Dreaded Tax Time P2

Hi Everyone!

My last blog post has the intro but this one has a lot more girth to it! Let's jump in.

Make it easier on yourself and circle the tax amount so when you go to subtotal your tax it will be a lot easier. Put aside or flag any refunds or returns as this will directly affect your end numbers. Gift cards will be something you should sort separately as well, because the money has been received but has yet to be charged it will work a little bit differently then another transaction. The money from gift cards almost should be put aside until the client redeems the gift card.

Keep on top of your records by going through them monthly, organize them, subtotal, put added details for your future self or accountant. I have been in the position where I felt like I had to be a detective to figure out the charge of $349.87 before. It ended up being an e-transfer for 5 different things.. Ugh, it was so much unnecessary work. I felt like a damn detective! Going around asking the recipient of the money, asking my colleagues. After a few of them (yes, it took me a few stressful times) I finally started being diligent with my notes. YOU CAN NEVER ADD TOO MUCH DETAIL FOR YOUR FINANCES, you can however not write enough. And honestly, we all have so much on our plate that if we wait too long to review our records then, well, it will slip our mind and will become so much more stressful. An easy way to organize this is to have 12 separate envelopes/baggies, label for each month of the year and then put all your receipts for each month into the allotted envelope. This will make it worlds easier!

Know what you pay tax on and what is exempt, for example bank charges and insurance - no tax. So you cannot claim any. I am totally for claiming as much as you can and I encourage it! Just make sure it is legitimate. If you know you paid a 15% tax on something but you only have the total, you can calculate the tax on it by dividing 15/115 then multiplying that number which is 0.13043 by the total amount of the receipt. This will then give you the tax you paid.. Let me show you:

I have a receipt of $100

So 15/115 x 100 = 13.0435 (the tax amount)

Now 100 (receipt total) - 13.0435 (tax) = 86.9565

86.96 is what would have been the price before taxes…

$86.96 x 1.15 = $100.0 (math checks out)

We multiplied the price by 1.15 because you are taking the price you'd pay and adding 15% of taxes. So you can adapt this to whichever tax is applicable to you, so if your tax is 7% you would multiply by 1.07 or 7/107 depending which equation you are using. Essentially 100% + 7% = 107%.

Hopefully this makes sense and this is something you could use.

At the end of the day, consult an accountant.. It is a cost but if you get audited, you will be in a lot worse of a financial scenario after the math. Keep your files for 7 years if you are not using an accountant and make sure to file on time!!

Be safe and not sorry -

Elise xox