time: Those long tax checklists can be overwhelming. Break them down into bite-sized tasks and tackle them one at a time to keep your cool.
3. Gather All Your Tax-Ready Documents: Pull together all the essential forms like W-2s, 1099s, 1098s, and K-1s. If you’re working from the comfort of your home, don’t overlook utility bills, rent or mortgage payments, and the square footage of your workspace, which can be crucial for home office deductions.
4. Create a Dedicated Tax-Ready Space: Designate a specific spot in your home or office just for handling taxes. Equip it with a tax binder and an accordion folder to keep things neat. A well-set-up space can turn tax time into a stress-free zone.
5. Set Up an Easy-to-Use Filing System: Place a filing system within arm’s reach of your desk to effortlessly file away receipts and documents. Make it simple; make it efficient.
6. Label and Categorize Your File Folders: Organize your folders with clear labels like Bank Statements, Invoices, and Contractors. Add a folder for each type of deduction to keep everything organized.
7. Make a Handy Dandy Tax Binder: Assemble a binder that keeps all your tax-related paperwork in one place. Divide it into sections labeled Income, Invoices, Contractors, Expenses, Mileage, and Receipt Pockets for quick and easy access.

Interactive Self-Assessment: Are You Truly Tax-Ready?

I’m not sure if you’re quite ready for April 15th. Here’s a straightforward tax-ready checklist. Answer these questions to find out if you’re ready or figure out what needs more attention before you file:

Documentation Gathered:

• Have you collected all necessary forms like W-2s, 1099s, 1098s, and K-1s?
• Do you have receipts for all eligible deductions, such as home office expenses, travel, and entertainment? Remember that you can also deduct the cost of your home office space.

Record Keeping:

• Are your financial records up to date and accurately recorded in your accounting software?
• Have you reviewed all entries for accuracy?

Consultation with a Tax Professional:

• Have you talked with a tax professional to discuss potential deductions and tax strategies?
• Do you understand the tax implications of your business decisions this year?

Financial Review:

• Have you conducted a thorough review of your financial situation so you know how much you have to pay?
• Are you prepared for any tax payments due?
• Is it time to start paying quarterly estimated taxes?

Organizational Systems:

• Have you set up a designated area or system for your tax documents?
• Is your filing system organized to retrieve documents if needed easily?

If you checked most of the boxes, you’re well on your way to being tax-ready. If you didn’t, take steps to address the boxes you didn’t check ahead of the income tax deadline. You’ll lower the temperature around this time of year, and your bookkeeper and accountant will thank you.

Your Tax-Ready FAQs:

What are the consequences of not being tax-ready?

Not being tax-ready can lead to late income tax submissions. Lateness can result in fines and penalties, such as late filing fees and interest on due taxes, which add up and hurt your business.

How can I maximize my deductions?

Keeping records is the number one thing that will help you and your bookkeeper or accountant spot potential deductions throughout the year. Meeting quarterly with your tax team can help you lean into and maximize these deductions.

What’s the best way to store my tax records?

I advise my clients to keep a mix of digital and physical backups. Use cloud storage for digital copies and a well-organized, physical filing system for paper copies so you’re covered from all angles.

Staying tax-ready doesn’t have to be a burden or a headache. With some upfront organization tips and a bit of planning, tax day can become just another day. Start early, stay organized, and tackle each task methodically to be fully prepared when filing time comes.

If you need help, you can always contact me and schedule a free 15-minute consultation. I can assist small businesses in Bellevue, in person or remotely, throughout the state of Washington.