New Year, New Financial Resolutions
New Year, New Financial Resolutions
The new year offers a clean slate, which means right now is the perfect time to make financial resolutions that better align with your business goals.
The best way to make 2017 your most successful year yet is to resolve to better organize your business expenses. This may sound like a massive task, but you can start by simply tracking and categorizing each expense as you go. Bad recordkeeping often prevents agents from truly knowing whether their business is making money. If you’re diligently tracking what you’re spending, you can make adjustments during both up and down months.
One of the most effective, on-the-go methods to track your business expenses is the QuickBooks Self-Employed mobile app. It automatically imports and categorizes your expenses, tracks your mileage, and captures receipts. This means you can free up an average of 11 hours per month of your time and make sure you don’t overpay at tax time.
If you prefer to use a simple spreadsheet, a free software program such as Google Sheets will work as long as you remember to track your expenses on a regular basis and stick with it. But don’t ditch the old shoebox full of receipts because you may still need a designated spot to place paper-only records. Just make a resolution now to set aside a few minutes each month to empty out those receipts and record them in your system of choice.
Ready for more? Here are some simple, easy resolutions that will make 2017 your best tax year ever.
1. Determine your deductible expenses in advance. Whether it’s how much you want to spend on marketing your business or what you want to give in tax-deductible donations this year, decide on a number and portion it out. For marketing expenses, look at how much you spent last year overall and divide that by one-fourth. When determining how much to give away, ask your accountant what the threshold for making an impact on your taxable income would be (based on last year’s earnings) and divide that amount between your favorite charities. Either way, you won’t be spending as haphazardly, and you can better categorize your expenses into the common groups for real estate professionals:
- Mileage & vehicle expenses
- Home office (utilities, insurance, maintenance, mortgage interest, repairs, taxes, etc.)
- Office supplies and postage
- MLS and key box dues
- Training classes
- Gifts to clients
- Meals and entertainment
- Depreciation of assets
For more on how to categorize your expenses, see the instruction sheet the IRS provides on Schedule C.
2. Set up a calendar alert to make sure you are ready to file your taxes every quarter. Here are the due dates for 2017: Jan. 15, April 15, June 15, and Sept. 15. But make sure you set your alarm early enough so that you have all your ducks in a row and are ready to file. If you are doing your own taxes, plan in advance to make sure the task doesn’t interfere with transactions you might be working on around that time. After all, the housing market doesn’t pause every quarter so you have time to get your taxes done.
3. Resolve to track all your vehicle expenses, not just mileage. Mileage tracking is one of the biggest deduction opportunities for agents. For the sake of simplicity, many opt to take the standard deduction for mileage rather than calculating actual costs. But the IRS gives you the choice, and the easy way out might mean you’re leaving money on the table. The standard deduction for the 2016 tax year is 54 cents per mile. If you decide to take the actual deduction, you’ll need to keep track of more than just miles. Things like maintenance and repairs, auto insurance, and even your registration can be deducted. Check out this article for more details about standard versus actual deductions. On average, QuickBooks Self-Employed customers log $7,393 in potential mileage deductions per year. This means guessing your mileage is against your best interest. While you can continue to use a handwritten mileage log into 2017, it's easier and more accurate to use an app like QuickBooks Self-Employed that automatically begins tracking miles as soon as you begin moving your vehicle. After the trip or even at the end of the day, you can separate business and personal miles and assign client names and purposes for each trip.
4. Follow through. If you take your New Year’s resolutions seriously and have a plan in place to better track your deductions as well as organize and plan your expenses, you’ve already made an important commitment to keeping your business in good shape. But a plan means nothing if you don’t stick to it. When you find yourself putting off tax-related tasks or straying from your goals, learn from it and adjust as needed. By creating good habits in January and February, you will pave the way for a successful rest of the year.