Taxing New Year’s Resolutions 

Take the initiative now that we’ve turned the calendar page to 2011 to make some New Year’s resolutions regarding your taxes. Here are some suggestions: 

• Keep up with your calendar. Your calendar becomes your bible when it comes to taking business deductions. Mark your appointments daily, along with the mileage you traveled to get there, and any tolls that you paid. Make sure that you list the client (s) name along with the locations of appointments.
• Set aside money for estimated taxes. It’s easier said than done. In these tight economic times, money is often earmarked, or spent, before it comes in the door. However, if the government comes calling, they don’t wait. I often suggest that clients set up a separate “tax” account. Let the tax money earn interest until it’s due.
• Set aside money for retirement, and do it regularly. Don’t wait until you’ve built up a surplus; make retirement savings one of your monthly bills. Even better, set up an automatic deduction from your checking account or payroll.
• Use the bill payment system offered at your bank. Most of the time it’s free, you save money on postage and you can set up your bills to be paid on time, at a later date. Set ‘em and forget ‘em.
• Stop co-mingling. You may work out of your house and most of your money may reside in your business account, but don’t use your business account to pay personal expenses such as your mortgage, or the vet bill. Similarly, don’t pay your equipment lease from your personal account. Doing so widens the scope of any potential tax audit.
• BUDGET! In tough economic times, it seems to take more money to keep things going. The first thing to do is to see how much money you spend throughout the year on everything from groceries to vacations and everything in between. It’s easier to stretch dollars further when you pay attention to where it’s going.