Every tax time, I have to break out my checklists to be sure I cover off all the tasks needed to prepare an accurate tax return.
You see, as an American and a Christian, I believe that I should render unto Caesar that which is Caesar’s. But, not a penny more than he deserves. That means I have to accurately account for all sales and all expenses.
Since we sell on several venues, we have several sales reports to download and collate.
We live in Oregon, so we don’t have Sales Taxes to worry about, just Income Taxes.
I pay for most of our expenses with credit cards, so these will all need to find homes in their folders. I do use Quicken to divvy up these charges, so most of that work gets done every month or so.
We also have a couple of inventory locations, so I get those reports, as well.
To do the final accounting, I then load it all into GNUCash, the Open Source accounting package. It allows me to do a proper double-entry accounting for sales, expenses, and profits.
Double-entry is the only method to accurately categorize the entries.
The formula is simple. Sales minus Cost of Goods minus Expenses = Net.
With Inventory It goes like this Sales minus (Starting Inventory plus Purchases minus Ending Inventory) minus Expenses = Net.
Then fill out the Schedule C with appropriate entries, and Done!
That is, Done except for paying the actual taxes. That is the hardest part, letting go of Caesar’s share. (I didn’t build that, you know.)
What is your tax process?