054 – Tackling Tax Prep

The flip of the New Year’s dial can be a bit of a double-edged sword. While it can bring about lovely feelings of a fresh start, it drags along with it the impending doom that our attention will soon have to turn toward taxes. I’ll admit, I went back and forth on whether or not I wanted to talk about taxes because, well, you know…ewe!

Plus, as independent music teachers, if you go looking, there’s a decent amount of advice already available to us online regarding the nitty-gritty facts like what’s deductible, what’s not, filing advice, and more. In fact, I will link to some of my favorite resources for you to check out in the show notes.

However, I did notice that there ISN’T much advice on how to approach the season in an organized manner – how to tackle the actual work that needs to be done. So, as a fellow independent music teacher who nerds out on helping my teacher friends get organized, I accepted the challenge.

By the way, I’m Amy Chaplin, and this is The Piano Pantry Podcast.

Valentine’s Day is just around the corner. One thing I enjoy doing in my studio this time of year is holding a candy jar contest. Now, I know it’s not exactly a music activity but consider that since private lessons keep students isolated, anytime we can create an opportunity for community building – that is, for ALL students to engage in the same thing (even if they’re not necessarily doing it together all at once), that’s got to be a positive thing for both your students and your business. Consider it a bonus if you can set up the chance to guess during a group class week where kids can congregate around the jar and get excited together, or even just schedule the winner announcement during a group class week.

To make this easy for you to set up, you can get a free printable along with a template with 30 blank guessing cards at PianoPantry.com. Find the link in the show notes

Today I have ten quick tips that I hope will help you streamline your process for tackling all your tax prep work. The first, I have to preface with a little story.

My husband and I will have been married for 20 years, and for most of our marriage, we have delayed our tax prep until right up until the last minute – always getting it in on time but just by the seat of our pants. Honestly, I blame it on him because he worked for his family business and was doing this stuff long before we got married, whereas it was new to me at the time, so I just went with his flow and he was always last-minute. If you’ve been around here long enough, though, as you can imagine, I absolutely hated this.

We couldn’t seem to break the habit until about five years ago when I decided I had had enough. I told my husband for my own mental sanity; we had to start getting it done sooner. My ideal would have been to have it knocked out in January, but the IRS’s deadline for employers sending W2 and 1099 forms is January 31, so that wasn’t realistic or necessary.

Having a deadline of the end of February or at least before Spring Break is completely reasonable, in my opinion.

So, this is my first tip. Don’t delay. Consider the mental energy it takes having that in the back of your mind for three months, knowing it’s coming but just continually putting it off. Make it a priority that at the start of the year, it’s one of the first things on your list.

My second tip is that you don’t necessarily have to wait until you have time to do it all at once. Start the process in January. We use Quicken for managing all of our personal and business finances so I like to begin combing through all of the transactions and double checking things are categorized properly. You can also start downloading and saving receipts – especially for those that recur monthly if you don’t keep up with them throughout the year. Believe it or not, my husband and I are still all about having hard copies of receipts. It’s not required by the IRS but it just makes us feel better. So I only print receipts from online purchases as they happen throughout the year and file them in a file folder on my desk by month. For recurring monthly expenses, I just wait until January to log in and print out all of the recurring ones.

The third tip is to keep up on recording all of your expenses and filing the receipts year round and don’t just wait until the end of the year. At a minimum, sit down once a month to record and track your expenses. I would even go so far to strongly recommend once a week. Time has shown me that it feels much more manageable to do this work in small snippets that only require 15-30 minutes of your time tthanit is to try and sit down for an hour or two once a month. For me, this is a task I do every Friday both for our personal finances as well as the business.

Which brings us to the fourth tip, and that’s to actually schedule it. Set it as a recurring event or task on your weekly or monthly calendar. Don’t just tell yourself you’re going to sit down and do it regularly; you have to put it in writing. For more talk on task management, jump back and listen in on episode (006 – Tasks: They’re not all created equal!

