October Tax Prep Checklist
Oct 08, 2024
Get Your Books in Shape for Tax Season: The October Tax Prep Checklist
As October rolls in, it's the perfect time to start prepping your finances for tax season. Whether you're a freelancer, coach, or small business owner, staying organized now can save you a lot of time and stress down the road. Use this checklist to break down the essentials into manageable tasks and get ahead on your tax prep!
1. Organize Your Invoices
Gather all your client invoices and organize them. This is especially crucial for service-based businesses like coaching, website design, photography, or consulting. Ensure each invoice is properly filed by client and date.
- Why: Organized invoices ensure you track all your income, keeping you prepared for tax reporting and making sure nothing gets missed. It helps with cash flow too!
- Fun twist: Use cute color-coded folders or digital labels to organize invoices by category—one color for weddings, another for family shoots, etc. (photographer example)
- Pro Tip: Set up automated invoicing tools (like QuickBooks or Wave or HoneyBook) to help streamline this process and reduce paperwork.
2. Separate Business and Personal Spending
It’s time to make sure your business expenses are separated from personal spending. Travel expenses for work, software subscriptions (like Canva, Zoom, or QuickBooks), and business-related purchases should all be clearly categorized and paid through an account solely for the business.
- Why: Separating business and personal expenses keeps things clear and accurate when it's time to deduct expenses for tax purposes. It helps prevent confusion and ensures you get the maximum tax benefits.
- Important reminder: Mixing expenses can cause issues, such as missing deductions or raising red flags with the IRS.
- Pro Tip: Set up a dedicated business bank account and credit card to make this separation super easy. If you are low on cash, transfer money from a personal account to the business to make a business purchase on the proper account, rather than paying for it through your personal account.
3. Double-Check Your Estimated Quarterly Taxes
By October, you should have made three estimated quarterly tax payments for the year. Make sure you've calculated and paid the correct amounts to avoid penalties and keep things smooth for tax season.
Click this link to learn about estimated quarterly tax payments and if you should be paying them.
- Why: Paying quarterly taxes is essential to avoid large year-end tax bills and potential penalties for underpayment. Getting ahead now means fewer headaches later.
- Important reminder: The IRS can charge penalties if you haven’t paid enough by year-end. Better to catch any issues now!
- Fun twist: Add quarterly tax payment deadlines to your favorite calendar app with alerts, using stickers or reminders that keep you motivated to stay on track.
4. Review Deductions Like a Pro
Now’s the time to review the deductions you can take. Common deductions for small businesses include:
- Equipment/Office Supplies: Deduct any business-related purchases like a laptop, camera, or software.
- Professional Development: Courses, certifications, or conferences you attended to enhance your skills can be deducted.
- Talk to Your CPA or Tax Preparer: To ensure you’re taking every eligible deduction, consult with your CPA or tax preparer. As bookkeepers, we help ensure that every expense is accounted for so you don’t miss valuable deductions. Missing expenses can overstate your profit, which means you could end up paying more in taxes than necessary.
- Why: Deductions are crucial for reducing your taxable income. Missing out on these deductions means you may end up paying more taxes than you should. Accurate and complete records help you keep more of what you earn.
- Pro Tip: At year-end, set aside a “deduction day” where you sit down with your CPA or tax preparer to make sure everything is covered.
5. Save Business Expense Receipts to Google Drive
Start saving all your business expense receipts digitally. Scan your paper receipts and save them to Google Drive, Dropbox, or another cloud-based storage system. For easy reference, name each file with the date, vendor, and price.
- Example: "2024-10-01_Canva_$120"
- Why: Keeping digital copies of receipts helps you stay organized and is especially useful in case of an IRS audit. It also protects you from losing receipts, which can lead to missed deductions.
- Important reminder: The IRS requires that you keep proof of expenses, so having a system for your receipts is crucial.
- Fun twist: Create themed folders in your Google Drive for each category of expenses—like "Marketing," "Supplies," or "Professional Development." Or, organize them by year and month—like "2024 Receipts" with subfolders "March," "April," etc. Pick an organizational. system that makes the most sense to you!
- Pro Tip: Schedule a weekly reminder to scan any new receipts and upload them right away to avoid backlog.
Ready to Outsource Your Bookkeeping? Let’s Make Tax Season Stress-Free! 💼✨
If this checklist feels like more than you want to handle, you're probably ready to outsource your bookkeeping. I help small business owners like you stay organized year-round so tax season is a breeze. Fill out our contact form, and let’s figure out if we’re a good fit to work together. You already know it’s time to get help—let’s take bookkeeping off your plate so you can focus on growing your business!
