Tax is like an Doberman. Daunting and a bit scary if you don’t really understand how to deal with it, but once you get over the basics, it’s pretty tame.
I had a phone call today from a friend of mine who’s recently become self employed asking for a spot of advice about his taxes. He was getting ready to do his first tax return, but was just totally totally lost. Like a lot of new freelancers the whole concept of a financial year that begins and ends in April is a big enough challenge to get your head around. On top of this he hadn’t kept records of what he had earned, what was paid cash and what went into his bank account, he couldn’t even properly remember when he first started freelancing!
I mean, lets face it, who would be buckling down to their taxes when they could be getting paid to draw a horde of Zombies attacking London?
For creatives especially there is sometimes this notion that we don’t like businessey stuff like taxes, balancing books and invoices and to some extent, it’s true. I mean, lets face it, who would be buckling down to their taxes when they could be getting paid for busting out a sweet illustration of a horde of Zombies attacking London? Well guess what. Zombie related excuses (of any kind) just won’t cut it when the Tax man comes’a’calling.
With that in mind I thought it might be a good idea to run through some of the simple tips I use to try and make things a whole heap easier when filing tax returns. With just a little bit of forward planning, submitting your tax return really doesn’t have to be daunting at all.
Now before I say anything else, let me say this: I AM NOT A FINANCIAL EXPERT. The advice I’m about to give works for me, and I’m telling you in the hope that it may be of help to you too. Obviously, every business is different and if you’re in any doubt whatsoever the best solution is always to get the advice of an accountant. Personally, I like knowing and being involved in every facet of my business, and whilst that’s still a possibility, I relish the opportunity. I’ve spent a lot of time making sure I fully understand my taxes and have even attended courses just to be sure.
If you do want to handle your own taxes then go ahead- it’s an awesome idea, it’ll make you feel a lot more in control of your business once you know how everything is calculated. Once you’re confident you have a good understanding of how everything is calculated, then the only hump left is making sure everything is in order. Going back through all your client invoices and bank statements is a nightmare and it’s totally unnecessary if you stick to these three simple rules.
This is my best tax tip by miles! If you invoice a client or buy some new supplies or anything in between, make sure you put it in a spreadsheet right away! Don’t make a note on the back of your hand, or say you’ll do it at the end of the day because you know you totally wont! If it was the choice between getting home five minuets sooner or filing an expense, I’d be out the door before you could say ‘spreadsheet’ – and that’s coming from the guy writing an entire article about taxes!
I’m constantly out meeting clients and drinking cappuccinos in cool little independent coffee shops. It’s called a life
“But Alex” I hear you cry, “I’m not always at my computer you know. I’m constantly out meeting clients and drinking cappuccinos in cool little independent coffee shops. It’s called a life”.
First of all – stop bragging you dick.
Second of all – listen up.
What I do (and what you need to do) is this. If you have an iPhone, then bite the bullet and invest £6.99 on Numbers (if you’re packing an Android phone then try Google Docs). When you have a debit or credit that needs to be accounted for then you can file it right away. It doesn’t matter if you’re at a store, in the office or sat in bed because it’s all from your mobile, and both Numbers and Google Docs update to cloud servers so you can grab your spreadsheets from your computer when you need them too. It takes like thirty seconds and it gives you the added bonus of being able to accurately check how your month is going at any time you like.
If you get into the simple habit of recording your earnings as they happen, then it’ll make your life a whole load easier later on.
This isn’t strictly vital, but I find spending a few minuets at the end of every month to quickly see what my profits are is a real help. It give me a really good grasp of how my year is going and works like an early warning signal if anything isn’t quite as it should be. Almost every spreadsheet app out there has a way to automatically calculate you’re totals so more often than not, all you’ll have to do is take a quick look to make sure everything is ok, email yourself a copy (just in case) and then start a new spreadsheet for the next month. Simple.
For a long time, my wallet was loaded with receipts for various graphic designer gizmos, train fares and computer equipment but I quickly learned that wasn’t the ideal place for them (especially since my wallet goes in my back pocket – not comfy!). It’s very easy to just have receipts live on your desk for months on end as they fall into that awful category of ‘stuff that’s totally useless, but I know I need to keep‘ so just do yourself a favour and give them a proper home. I use a little box I have on my desk so I can just throw them in there out of the way. Chances are you’ll never need them (since you’ve already catalogued them on your spreadsheet right?), but if tax gods see fit to check up on you, they’ll need to have a look at them.
Now like I said earlier; I’m no financial guru, but if you stick by these rules you’ll find tax day a whole lot simpler. If you’ve got any of your own tips for staying on top of your taxes, then let me know in the comments below.Photo Credit to x_jamesmorris
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