As a mostly self-employed individual, without a formal business set up, I struggle when it comes to tax time. Since it’s the new year I’m wondering if there are good ways to automate as much as possible so I don’t have to spend forever preparing my financial situation for my accountant.
What are your favourite tax automations?
My current situation is: When tax time comes every year I comb through my credit card statement, bank statements, PayPal account, and emails, and make a list of categorized business expenses for my accountant. Almost everything goes through one credit card, which makes it easier to have a single source of truth that tells me which receipts I should be looking for, but it’s still long and boring.
So far, I’m thinking that some email rules might help to auto-file some receipts, but that’s my only automation idea so far.
Speaking as the person on the ‘accountant’ end of this: before you look at automation I would seriously consider whether it’s possible for you to set up a dedicated account or card for your business transactions. That has the potential to simplify this process enormously.
I would also consider some form of accounting software - this might depend on where you’re located and whether you’re likely to expand in the future (probably more the latter). In Australia we have several options, including Xero (I believe this is also available in the US, NZ and the UK) which would enable you to save receipts with transactions, automatically categorise transactions, etc. and also share all of that information with your accountant without you needing to do anything. (Depending on the plan you choose, you may also gain some invoicing capabilities etc., if that’s something that would be useful to you.)
Auxiliary to that there are ways to send receipts through to Xero, say (they have a dedicated email ‘inbox’ for receipts so you could set up some email rules; and there are app integrations whose job it is to process receipts).
I’m not sure where you’re located, or what records you need to keep, but that might drive some potential automations so it might be helpful if you could provide some more information. For example, in Australia many people can claim a tax deduction if they complete a vehicle logbook for their car, which shows how often they use it for work/business purposes.
So far the reasons I’ve avoided separate accounts are to avoid a second set of bank and/or credit card fees, and because I get quite a lot of reward points through my credit card, (I pay a high-ish annual fee that’s worth it for other reasons, and a side effect is a high reward ratio). That said, I understand the “If I’m serious about my business I should treat it like a business” attitude and should do better there.
I’m in Canada, and we can use Xero here and Quickbooks. I like the idea of accounting software - I feel like if I use it properly, when I hit tax time it’ll be super-easy for my accountant and I. I’m sure there are others. I’ve used Harvest for tracking billable hours and billing for years and am happy with it, but I’m not against changing. Since I’m in Canada, and deal with both Canadians and Americans, I need multi-currency support from any accounting software. For Xero that would cost me $50/month, but it looks like Quickbooks would be $20/monthedit: Quickbooks is $40/month, there was a 3-month 50% off price that fooled me,which is more reasonable.
I’m a web developer and work entirely remotely, so most of my expenses are things like software and web hosting or other online services. I don’t have a car or drive to appointments, so I don’t need to worry about mileage. The one slightly weird thing is I can claim a percentage of my rent & utilities because I work from home, so I usually just tell the accountant the total amount of each, (rent, and each utility), and they handle the percentages.
Maybe the trick is to grow my business enough that I’m legally forced into handling things more professionally
I auto file Amazon receipts from my business cards into certain folders. I’m currently experimenting with an Integromat scenario (what they call automations) to PDFify them so they can be dropped straight into DEVONthink for better classification.
I heavily make use of DEVONthink for this. Throw something in, and then forget about it. Then at tax time I can find everything within a date range and filter it out. Now if only I could script filing the returns!
I’m already on the DEVONthink train, so I like the idea of using a tool I already have. It won’t make it tons easier, but it’ll help, at a minimum, give me a repository of receipts.
That’s valid! Totally understood re the price - I wonder whether there might be a simpler (cheaper), personal finance software that would at least do some of the expense tracking for you. (If you subscribe to SetApp already, for example, there are several options - MoneyWiz for example I think does handle multiple currencies.)
The most obvious suggestion would seem to be to combine that with options like Hazel/Scanner Pro/Shortcuts automations for filing/saving receipts to a consistent location, as Rose suggests.
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