Running a business comes with enough surprises — your taxes shouldn’t be one of them.
Whether you’re self-employed, running an LLC, or managing a side hustle, one of the best ways to reduce tax-time stress is by keeping tax-ready books all year round. Good bookkeeping doesn’t just make filing easier — it can also save you money and keep you out of trouble with the IRS.
Here’s how to stay ahead.
- Separate Business and Personal Finances
This is rule #1 for a reason. Mixing personal and business expenses is messy, confusing, and a red flag for audits.
Set up a separate:
- Business checking account
- Business credit card
- Payment platforms (Venmo, PayPal, Stripe, etc.)
- Track Every Transaction
Every dollar in and out should be accounted for — even if it’s just a $5 coffee with a client.
Use accounting software like:
- QuickBooks
- Wave (free)
- FreshBooks
- Xero
Or go old-school with a spreadsheet — but be consistent.
Don’t forget to record mileage, meals, subscriptions, home office expenses, and any reimbursable costs.
- Save All Receipts and Invoices
Digital or paper — keep them. The IRS doesn’t require physical copies, but you need proof for deductions and expenses.
Organize them by:
- Category (e.g., travel, supplies, marketing)
- Date
- Vendor
- Reconcile Monthly
Set aside time every month to:
- Match your bank statements with your books
- Categorize expenses properly
- Flag any discrepancies
This habit keeps your books clean and helps catch errors early.
Schedule it like a recurring meeting — maybe the first Monday of every month.
- Keep a Real-Time Profit & Loss Report
A running P&L shows:
- Your revenue
- Your expenses
- Net income
This not only prepares you for taxes, but also helps you make smarter business decisions.
Bonus: It’s often the first thing your CPA or tax preparer will ask for.
- Stay Updated on Deductible Expenses
Tax rules change. What was deductible last year might not be this year.
Common business deductions include:
- Office supplies
- Software subscriptions
- Business meals (50%)
- Education and training
- Advertising and marketing
- Contractor payments (1099s)
Consider meeting a tax pro once or twice a year — not just at filing time.
- File Forms On Time (1099s, Sales Tax, Payroll)
If you:
- Hire freelancers: file 1099-NEC by Jan 31
- Sell goods/services with sales tax: file monthly/quarterly sales tax returns
- Run payroll: stay compliant with W-2s, 941s, and state filings
Use tools like Gusto or ADP if you have payroll — or work with a tax pro to stay compliant.
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