Tax Tips for Doulas: Keeping the Books

doula business and taxesPart 3. Five Bookkeeping Tips that Make Life Easier

If you own a doula business and are organizationally challenged, then right about now you are probably pulling your hair out as you attempt to gather varied receipts and income records in order to complete your tax return. Or, perhaps you are in a deep state of procrastination? In either case, you are not a happy camper. Put this trauma to good use and get your @#&! together! Here’s how.

Tip #1. You need a SYSTEM. When something is systematic, it means you do it without even having to think about it. One needs to set up the system, so there is a small investment of time and effort to accomplish this step, but once in place, you simply need to you use the system.

Tip #2. The system needs to work for you. If your doula business model is a simple one, then your bookkeeping can also be simple. Briefly, if you are offering services or perhaps a class or two, then your needs are straightforward and a handwritten two-column ledger book purchased at your nearest office supply store should suffice. The ledger book is super easy. For example, track income for the month on the left side and expenses on the facing page. Entries can be as simple as date, source of income, and amount. For expenses, enter the date, category of expense (e.g., office supplies or continuing education), and amount.

If you need your system to track more than income and expenses, for example inventory, then you will need something more robust. QuickBooks software is quite powerful, likely containing more functionality than you require. However, it can also be used on a very simple level as an electronic checkbook. Again, you simply enter your income (as deposits) and expenses (as checks/debits). You will need to set up your expense categories. This step is not too techy (found under Lists/Chart of Accounts) and can be amended as you go.

Tip #3. Your system needs two key components: (1) a place/way to track income and expenses and (2) storage for your receipts. Should you ever be audited by the IRS, you will be required to produce your receipts for any deductions you have claimed. Print and save all receipts! A simple method that has worked for me for over 30 years is to have a small envelope for each month labeled “receipts.” After I enter the transaction into my QuickBooks program, I put the receipt in the envelope. Once the envelope is full, I seal it and file away under “2015 business receipts.” No sorting through bits of paper, trying to read faded receipts, or puzzlement regarding purchases. Ever. Keep all tax-related documents for a period of seven years.

Tip #4. In order to claim your mileage deduction, you need written documentation for business use of your vehicle. Again, the system has to work for you. Mileage tracker booklets from the office supply store or phone apps are pointless if you can’t muster up the self-discipline to enter a start and end point for each business-related trip. However, a calendar of appointments/events, client records, and MapQuest will enable you to re-create your documentation if that is your only option. Randomly pulling a ballpark number out of thin air is another method, but one that will be difficult to justify if the IRS comes knocking.

Tip #5. Use your system! All else is moot. And do it as you go. (Here is where the self-discipline comes in.) It will make pulling your taxes together for your doula business next year a simple matter rather than a hair-pulling-out mountain (or pile) to climb.

More Tax Tips Coming Soon from the Doula Business Advisor!

Part 4. Options to Making Quarterly Tax Payments (on 4/7)

Patty Brennan is the author of The Doula Business Guide: Creating a Successful MotherBaby Business, 2nd Edition. Now offering The Doula Business Guide Workshop and Webinar Series — an inspiring workshop and online class covering the nitty gritty of establishing a doula business and growing it into a sustainable income.

Posted by Patty Brennan on March 31, 2015 • Filed under
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