Fifth, regarding keeping track of all your receipts, I would recommend deciding if you want to keep everything in hard copy OR digital and stick with it consistently. As I mentioned earlier, we like having hard copies, so it’s just part of my workflow that anytime I purchase something online, I immediately print out the receipt and file it into a folder on my desk for that month’s receipts. Yes, I always have the hard copies, but since we have chosen hard copies, I don’t worry about scanning all my hard copy receipts into digital format. For example, if I purchase some printer paper from my local Walmart, I already have the hard copy receipt. If you prefer keeping it all digital, you can tag or label all receipts in your email as “receipts” or “orders” or even print those emails to PDF and save them into a folder in your documents manager on your computer. That way, you keep all the receipts in one location rather than having to scan some and save them somewhere and then have email receipts in email separately. Just choose a way and be consistent.

Sixth, keep a separate business checking account and credit card. Not only does this make it easier to see all your expenses in one location and not have to separate personal and business expenses, but it’s just good practice to keep your business and your personal finances in separate accounts.

Seventh, don’t be afraid to spend money to run your business and reduce stress. Professional services and business tools are tax write-offs! Start by utilizing a financial management tool. As I mentioned earlier, we use Quicken, but there are plenty of great services these days that are designed for managing a studio business, like My Music Staff and Duet Partner. Things like expenses and mileage can be tracked right in the software. Yes, you can absolutely track expenses in a spreadsheet as well, so if that’s more your jive, that’s fine. Just know that if you’re avoiding using great tools because of expenses, you can write this off of your business so you have to weigh how much it’s worth. The same goes for professional accounting services. From day one of my business, I have happily written a check to a professional accountant. It’s so nice just knowing that I have someone there helping us properly navigate things like depreciation and such. The expense for the professional services is a write-off.

Eighth, have designated a location where you drop all of your incoming tax forms that come in the mail into until it’s time to sit down and go through your filing process. Some of this might be more needed for personal tax items like W2 forms for a spouse or statements from charity organizations, property tax claims, and so forth. I just keep a file folder on my desk, which you can see in a blog post on the Piano Pantry blog, which I’ll link to in the show notes. I’ll even throw things like my mileage sheet since I do some of this backend work in January before my husband and I actually sit down and file in February. Then, when it’s time to submit with our accountant, everything is compiled in one place ready to go.

Ninth, keep a checklist for yourself you can refer to each year so you don’t have to waste mental energy making sure you remember everything and update it each year.

Lastly, don’t forget to finish up the process by getting RID OF what you no longer need. Double-check with the IRS recommendations on how long you need to keep records then you can dump old receipts you may be holding onto. There’s a link in the show notes were you can look into this.

OK, so here’s a quick recap of our ten tips:

Don’t put off the process
Don’t feel like you have to wait until you have a huge chunk of time to do it all at once. Do what you can when you can.
Keep up on recording expenses throughout the year.
Schedule a designated time on your calendar either monthly or weekly to make this happen.
Be consistent with how and where you save receipts
Keep your business accounts separate from your personal
Don’t be afraid to spend money on professional services – remember, they are a write-off
Have a designated location where you gather all your incoming tax forms and prep work
Keep a checklist of what needs done you can refer to each year
After filing, take time to get rid of what you no longer need.

I hope you found these tips useful. Remember, don’t delay, just get it done.

Today’s tiny tip has to do with keeping teaching manipulatives organized. Rather than using rubber bands or metal clips to hold things like flashcards together, try using mini Ziploc bags. The snack-size ones have three different shapes – at least that I’ve found in stores near me. There are square (pause), ones that are designed in more of a horizontal shape with a large top opening, and ones that are designed in more of a vertical with a much smaller top opening.

I used to use metal clips a lot in the past, but I hate how they make indentations on the paper manipulatives, and rubber bands either create a weird bulkiness when trying to store them or eventually dry up and break.

Plastic baggies make for a more long-term and satisfying organizational solution!

Alright, teachers, it’s time to say farewell for now. Don’t delay all your tax prep work too long. Just get ‘er done. Have a great week.

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Tax Advice

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