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Tax season is coming soon – eek! Are you ready? Do you have your expenses organized? I use to be so stressed trying to figure out how to organize receipts, going through hundreds of credit card transactions, and reporting self-employed tax deductions.
SEE ALSO: How To Start An Online Business
Today I’m sharing how I organize expenses for self-employed tax deductions and the 9 self-employment tax deductions you don’t want to forget to write off in 2019!
HOW TO ORGANIZE EXPENSES FOR TAXES
Running my blog for now 8 years (full-time for 3 years), it took me a while to figure a system to keep track of my receipts. I organize my receipts each month with a sticky note that notes the month and then paperclip it off. So when I go through my receipt box, I can easily rifle through and find a specific month. I’ve made it a habit to write on every receipt what the expense was for. For example, after a business meal, I’ll write on the receipt, “business meal” and who I dined with. If I went to Target to buy office supplies, I’ll write “office supplies” on the receipt.
At the beginning of a new month (generally the 4th or 5th), I’ll work with my bookkeeper to go through all the transactions on QuickBooks to make sure they’re properly categorized. Best Buy transaction for $1000? I’ll go through the receipts and see that transaction charge for was the MacBook Air I bought for my blog so that’ll be categorized as “Equipment.”
You don’t have to keep physical copies of your receipts (I do though!) and you can easily scan copies of your receipts with the built-in receipt scanning feature in the QuickBooks ap. The scanned receipt is saved as a digital file that you can easily access.
My bookkeeper generates a QuickBooks report every month so I can see how much revenue the business generated and how much expenses were. I love how I can also see a yearly report of my business profit and loss on QuickBooks.
SELF-EMPLOYED TAX DEDUCTIONS
Let’s talk about self-employed tax deductions that you can write off for 2019. While it can painful to wonder how you spent so much money, you’ll want to write off as much of it that you can!
Please also consult with your tax advisor or CPA before claiming a deduction on your tax return as not all deductions will apply to your small business.
Print ads, Google ads, Facebook ads, Instagram ads – any advertising and promotional costs that you spend to advertise your business are 100% tax deductible. Including those business cards!
- Facebook ads
- Instagram ads
- Google ads
- Promotional signage
- Website maintenance
- Email marketing
- Business cards
As a blogger, I regularly spend money on website maintenance, Facebook and Instagram ads, and business cards.
Do you drive to meet clients? When you use your car for business, you can add those to your tax deductions. Make sure to keep records of mileage and gas because you don’t want to accidentally report a personal car trip as a business car trip. There are two ways to calculate car expenses: standard mileage rate ($0.545 cents per mile in 2018) or the actual expenses. To calculate actual expenses, you need to document the total cost of operating your car, gas, oil changes, registration fees, repairs, and car insurance. Then calculate the percentage of driving you did for business. The standard mileage rate is the easiest because you don’t need to calculate everything and you can easily track miles with the QuickBooks app!
If you hire any contractors or consultants for your business, you can write off those costs. Thank goodness because I have a CPA and hire photographers/videographers throughout the year!
- Business coaches
- Event planners
- Social media consultants
- Virtual assistants
You do need to file a 1099 for anyone who you pay over $600 throughout the year so don’t forget to send them a W9 form.
Any equipment that you buy to run your business counts as a self-employed tax deduction! Anything from laptops, tablet, phone, camera, and books. If you can use that equipment with a large price tag over a series of years for your business, you will have to opt for depreciation of fixed assets.
This year I bought an Apple MacBook Air, headphones, Sony 24-70mm lens, books, and misc tripods.
HEALTH & DENTAL INSURANCE
With the new laws, it’s no longer mandatory to have health insurance and you will not get fined if you don’t have it. If you are self-employed, health and dental insurance are both tax-deductible as long as you meet the following criteria:
- Your business is claiming a profit. If your business claims a loss for the tax year, you can’t claim this deduction.
- You were not eligible to enroll in an employer’s health plan. This also includes your spouse’s plan. If you were eligible to enroll in one and chose not to, you cannot claim this deduction.
- You can only claim premiums paid for the months when you were not eligible for an employer’s health plan.
Work from home? You can expense that! But not your entire home, only the workspace of where you work. To qualify for the home office deduction, it needs to be exclusive, regular, and precedence. For “exclusivity”, that means you cannot count your bed or the couch (I wish!) as your home office because you sleep and watch tv from those spots. You must use your home office regularly, and precedence means your home office must be the principal place of business.
Common home office expenses:
- Home office furniture
- Office supplies like pencils, pens, etc
- Home office rent
If you don’t want to keep track of home office expenses, the IRS has introduced a simplified method by deducting a standardized $5 per square foot of your home that is used for business, up to a maximum of 300 square feet (via IRS.gov).
If you rent out an office space or coworking space, you can deduct the amount you pay for rent.
My workspace is upstairs in my master bedroom where I’ve sectioned off a desk area. I do own my home so I can also deduct expenses like mortgage interest, home depreciation, property taxes, utilities, homeowners insurance, and home maintenance. My home office only occupies 10% of my home so then 10% of my annual utility bill becomes tax deductible. Reporting your home office is based on an honor system but IRS audits do sometimes happen.
Just started your business and hired a lawyer to set up your LLC? Expense that. Hired a bookkeeper to keep track of your expenses? Expense that too.
SEE ALSO: How To Start An Online Business
Photography by The Dani Creative
You can deduct 50% of business meals but make sure to note the following:
- Date and place of the meal
- Amount of meal
- Business relationship of the person you dined with
So what counts as a business meal? Any breakfast, lunch, dinner, runch, coffee, or drinks where you discussed business with someone else. If you treat your intern or staff member to a meal or drinks. You cannot expense a coffee that you got by yourself or lunch for yourself.
One good way to do this is to record the purpose of the meal and what you discussed on the back of the receipt.
No, you can’t expense that summer vacation but if you take a trip for business, you can expense that.
- Overnight accommodations
- Transportation – Uber, Lyft, taxis, train
- 50% of meal expenses
You can see a complete list of self-employed expenses and tax deductions on QuickBooks.
*50% off the monthly price for QuickBooks Self-Employed is for the first 12 months of service starting from date of enrollment for new paying subscribers only (trial subscriptions are not applicable), followed by the then-current fee for the service. Additional terms, conditions, pricing, features, service, and support are subject to change without notice