Doing taxes as a self-employed person is a little more involved than doing taxes if you are employed by someone else. If you are self-employed for the first time this year, then here are 2 ways to be prepared and organized for tax time.
Accounting Program or Spreadsheet
First, one of the best things you can do is keep an ongoing record of all of your income and expenses throughout the year. Keep your expenses categorized as well so that you do not have to sort through them at tax time.
This means have a section for general business expenses, phone expenses, rent, utilities, health insurance, business trips, meals, and other expenses that are specific to your business.
When you record the expenses, put the date, the dollar amount, and what the expense was for. You should also keep all of your receipts for business so that you will have them if you ever get audited.
You can even get an accounting program that you can link to your business accounts so that the expenses are automatically entered in. The program should also include a category for your income into the business account so that you never have to worry about if you recorded the amount accurately.
Second, you need to keep an accurate account of the miles driven for your business. Make sure that you also record the date, the number of miles, and where you drove so that you can show an accurate record. This is also important if you ever get audited because you need to have an accounting of what the miles were used for.
If you put a lot of wear and tear on your car, it is also possible to write off the expenses for repairs, oil changes, and buying gas. As a note, you cannot write off the miles and the expenses. You have to choose one or the other. If you choose to write off the expenses, then you cannot switch back to writing off miles the next year because of tax rules.
Remember that you get a certain dollar amount back for every mile that you drive, so it may be to your advantage to write off miles instead of expenses. Talk to an accountant, such as one from Jeff Baker & Associates, PS, so that you can make the best possible decision.
By doing these 2 things, you can be prepared and ready for tax time without stressing out. Stay organized during the year, and then you will never lose receipts or miss important expenses to write off.Share