Keeping track of your income and every single expense throughout the year can be tricky unless you stay organized. Financial decisions may be daunting, but they don’t have to be when you follow these handy tips to get you through the next fiscal year.
Keep records of clients and payments – If you work with multiple clients over the course of the year, it’s a good idea to keep a list of each client and how much you made while working for them. There are a number of invoicing programs out there to assist with this such as Harvest, Freckle, and MarketCircle. NOTE: If you go over $600 for anyone client, they should send you 1099 in January. This list can help you follow up with any late documentation come February or March.
Know your deductions – Expenses can add up, especially if you drive client meetings, or deliver work to your clients, keep a record of trips back and forth. You can’t count commuting miles, but if you work offsite, mileage to and from clients can add up to a hefty sum. Client lunches, parking, healthcare, Internet, and entertaining all fall under the deductions category.
Create a dedicated office space – You can only take a home office deduction if your space is used exclusively for work. But it doesn’t take a lot of space to count as a home office. Dedicating a small area of your home to work can help with deductions for part of your rent and utility expenses.
Keep your receipts – Save your receipts and work with a tax professional to help you determine what can actually be written off as part of your business.
Save some money – Depending on your situation – you may end up owing some tax next spring. You don’t want it to be a surprise. Therefore, it’s always best to put a bit of each paycheck into a separate account – just for tax payments in the following year. If you have nothing to pay – you can always give yourself a refund.
Do you have any helpful advice you adhere to each tax season? Share your thoughts in the comments.