Stop the Chaos: Tracking Income & Expenses the Easy Way
Staying on top of your income and expenses is essential if you want to be ready for the IRS. But does how you do that matter?
Most people fall into one of three camps.
Total Chaos: You have the receipts…somewhere. There are some in your desk drawer, a few in the glove compartment of the car, and even a handful in your nightstand.
Box Collector: You hoard receipts like the Goblin King, but they’re all piled into a shoebox in no particular order.
Computer Organized: You have the software and keep everything under control on the computer.
Which one are you? If you fall into the Total Chaos category, it’s time to make some changes and this is the perfect month to do just that.
The Shoebox Method: Chaotic, Iconic, and (Sometimes) Valid
While this may seem like the epitome of chaos to some, putting all your receipts in a box can work for others. Let’s take a closer look:
Pros of using a shoebox:
Low friction
No learning curve
Better than not saving them!
Cons include:
Annoying at tax time
Weak without a log
Easy to forget a receipt here or there
If you don’t have a lot of expenses, this can work for you. It’s also fine for very small side hustles or anything where you get paid a lot in cash. But, if you want to make life simpler come tax season, you may want to plan for an hour or so each month to sort through it. Make a log, clip the receipts for that month together, and you’re ready to hand it over to your tax expert without hours of stress.
Software: Let the Bots Handle It
Most people find the idea of using accounting software or even a spreadsheet intimidating. Not to worry, it’s actually easier than you think!
Pros of using software:
Can be setup to auto add transactions
Easier for your tax expert
Immediate quarterly estimates and reports
Cons for this method:
Monthly cost (in some cases)
Correct set up is important
Transactions may end up incorrectly categorized unless you review
For those who have a more active side hustle or a full-on business, you’ll want to use a spreadsheet at the very least. This does require manually adding information, but you can find templates online that will make it simpler.
The fastest option is using tax-specific software, but keep in mind that you do need to learn how to use it correctly. You should also keep or scan receipts to track your messier expenses.
Need Help Turning Your Mess Into a System?
If you need a hand figuring out how to handle your taxes, especially as you start to grow your business, Ask Anna Tax is here to help. Contact us today to find out what we can do for you.
