How to Prepare Your Biz for Tax Time!

 
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If you’re like a lot of self-employed business owners I know, you’re probably either frantically pulling documentation together for tax time, or you’ve already filed, but you’re not quite sure if you actually got the most out of your deductions. I’m here to help shed some light on what tends to be the most stressful time for business owners.

We’ll start by handling your biz income:

  • The income you claim should include any 1099s, checks, credit cards, Venmo, PayPal, and cash you received on behalf of your business.

  • The amount received should be before any processing fees (so the total you billed the client on their invoice).

  • You can split your income into multiple categories if it helps you, but it really doesn’t make a difference for your tax prep.

  • If you’re doing your taxes yourself, the amount on your 1099s needs to be subtracted from the total remaining sales, otherwise you’d be double counting your income (and paying too much in taxes).

    • For example, if you had one 1099 that showed $10,000 in income, and your business made a total of $40,0000 last year, you’d report $10,000 of it through the 1099 and $30,000 of it as other income/sales.

Now it’s time for qualified business expenses, you’ll want to add them up into the main categories below:

  • Business Travel (keep your receipts-scan them to google drive)

  • Advertising/Marketing (website, FB ads, design services for freebies, etc)

  • Meals with clients or while traveling (these are 50% deductible and need to be reasonable - again, keep receipts)

  • Rent for office or co-working space

  • Legal and Professional Fees

  • Bank service charges (wire transfer fees, credit card processing fees, international fees, etc)

  • Software & Subscriptions

  • Training & Education

  • Client Gifts ($25/client/year is deductible)

  • Payments to Contractors (anything you paid out like graphic design, accounting services, a VA, etc)

  • Office Supplies/Expenses (printer, paper, pens, notepads, keyboards)

  • Biz portion of personal cell phone

  • Biz portion of internet use at home

 
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You can also normally deduct some of your expenses for your home office! So, gather any expenses related to your home office like:

  • Rent/Mortgage

  • Power

  • Water/Sewer

  • Garbage

  • HOA Dues

  • Landscaping

  • Gas/Propane

  • The square footage of your house or apartment and the square footage of your office

After you’ve totalled your home office utility info for the year, you’ll want to set it aside if you’re entering it in TurboTax or TaxAct, but if you’re filing with an accountant, you’ll need to provide that info to them along with the rest of your tax documents.

To wrap the rest of your tax prep up, you’ll want to pull together any of the following that you have:

  • 1099-MISCs

  • 1099-INT (interested paid to you)

  • 1099-DIV (dividends paid)

  • 1099-R (retirement funds cashed/paid out)

  • 1099-B (sales of stocks)

  • W-2s  (traditional employment income)

  • 1098 (mortgage)

  • Childcare expenses

  • 1098-T (tuition expenses)

For 99% of you, this list should wrap up what you need to prepare to feel comfortable filing your taxes yourself or giving them to a tax preparer. You can also check out the couple of spots I have left available for tax time prep where I help you with everything above, PLUS spend up to an hour actually filing your taxes with you via TurboTax!

Click here to snag your spot and ask me any lingering questions!

Cheers!

Katelyn

You can't ignore your bookkeeping as a small business or freelancer or you will regret it come tax time! Fortunately, there are some easy practices you can start today to ensure you're prepared for tax season!
If you're self-employed, tax season can be a real trial, especially if it's your first year or you're DIYing your bookkeeping. Find out what you can do to avoid audits and maximize your tax return.
Katelyn Stanton