People ask me all the time “What do I need to bring you for my taxes?” or “I need to do taxes, what do I do?” or some other derivation of that. Often times with a sigh. Or profanity.
People make such a big deal out of taxes. The world has talked it up into this giant mountain when it really doesn’t need to be.
So, deep breaths.
Business is simple.
What do you pay taxes on? Simple: Profit. Most businesses owners know that. If you don’t, now you do. I just told you. You pay tax on your profit. Not the total sales, not the deposits, just the profit.
Ok, so what was your profit? Easy. Revenue minus expenses.
Figure out your total revenue. This can be found in lots of ways. Don’t have books? No problem; look at bank statements. Add up customers manually. Go pull up all your invoices and add them up. Easy stuff.
Now add up your expenses. Hopefully, you have books and you have been adding it up a little at a time each week, instead of causing yourself to do all the work now. But if you haven’t, it isn’t the end of the world. Again, look at bank statements. Add up receipts. Make sure you don’t forget something. Do you have an online account like Paypal? Grab the expenses from there. Check your credit card statements.
Subtract your expenses from your revenue. That’s your profit. Pay tax on that.
Now, if you want to pay even less tax, it helps to have someone that can help you. Like me. But, you do not need that. And if you are scared of using someone because you are embarrassed to show up with your shoe box, now you know how to do it like a pro.
Show up at my office with revenue and some expenses and we can make that work, no problem. The same is likely true with any decent CPA.
And before you get overwhelmed, think about it this way. It doesn’t take long:
First week of January: Add up your revenue. That’s it. Just do that little bit.
Second week of January: Look at your bank statements and add up expenses there.
Third week of January: Look at your credit card statements and online account.
Fourth week of January: Gather up any other miscellaneous receipts you have.
First week of February: Your other documents start coming in the mail (1099s, W-2s, etc). Put those in the folder with the things you pulled together in the previous weeks. You are now ready to get your taxes done
Second week of February: Add up what you brought in. Add up what you spent.
Give those to your CPA.
Business is Simple