A 5-Step Guide to Manageable Tax Prep for Entrepreneurs

Not only are taxes time consuming, confusing, and a nuisance, but they can also be a drain on your wallet if you don’t prepare well. This is especially true for entrepreneurs who, aside from having to deal with the complicated tax filing process of running a business, also have to actually run the business.

If there’s one thing all entrepreneurs can agree on, it’s that they dread tax season.

In fact, a recent survey by the National Association of Small Business (NSBA) reveals that 38 percent of small businesses reported they spent more than 80 hours a year dealing with federal taxes. That’s two whole workweeks! That same survey found that almost 50% of small businesses spend $5,000 or more annually on the accounting process alone—before paying their taxes!

Not only are taxes time consuming, confusing, and a nuisance, but they can also be a drain on your wallet if you don’t prepare well. This is especially true for entrepreneurs who, aside from having to deal with the complicated tax filing process of running a business, also have to actually run the business.
Whether you choose to do taxes on your own or hire an accountant this year, here’s a quick guide on how to knock tax season out of the park:

1. Familiarize Yourself With the Lingo

One thing we shouldn’t complain to the IRS about is the amount of tax breaks they offer. Tax breaks give small business owners and freelancers a great opportunity to win back some of that money they’ve been spending on their business, and it’s a unique way to encourage entrepreneurship.

However, there is a small caveat to this: it’s hard to keep track of what’s what. There are important differences between deductibles, refundable credits, and non-refundable credits. Each can help you in distinctive ways, so it’s useful to know which expenses qualify for which tax break as you track your finances throughout the year. Investopedia and the IRS website are helpful tools that can break down tax vocabulary into simple terms.
 

Deductibles

Benefits: Lowers taxable income and total tax liability. Can help with items that represent reductions in ability to pay tax (i.e. casualty losses).
What Does That Mean: Because deductions cannot reduce taxable income below zero, their value is limited to the filer’s tax liability before applying the deduction. Value depends on the taxpayer’s marginal tax rate, which rises with income.
Examples: Health care expenses, mortgages, car loans, investment-related expenses
 

Refundable Credits

Benefits: Decreases a person’s tax liability. Same value for all taxpayers with tax liability at least equal to the credit.
What Does That Mean: Treated as payments of tax you made during the tax year. When total of credits is great than total tax owed, you get a refund for the difference. Credits are more appropriate for subsidies provided through the tax system.
Example: Earned Income Credit, Additional Child credit, Small Business Health care credit.
 

Non-Refundable Credits

Benefit: Lower tax limit as low as it can go. Represents the majority of credits.
What Does That Mean: Credit cannot be used to increase tax refund or to create a tax refund when you wouldn’t already have one. Savings cannot exceed amount of tax you owe.Example: If you only owe $200 in taxes, and the only credit you’re eligible is for $500, the $300 difference is non-refundable.
Example: Child and Dependent Care Expenses credit, Saver’s tax credit, Adoption tax credit, Foreign tax credit.
 

2. Don’t procrastinate

Unless you want to have a very stressful week, don’t wait until right before April 18 (note – usually tax day is April 15) to prep and file your taxes! Last year, the IRS reported that 28% of Americans waited until the last few weeks before tax day to file their return. Sure, you can file for an extension if you can’t make it before the IRS deadline, but there are drawbacks to this, like late fees. And, just because you file late doesn’t mean you get extra time to pay taxes if you owe the government money.

Plus, when you take your time to carefully approach a tax filing, it won’t seem as stressful or time consuming. You’re more likely to make an error or miss out on a deduction if you rush the process.
 

3. Stay organized

By far, the easiest way to minimize the hassle of tax season is by staying organized and keeping updated records of receipts, payments, and expenses. The IRS demands documented proof for claims, so having everything stored and accessible can reduce a substantial amount of time and pressure.

Organization also helps maximize deductions and reimbursements without the hassle of scrambling to find misplaced financial records. It also makes it possible to file taxes at the earliest possible time because paperwork is readily available at your fingertips.

Shoeboxed’s mission is to streamline this process so that you can focus on more important things during tax season, like running your business or taking care of your family. We process and organize your receipts so that vendor, total amount, date and payment type are extracted and available in a searchable online account—without you ever having to lift a finger. You can also tag receipts as reimbursable or deductible so when you file taxes, your documents are already catalogued appropriately.
 

