Small business owners prepare for tax time all year long. If you’re starting a small business, or simply want to improve your organizational skills, three small business owners share their tax time tips.
Although their companies are very different, the following three small business owners share a passion for what they do. They’ve also found ways to optimize their time throughout the year, so tax time isn’t a burden. We chatted with these entrepreneurs to get helpful tax time tips on becoming organized and staying that way, every day.
Rhonda Tibbs is a Registered Massage Therapist and Osteopathic Manual Practitioner, who has a practice in St. Catharines with Osteopathy Niagara, ON. When she’s not helping her clients, Tibbs is travelling the world.
Table of Contents:
- How do small businesses stay organized?
- How can I keep my desk organized?
- What can I write off as a small business owner?
- How can I improve my home office?
How do small businesses stay organized?
Barb Botten follows her late Mother’s advice when it comes to keeping her many magazine deadlines on track. “She used to always say, ‘write it down.’ My office, my car and even my bedside table are equipped with [self-stick notes] and a pen,” says Botten. “When a thought enters my head amid completing another task, I quickly write it down to come back to later. At the end of the day, I check off what has been done,” she continues. “The sense of accomplishment is satisfying.”
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David Winter agrees and adds that it helps to set targets that are achievable. “Have goals that you can match in a day, week, or month. That way you don’t get discouraged,” says Winter. “I have [a] scratch pad on my desk, that I do that with.”
The use of popular tax software helps Botten improve efficiency with her book-keeping. “I recently started using accounting software,” she says. “After the learning curve and customizing it to my needs, it has made my business run a lot smoother. Profit and loss reports are at my fingertips, and I can do HST reporting in minutes instead of hours.”
This accounting software by Intuit Canada can help you file your 2018 tax return with accuracy. This software helps you prepare returns with personal and self-employment income (consultants, contractors, sole proprietors). It also offers expert guidance on how to claim and maximize self-employment deductions and eligible business expenses.
Rhonda Tibbs maintains vigilance about due dates, and that saves her money. “Keep a calendar with important dates on it. Is the mortgage biweekly? When are the taxes due? Pay on time,” she advises. “You don’t want unnecessary interest or late-fee charges. It all adds up.”
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How can I keep my desk organized?
To keep work-life and home-life from overlapping, Botten has a large and well-organized home office. She keeps work-related information easy to find with two filing systems. “I suggest a paper filing system and an electronic filing system. For the papers, I categorize each item and label file folders accordingly,” she explains. “File your electronic items in the same fashion. I separate most of my desk papers into two categories. One is called ‘To-Do,’ and the other is ‘To Be Filed,’” continues Botten. “This saves time looking for an item in a big pile on the desk.”
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Duplication helps at tax time, according to Tibbs, who says it’s too easy to misplace an important document if it’s not filed properly. “If you receive invoices and receipts online, print them out and file them as well. You will need these if you are ever audited and need to support an expense,” she recommends. “It’s way easier to look up a specific expense if you have them filed separately such as office, supplies, repairs and maintenance, utilities, etc. than to have to go through a pile of disorganized paperwork.”
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What can I write off as a small business owner?
For Tibbs, knowing the differences between current and long-term expenses is key to approved write-offs. “Think of it this way: current expenses get used up and need to be replaced regularly, like light bulbs, whereas if you need to replace the whole light fixture, that is long-term,” she explains. “It shouldn’t need to be replaced as often, so you write it off over a longer period.”
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Sometimes, learning the hard way commits a habit to memory, says Botten. “When I started my own business, the last thing I was thinking about was how I was going to do my taxes. I wanted to concentrate on running the business,” she says. “When tax time came around for the first time, I hadn’t considered the importance of keeping all my receipts. Parking fee receipts for $3.00 were tossed away, but over the course a year, these add up. I now keep every receipt.”
Bank fees are another expense small business owners often overlook, according to Botten, who also advises shopping around to find a bank that offers the best deal for your type of business.
Winter relies on a trusted accountant to know what can and can’t get written off against his business income and agrees with Botten that vigilance is important when keeping receipts. He hangs onto all of them and lets his accountant concern himself with the details. “An accountant is so valuable to a small business owner,” he says. “They know the ins and outs of your books.”
How can I improve my home office?
Winter believes in the benefits of keeping live plants in his workspace, as well as proper lighting. “It will [help] make you feel so much better.”
A cheerful, bright green hanging plant like this Boston Fern will help elevate your mood while helping to oxygenate your office space. Make sure a fern receives indirect sunlight each day and never let the pot stand in water.
Procrastinators beware: Tibbs suggests being proactive about paperwork, long before it snows you under. “Set aside half an hour every week to go through your business activities.”
Although she relies on her smartphone for many tasks, Botten believes using a planner is better than an electronic calendar. “When I look at my paper planner, I have one task in mind, and that is to plan my schedule,” she says. “There are no pop-ups or emails or alerts that can easily distract my focus. I also believe that writing things down helps commit them to memory.”
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It’s clear that for small business owners, preparing for tax time isn’t just a once-a-year activity. Keeping receipts, knowing what you’re entitled to write off and creating a pleasant working space is part of the secret to success for these entrepreneurs. Visit the Government of Canada’s information page for Small Businesses and Self-Employment to learn more.