Tax season is a very stressful time of year for many people, and understandably so. Dealing with money — and the possibility of owing the IRS a lot of it — is hard on a lot of us, and complicated tax laws and tax-filing processes don’t help.
Doing your taxes, on top of the million other things on your to-do list, can add additional strain. But it doesn’t have to be that way forever. Here’s what you can do right now — and throughout the coming year — to avoid next year’s tax headaches.
If your method of record-keeping involves a shoebox and a bunch of crumpled-up papers, you are guaranteed to have a tough time doing your taxes.
Lay your foundation for a stress-free tax season well in advance by getting organized. One key to effective organization is tracking your business expenses regularly.
Find a way to log and file all your business-related receipts on a rolling basis. For instance, there’s now an ample offering of computer software and smartphone apps that can snap a picture or scan receipts and send it to an accounting log.
As for keeping the paper receipts, the easiest way to do it is to keep them divided in separate folders based on categories. For instance, you can categorize your expenses into the following groups: fuel, repairs and maintenance, tolls, hotels, food, supplies, permits and fees, and any other category you might need to take into account. Here’s where paying for your vehicle-related expenses using a fleet card can make a big difference. Not only will you eliminate the need for stacks of paper receipts; you’ll typically receive regular expense reports that make documentation and tax preparation much easier.
Tracking your business expenses throughout the year is essential to ensure a fast, smooth, and proper tax-filing process. It’s also very important in making sure you claim all the deductible expenses at your disposal, helping to lower your tax burden.
Learn more about tax laws
Another important step to getting ahead of next year’s taxes is familiarizing yourself with the tax laws that apply to you, and learning as many details about the process as you can. This will help you save time when you actually start preparing your income taxes because you’ll already have the relevant information in mind.
For instance, you might wonder about the procedure involving the per-diem deduction, the types of write-offs that apply to your business and the ones that don’t, or even how truck depreciation is calculated, which is usually a very substantial item in the entire tax equation.
Do online research, and even consult tax or SMB professionals, to make sure you are up-to-date on all the pertinent tax regulations that impact your business.
Take note of the most common deductions
The list of possible deductions is pretty long; and, although it can vary from one business to another, there are some common items that apply in most cases. Here are some of the typical fleet-related costs you will most likely be able to claim as deductions:
- Repair and maintenance costs
- Fuel, oil, and coolant
- Supplies for your truck, including the delivery costs
- Permits, license fees, and commissions
- Lease payments
- Home office costs (rent, electricity, etc.)
- On-the-road food and drinks
- Insurance premiums
- Expenses for accounting and legal services
- Lodging expenses
- Parking fees
In addition to these common deductions, there are a couple of other potential write-offs that are sometimes disregarded. For instance, if a carrier you subcontract from requires you to wear a uniform, you may be able to expense the cost of buying and cleaning it. You can often claim safety clothing, such as gloves, coveralls, glasses, steel-toed boots, and so on.
Retirement plans are also a deductible expense. These may include a Keogh plan for yourself or for your spouse, an individual retirement account (IRA), a simplified employee pension (SEP), or other plans that are applicable to self-employed individuals.
Another potentially significant group of deductibles to keep in mind is depreciation costs related to equipment you use for business purposes. In addition to trucks, this can include computers, desks, chairs, copiers, phones, and fax machines, to name a few.
Calculating the depreciation of property can be particularly confusing. There are a lot of variables involved, and a couple of different methods to calculate and file it. You can either go with a straight-line method, where the depreciation is calculated in even amounts over the course of multiple years, or a declining balance method.
It comes down to the type and class of the property in question, when it was put in to service, and a few other factors, which can make the whole process daunting and confusing. But the IRS provides enough information to get you familiar with the procedure behind property depreciation, so it would be good to learn as much about it as possible before you start.
Get ahead of this year’s tax season
Let’s be real: Filing your taxes will never be a treat. You can, however, make tax time easier and faster thanks to meticulous record-keeping throughout the year, learning more about the tax regulations that apply to you, and finding out how to maximize your deductions. With these tools, you can mitigate most of the annual stress and headaches, and get through tax season with time and money to spare.