Sunday, February 21, 2010

Everyone Likes Choices

Everyone likes choices. We have resisted being told what to do since we were small children. We not only want our own way but we want the freedom to decide for ourselves. Ever remember your parent saying, “You will do it, or else.” Regardless of whether the task was doing homework, cleaning your room or being nice to your little sister, there is something in our human nature that resists being told what to do. We have all been there.

Some things you either choose to do or pay the consequences. Its time for one of those joys right now. Taxes. Now the IRS is on most people’s ‘least favorite’ lists; they are on a parallel with having a siren and red and blue lights flashing behind you on the freeway. Or maybe you would prefer a root canal. All three of these receive a groan and a few choice words.

The IRS is not simply writing a check. Oh no, they make you suffer first and then write the check. Every one of us promises that next year we will keep up with the books every week. Each expense will be in its properly labeled and dated folder. Not only that but it will be recorded in the computer for easy totaling and access.

We know we should, but how many really do it every week?

Employment with a CPA firm brings many challenges. The most impressive client was a well dressed, impeccably groomed man. He entered the office with poise and professionalism; he even spoke very politely with excellent grammar. He requested to have his taxes prepared. No problem, we are a CPA firm; ‘taxes are us.’ When asked if he had all of his documents with him and organized, he replied, “absolutely, I have them right here.” Seeing a lovely leather briefcase in his hand was a promising sign. “How much will it cost?” The minimum fee was quoted with the stipulation that it could be more depending on the scope of the work.

He was asked if he would like to wait and speak with the CPA in a few minutes or leave the records and return for a scheduled appointment at a later date. He preferred to schedule an appointment for next week. Once the appointment was scheduled, his records were requested.

He excused himself, stepped out of the office, and returned with five paper grocery bags each overflowing with miscellaneous documents. He calmly asked, “Here they are, when do you think you will have everything finished?” “You must be kidding” flashed through my mind, well, those words in combination with other words.

Record keeping usually involves a bit more organization than Safeway paper bags. People wonder why the bill is so high. Hmmm. Hiring a good bookkeeper would be more efficient and less expensive than CPA rates.

If you have not organized your records, now is a good time to start. Actually, 13 months ago would have been the ideal time to start. We can not go in reverse, but starting now is wise.

QuickBooks Pro, Quicken, or Excel spreadsheets are a few suggestions for organizing your records electronically. Even a lined yellow tablet and lead pencil are better than the Safeway bag system.

Buy a box of manila folders and label each one. You can label by month or by type of item i.e. insurance, medical, miscellaneous, automobile, taxes. When you pay a bill, write the check number, date and amount paid on the bill and drop it in the folder.

If you are self employed, none of your business expenses will be deductible without proper records. Either keep proper records or shake in your boots and be prepared to write a big check if you are ever audited. IRS agents are not known for their lighthearted sense of humor. Another hint – IRS likes paper. The more specific proof and written records you can provide to the IRS, the happier they are. Excellent record keeping is not optional. Of course you could take your chances just as you do with the lottery.

The difference is that if you do not win the lottery, you simply do not win. If you gamble with IRS audits and lose, the IRS adds penalties and interest. Pay me now or pay me later takes on a life of its own.

Bottom line, keep detailed records and back each one up with lots of paperwork.

You have choices.

1. You may choose not to follow good accounting practices now and pay a huge sum to the CPA to prepare your taxes.

2. Ignore the entire issue and hope you never get caught. Be prepared for a roommate named Bubba in a barred room for which you do not have the liberty of self check out.

3. Hire a bookkeeper.

4. Keep organized records yourself.

You do have choices. If you would like specific, easy to follow organization tips and techniques to make 2010 easier than 2009, join me at www.Elaine4Succes.com. The Entrepreneur’s mentor makes your life easier and more profitable.

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