Tax Refund

I still remember the first year I did my taxes and had self-employment income. Similar to many first-time self-employed people, I didn’t go into the year knowing that I’d have self-employment income.

One common mistake that many first-time self-employed filers (including myself!) make is forgetting to keep track of their business transactions during the year. I did a good job keeping track of the business income but not as good of a job with the business expenses. If I didn’t claim any expenses, that would increase my tax bill and would be especially painful when you take into account self-employment taxes on top of the federal rates!

If you haven’t tracked any of your expenses this year, you can, fortunately, work your way back to find out your expenses for the year.

Scour Your Credit Card Statements

One great way to collect your expenses is to look at the best, and perhaps only, record you have – your credit card.

If you use a dedicated business credit card or debit card, use that as your proof of expenses. If your card doesn’t offer any kind of transaction categorization, you can use a tool  to download your transactions and categorize them for you. If you ordered something for your business, you can go back to the vendor and request an invoice to prove what you purchased to claim as a business expense.

If you do not use a dedicated business credit card, it can become harder because you will have to sort business and personal transactions. So, now would be a good time to get a dedicated business credit card!

QuickBooks Self-Employed can help you track your income, expenses, mileage and capture your receipts year-round, and then you can export your information to your TurboTax Premium tax return. Even if you haven’t kept track with QuickBooks Self-Employed yet, you could go in and enter your information for your business for last year and have it easily exported to your TurboTax Self-Employed tax return so you can get your taxes done.

Record Your Business Mileage

Business mileage is any driving you do in support of your self-employment income. The rules state that you need to keep track of your business mileage and be able to prove that you traveled where you say you’ve traveled.

One of my business activities is depositing checks at the bank. I go every week to deposit any checks I have received and can claim that business mileage. I do not keep the deposit slips, but if I needed documentation, I can go on the online banking portal and show that there were deposits made every week.

If you have irregular or one-off trips you can prove that travel with credit card receipts and other documentation if you don’t have the original receipts. In the future, it’s best to keep track of the mileage, which QuickBooks Self-Employed can help you track.

Claim Your Home Office

If you have a home office, you can claim it as a business expense! First, ensure that your home office qualifies as a home office. It must be used regularly and exclusively as the principal place of business. The office can’t double as a guest room for a few days out of the year. It can’t also be a playroom for your kids (unless you’re a certified daycare!).

When claiming your home office, you can claim actual expenses or the simplified deduction. For actual expenses, you deduct all direct expenses as well as a percentage of indirect expenses. Direct expenses are expenses you pay to maintain the home office space, like painting or repairs. Indirect expenses are expenses you pay for the entire home, like home mortgage interest, rent, property taxes, and utilities, for which a percentage is assigned based on the square footage of office space used for your business.

The IRS is also allowing the simplified home office deduction available for offices that are 300 square feet or less. You can claim $5 per square foot of space with a maximum of $1,500.

Don’t let the last-minute tax crunch scare you away from claiming expenses that are rightfully yours. With a little bit of homework and the help of the tools mentioned, you can reduce your tax liability and save on your taxes.

Even if you still have questions, you don’t need to worry about knowing these tax laws.  TurboTax Premium will ask you simple questions about you and your business and give you the tax deductions and credits you are eligible for based on your entries.

  • Previous Post

    Small Business Saturday and Giving Back

  • Next Post

    The Importance of “Clean Books”

Jim Wang
Jim Wang

2 responses to “A Guide for Self-Employed Filers that Haven’t Tracked Their Expenses This Year”

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *