Tax Season is Finally Over, Now What?

Tax Season is Finally Over, Now What?

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Congrats! You’ve officially surpassed your first—of many—tax seasons. You’re over the 2020 tax filing hump and you couldn’t be happier. All the blood, sweat, and tears that went into tracking your finances were worth it, at least until next year.

Whether you completed your tax season early or waited until the new IRS federal tax filing deadline of May 17, 2021, the worst is over. While the entire experience is still fresh on your mind, now is the ideal time to reflect on the lessons you’ve learned this year: the good, the bad, and the ugly.

Reflecting using lessons learned or post-mortem process is key to learning from past mistakes—and ensure they don’t happen again. And most importantly, you’ll definitely want to celebrate the wins, no matter how small.

Here’s how to get started:

Tax Season is Finally Over, Now What?

👀 Look back to plan ahead

We know what you’re thinking: what, already?

But planning doesn’t need to be exhaustive. Starting early and asking the right questions is key to a successful post-mortem check-in with yourself. If your accountant works closely with you, you might want to loop them in as well or ask them a few questions to get you prepped for next year.

Why are questions more important than answers? Brilliant thinkers never stop asking questions because they know that this is the best way to gain deeper insight into their work and the world around them. Answers, at their best, are temporary responses that change, shift and decay over time, needing to be reformed and remade and reevaluated as the world itself changes. If you keep asking questions you can keep finding better answers.

Review your financials often, and make sure you’ve started putting a portion of your income aside for tax payments next year. Envision Financial recommends setting aside a minimum of 25 percent of your business income for tax and other contributions, like RRSPs.

Learning from your hands-on experience can help optimize your approach to tax season in the following years. Review your returns in 6 months, and then also a year from now. There are a lot of details about tax filing that could easily slip from your memory.

📒 Keep up-to-date with your bookkeeping

The best part of experiencing tax season closely is to take your learnings and improve on them for a flawless execution next year. Right after tax season, every ounce of your being may want to relax and not look at your business numbers for a few weeks.

By all means, do rest up!

But the next thing is to start assessing your cash flow and get into the habit of regularly managing your bookkeeping. Just like you budget your personal income, you should be just as intimate with your bookkeeping to understand where your cash flow sits. In fact, accounting software can boost your cash flow with minimal work on your end by speeding up cash inflows, generating financial reports, and allowing you to be that much closer to your business’ numbers.

Here are a few bookkeeping tips to consider for the next tax season:

Claim all of your deductions

How would you know you missed deductions if you don’t know what deductions you’re eligible to claim? There are three ways to stay on top of it:

  • Do your own research. Learning the basics of accounting shouldn’t be for undergrad students studying accounting or math. Accounting is for everyone, even if you aren’t necessarily good with numbers. Take the time to learn how to read and analyze financial statements, network with friends or family members who are experienced in accounting, dedicate time to your learning, and most importantly, apply these skills and knowledge to real-world applications—like your business!
  • Hire an accountant. Let your accountant review your income and expenses on a quarterly or bi-annual basis. Once halfway through the year, and the next a few months before tax season. They’ll let you know if you missed any deductions you’re eligible to claim, or if you made an error. If you can’t afford to hire expert advice, even streamlining one important aspect of it, like invoicing, can drastically improve your deduction claims. TrulySmall™ Invoices offers an easy-to-use tool to start invoicing today—try it out for free.

Use a “do-it-yourself” approach

As a small business owner, you already have this mentality. Do you know which one we’re talking about? The one where you take it into your own hands to understand something you don’t know—no matter how complex it is.

Accounting should be the same.

By using simple accounting software, you can take bookkeeping into your own hands. Software that offers double-entry accounting, like TrulySmall™ Accounting, can help you with customizations and detailed reporting. It’s also accountant-approved, which means that your accountant will be extra excited to help review your books next year.

With TrulySmall™ Accounting, you can add a user, like your accountant, to your account to under Manage Users. Your accountant will get an email, and you can always easily manage access and permissions directly from the app.

📰 Get in the habit of reading the news — for accounting and taxes

To be prepped and ready for next year’s tax filing, it’s important to stay current—and we don’t mean by watching the news.

Well, we do.

But we mean news related to accounting and taxes, specifically. Every day, there are new happenings related to federal taxes or best practices on how others approach accounting. Learn from them and stay in the know so that you’re capitalizing on what you should or should not doing throughout the year as tax season inches closer.

Depending on your morning routine, try to squeeze some light reading while you sip on your tea or coffee. Simply search “accounting” under Google News or follow news categories on Flip Board, Wall Street Journal, etc on topics related to taxes, politics, or business.

Finally, if you really have no interest, then outsource the work to an accountant. Either way, you should be able to do (nearly) everything that your accountant does for you so that you at least understand what’s happening on the financial side of your business.

📎 Ditch the paper invoices (or Word invoice templates)

It’s not uncommon for people to save their receipts and other documents in the back of their closets, in old file folders, or sometimes even in their wallets and purses. Don’t be someone who falls prey to this routine!

Keeping your documents is a good habit to have, but there’s a much easier (and more organized) way to do this. Here are two methods to get started:

  1. Local computer. Create a folder on your computer hard drive labeled by your client name. Create a folder inside labeled “Invoices”. From there, use one of TrulySmall’s free invoice templates to get started. Download the invoice for your profession, fill in the details, and be sure to save the invoice with the invoice number, date, and client name. From there, you can send it off to your client! But don’t forget to save the final invoice—in both its original format (e.g. Word) and PDF—in the folder that you created.
  2. Invoicing app. If all you need for your business is to send a few invoices quickly, get paid, and track payments, then a more cloud-based, streamlined workflow is the right fit for you. Send your first invoice with TrulySmall™ Invoices for free to see what we mean. Simply fill out the details and let us auto-fill recurring details for you on your next invoice.

💳 Create a business cc (if you haven’t already)

And if you haven’t already, separate your business and personal finances. In fact, it should be one of the very first things you do as a freelancer, sole proprietor or truly small business owner. Having a shared account for both personal and business use could cause you to overlook a legitimate business expense or accidentally claim a personal expense.

Here are some steps you could take:

  1. Start by applying for a business bank account that’s separate from your regular chequing account.
  2. Next, apply for a new business credit card to make sure all business-related expenses are used on that card.
  3. Finally, move all of your invoicing to a centralized place for seamless tracking, invoicing, and sending. With TrulySmall™ Accounting, you can always refer back to the software to find a specific invoice based on the invoice number, making referencing and tax filing that much easier. All you need is a computer and wifi to log right in!

Learn from your tax filing experience

Tax season isn’t always exciting, and neither is preparing for it year-round. There’s nothing more distressing than finding out that you missed eligible deductions or missed a critical aspect in your tax return.

Whether you choose to invoice on your local computer or take a more cloud-based and streamlined approach, TrulySmall™ Accounting can help you do it all! Choose from sending a few invoices or take a more customized, detailed reporting approach with our double-entry accounting tool today.

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Did you know that using invoicing software not only helps you to get paid faster but also reduces your invoicing costs by 29%? Start sending invoices free today with TrulySmall™ Invoices!
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