Pet sitting and Tax Time. How to stay out of the Dog House.
Tips to deal with the least fun part of pet sitting.
The end of the year is only about 11 weeks away so I thought tax time for pet sitters was a timely topic.
By nature, math is not my strong suit, so it would also stand true that tax time as a small business person should have raised my blood pressure and cause some stress and confusion. And to be honest, the first year or two it did, but then I learned some things and came up with some strategies that really made it not such a big deal at all.
Let's cut through the red tape shall we and get down to business - tax business that is!
Here are some tips that might help pet sitters out there - especially new pet sitters who have never had a small business.
1. Doing some things in advance of tax crunch time really reduces stress, so right from the "get-go" assign one place to keep ALL of your receipts and pet sitting financial records. I mean ALL receipts. I started with a folder with pockets but as the years went by I moved up to a plastic zippered pouch. Not that high-tech but it doesn't have to be. With all receipts and financial records in one place, tax time became easier.
2. I also would keep the above-mentioned receipts in chronological order with the most recent ones on top.
3. At the beginning of my business I was a little hesitant to keep my financial records (other than forms) on the computer, so I kept a simple handwritten ledger of expenses and income. It wasn't complicated. It doesn't have to be. Sure some people are great with Excel, Quickbooks, and fancy computer programs, but if you are not a technical person or a minimalist and like things super simple, most solo pet sitters can keep handwritten records just fine.
If you are high-tech then you have a leg up and go for it - but don't make it complicated for yourself.
4. Hire a good small business accountant. This is worth the money and when all is said and done, it isn't all that expensive. Your accountant will give you good advice throughout the year too, not just at tax time. My accountant set me up on quarterly tax payments so everything stayed current. He'd give me the forms to send in and envelopes and I just needed to write the check, stamp it, and mail it.
5. The first week of January make an appointment with your accountant for mid-March. I found that was the best time to meet for my yearly taxes. Accountants get busy so I found calling right after the new year and being proactive got me the meeting time and day I wanted. Setting a date also kept me motivated to stay organized.
6. Every week or two, sit down with your collected receipts, checks, and any other income and record them in your expense/income ledger (on paper or online), and put a checkmark in the corner of the receipt so you know they have been recorded. Do this at a quiet time so you aren't interrupted.
7. If you do # 6 religiously, then when tax time comes around it will be easy-peasy for you.
8. Keep diligent mileage records. Not just the "to and from" mileage numbers, but also the client/business name and reason for the trip (ex: pet visit= PV). On a quarterly basis, add up the totals for mileage and put that quarter's mileage sheets in with your other receipts. Check them off in the corner after you add up the miles. After the last quarter of the year add up all the quarters of mileage and you are done with that.
9. Keep a separate business bank account right from the beginning of the business. Do a quick monthly look at it and make sure you record any expenses in your expense/income ledger (online or on paper). I would always photocopy the check along with whatever bill it was for so I'd have a copy. For instance, when I paid my NAPPS dues (National Association of Professional Pet Sitters) or my Liability/bond insurance, I'd copy the checks and the invoice, file them away and all was good.
10. Right after the new year make it a ritual to gather all the just-ended year's records so they don't get mixed up with the new year's records. This way your previous year's receipts and ledgers don't get mixed up with the new ones which can cause extra headaches down the road. I used to do this on New Year's day or the day after.
11. After # 10 is done, I'd sit with everything and check all the numbers, double-check the receipts and any other financial paperwork and once organized they were put in a large manila envelope, labeled for the year, and put aside until I met with the accountant in March. (Remember where you put them so you can find them in March!)
12. I'd make a list of any questions I had for the accountant and I'd either call them right away with them or if they could wait, I'd keep them in the envelope for our March meeting.
13. If you have products you sell (dog biscuits, etc...) make sure to keep good records of those sales as well. For a couple of years, I sold either my own homemade biscuits or treats I purchased from another local person who was making and selling them. I'd keep those income and expenses separate for my own insight and the accountants.
14. At tax time, I'd bring what I did in # 13 to my accountant so he could meld it into my tax return.
If I can do this, then anyone can. The most important advice for all of the above is to stay on it, be organized, keep it simple, and ask the accountant questions as needed.