Wednesday, May 13, 2009

30-Day Persistence Challenge: Speaking of organizing--taxes

Monday, June shared how important persistence is in maintaining an organizational system. I thought now would be a good time to piggy-back off that and talk about taxes.

Yes, taxes.

I'm not talking today about how to pay them or how to save for them. Today, I want to talk about how to organize for them. This is a questions coaching clients often ask and something all freelancers have to deal with. The good news is, if we create a system and persist in using it, tax time will take less time, and, while you may still feel panicky and a little queasy, you'll feel some calm and sanity underneath that.

Creating a System

So, start with this:
  • 23 manilla folders
  • A marker
  • Some kind of storage device: A filing cabinet is my preferred solution (you don't have to look at the files every day and I already had one), but you can also use an accordian file, a hard-side lock box or a simple pair of book ends on a shelf.
  • Your receipts for so far this year.
Now label the files. One each for:
  • Paid Invoices (you'll put your stubs in here)
  • Accounting
  • Bank charges
  • Car/truck rental
  • Continuing education
  • Dues/organization memberships
  • Health insurance
  • Internet costs
  • Mileage
  • Office expenses
  • Other insurance
  • Other interest
  • Parking/tolls
  • Postage
  • Printing
  • Publications
  • Rent/mortgage
  • Repairs
  • Taxes
  • Telephone
  • Total meals/entertainment (business related, natch)
  • Travel
  • Web design/hosting
Your exact categories may differ. If you, like I, don't have a car, then you'll have a category for public transportation instead of mileage. This is just to prompt your thinking. Almost anything you buy for your business is deductible. One of the few exceptions is work clothes. Sure, you may work most days in your bunny slippers and robe, but that doesn't mean the slacks and blazers you buy for work meetings can be deducted. As someone I interviewed once said, "If you can wear it in public, you can't deduct it." It doesn't matter if you want to wear those clothes on your own time.

Next, go through your receipts so far this year and start sorting. Believe me, future you will thank you for having done this now. Add a note onto gas receipts and toll receipts for where you were going. On meal receipts, write who you met with and what you talked about. Then stick them in the folder and forget them.

The Persistence Part

So how do you keep up with it? Here are a few ideas.

Create a way station.
I don't file receipts every day. But having the files at the ready makes dealing with them easier. I keep them--and a bunch of other stuff I don't want to look at every day--in the bottom tray of a trio of clear plastic stackable trays. As I write this, It's bulging with articles to scan, receipts, old article files, etc.

When I have a spare minute, I can grab a handful of papers and file them away. I don't do it all at once. I don't spend 50 minutes or three hours on it. Little and often is my motto.

Place the piles where you can see them.
I hate looking at those ugly bulging piles. If I put the trays elsewhere, chances are, those piles would lay around much, much longer than they do now.

File while you talk.
Sometimes, I'll be on the phone with a friend or with a family member who calls during work hours--I know, poor discipline--and I'll take that time to put a few things away. Or I'll shred docs that need shredding.

The Payoff

Come the beginning of the year, I do something very simple. I sit down with the files and a calculator and I write the amount and date of each receipt on the outside of the file folder. Then, I tally it all up. Takes a few minutes while watching TV at night and I have my total spending. Score.

How about you? How do you do it?

Photo by D'Arcy Norman.

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