4. Stay informed

There’s a lot to swallow these days when it comes to tax codes, especially since the IRS makes changes on a yearly (and sometimes, even seasonal) basis. It doesn’t hurt to take some time researching professional blogs and news sites that can keep you informed on the latest tax changes. The extra initiative will take a few hours of time on your end, yes, but not nearly as much time it would take to prep taxes with little to no knowledge on how to maximize returns. This is especially helpful for entrepreneurs who do not have their own accountant.

Without a guiding hand, it’s easy to make misinformed decisions with tricky nuances (like filing status, for example). Some helpful sites that give excellent pro advice are Don’t Mess With Taxes, TaxGirl and AICPA.
 

5. When in doubt, ask a pro 

With an endless supply of information, the Internet of things can answer any question you may have related to taxes. Sometimes though, having 10+ pages pulled up with an overwhelming amount of information can make material difficult to digest. If your questions are very intricate and situational, it may be best to approach a tax expert or CPA. Examples of these questions may include:

  • Do I have a limit for my charitable contributions?
  • Should I itemize deductions? How in-depth?
  • When should I contribute to an IRA?
  • Should I file jointly, as single, or as head of household?
  • I have all these miscellaneous business expenses and reports, but which ones should I keep for reimbursements and deductions?

Sometimes it’s easy to do a quick Google search for these common tax questions. Other times, the answer depends on your business situation, among other variables.

If you have an accountant, keep in touch with them throughout the year. There’s no reason you should wait until tax season every year to speak to them. CPA’s are experts in their field and they’re a great resource that can put you up to date with all the latest changes in tax policy. Stay organized, plan ahead, and you can get the most out of your tax season.

6 (Truly Amazing) Tools to Help Grow Your Small Business

Business owners are constantly bombarded with online tools and services that claim to boost productivity and help manage the growth of their business, many of which fail to deliver their promises. This is a list of tools that do deliver, and truly help small businesses get to that next level.

Business owners are constantly bombarded with online tools and services that claim to boost productivity and help manage the growth of their business. In fact, a simple Google search for “online business tools” gives you close to 700 million results – quite the marketplace to choose from. 

But how often do those tools actually help a business grow? And how often do business owners find themselves signing up for those tools, only to never use them? Probably more often than not. Which is why Shoeboxed did some investigating and curated an eclectic list of helpful, wide-ranging tools for growing small businesses.

Grasshopper

Phone System Automation

1Grasshopper is perfect for businesses looking for a full-service virtual phone system. Their services include customizable toll free 1-800 or local phone numbers, main greeting messages (with the option to include information like hours and address, among other customizations), departmental and employee extension numbers, voicemail to email transcriptions, and more. If you have a sales or support team, or just simply want to automate your business’ main line to make it easier to communicate with your customers, Grasshopper has you covered. Pricing starts at $12/month.

Plus: Grasshopper has a free app that turns your smartphone into a business line, allowing business owners and entrepreneurs stay professional even when they’re not in the office.

Bookly

Online Bookkeeping

Bookly.co logoIf you’re looking for a cheaper way to outsource a  bookkeeper, Bookly is the way to go. Their software automates dreaded bookkeeping chores by reconciling transactions with your connected bank and credit card accounts. Users can also create customized reports and compare balance and transactions trends in real-time. Additional features include invoice delivery and multiple user account collaboration. Pricing starts at $99/month.

Plus: In addition to the software, Bookly provides users with a dedicated bookkeeper who can look over your data and make sure that finances stay up to date.

Upwork

Project Outsourcing

2

Need someone to rebuild your website but have zero-to-little design or programming experience? Want to increase traffic to your blog or social media, but don’t have enough time to write the content? Or do you simply need professional marketing advice and have no idea who to reach out to? Whatever your business needs, Upwork helps you find freelance talent to get the job done. Quality work resonates with existing and potential customers, so the next time you’re contemplating whether or not to outsource the job – consider Upwork. There is no plan to sign up – all you pay for is the work done by the freelancer.

Plus: Upwork allows you to customize the talent you are looking for, including filters like location, specific skill-set, experience level, and more.

Insureon

Online Insurance Agency

3

If you think it’s easy to hunt down cheap, reliable, and quality insurance for your business, then you’ve obviously never run a business before. But that hunt is exactly what Insureon does. Insureon is an online agency dedicated to helping small businesses find the best insurance protection. All you have to do is fill out a quick online application, and Insureon does the rest – they calculate your risk, leverage relationships with top-tier insurance companies, then email you the best quote on the market, including coverage and cost options. Quotes are free.

Plus: Insureon matches you with a specialized agent experienced in your specific industry, and work with you to identify the unique challenges and insurance types of your business.

OutboundEngine

Marketing Automation

4
If you are a small business owner who absolutely dreads the marketing side of things, OutboundEngine will be your hero. They’ll help you run fully-automated marketing campaigns, highly-targeted to your specific audience. Services include professional email marketing campaigns, automated social media updates, lead-generating referral programs and custom-tailored content writing. It’s like having an entire marketing department but at the fraction of the cost. Pricing starts at $179/month.

Plus: Everything is personalized, so the pros working on your campaign dive deep into your market and industry before testing anything.

Shoeboxed

Receipt and Expense Management

5

Keeping track of receipts for bookkeeping and tax purposes is an exhaustive, daunting task. But for business and financial reasons it’s a highly scrutinized part of running a business — all business owners have to do it. The problem is, business owners absolutely hate doing it! Cue Shoeboxed. Shoeboxed scans, organizes and categorizes receipts and other business documents so that all of your important paperwork is fully searchable and accessible in the cloud. There is a free DIY plan and premium plans start at $9.99/month.

Plus: All receipt images are IRS-accepted, with vendor name, total amount, date of purchase and payment type automatically extracted once its submitted to Shoeboxed.

This list is not exhaustive, but we hope it provides a holistic approach to the types of useful services and tools that every small business owner needs as their business grows.

Continue reading “6 (Truly Amazing) Tools to Help Grow Your Small Business”

The Official Shoeboxed Magic Envelope Starter Guide

Shoeboxed Magic Envelopes are a pivotal tool for thousands of small business owners. Simply stuff your receipts, business cards and other documents into a Magic Envelope and watch them automagically appear in your Shoeboxed account.

First things first, give yourself a pat on the back. Signing up for a Shoeboxed mail-in plan means you’re on your way to achieving organizational nirvana. It’s a freeing feeling not to mention it will also save you a lot of time, money and frustration!  

Secondly, it’s time to prep for when your two Magic Envelopes arrive at your doorstep! Here’s a short list of frequently asked questions to get you started:

What can I send in Magic Envelopes?

Magic Envelopes are the perfect way to get your receipts, business cards, invoices, work orders and other important business documents organized. If you send it, we’ll scan it.  

shoeboxed magic envelope

How many documents fit in a Magic Envelope?

Our Magic Envelopes are large 9″x 12″ Tyvek envelopes. Tyvek is a very sturdy and reliable material, so our Magic Envelopes can usually hold hundreds of receipts depending on the receipt size. However, if you find that your receipts do not fit we can send you more envelopes at no charge!

Do I need to sort my documents before sending them in?

For the most part, documents do not need to be organized in any way before you send them to Shoeboxed. Please make sure that documents are not attached to larger pieces of paper, as we are not able to process this kind of document.

Each receipt should be loose in the envelope. Each individual document should also not be stapled or otherwise attached to other pages, unless the document is part of a multi-page document.

magic envelope

How do you handle multi-page documents?

Double-sided documents that contain printed information on both sides will be automatically processed as a single document entry in your account.

All you have to do is put a paper clip on receipts or documents that have multiple pages, and we will scan them as one document with multiple pages. Multi-page documents only count once toward your monthly limit– not once for every page.

magic envelope

Will my documents be returned to me?

If you are signed up for a Shoeboxed Classic, Business or Executive plan, your receipts and business cards are mailed back to you by default. We will also include a fresh Magic Envelope with the return envelope for you to send in your next shipment of documents!

If you don’t want your documents returned after they have been processed into your account, you can choose for Shoeboxed to securely shred and recycle them. You can choose this preference in “My mail-in settings” in your account settings.

How can I track my envelopes?

Each Magic Envelope has a unique envelope code. Before a Magic Envelope is sent to you, we associate its envelope code with your account, and then we wait for that envelope to come back. When we receive it, we will send you an email letting you know that it is going through processing.

You can also use the envelope code to track at which point in the processing cycle your envelope is in. Simply log in to your account and click on “My Envelopes” on the overview page. From there you will be able to see when your envelope was received, when it has been processed and when we sent new envelopes out to you.

Shoeboxed Magic Envelope

 

Additional Questions?

If you have further questions about our Magic Envelopes please don’t hesitate to reach out to our friendly support team at 919-687-4269 or check out our Support Site.