ADVICE / 39
today’s question...”how do you deal with tax deductions and working with an accountant?”
taxes… yuck. i’m really bad at them because I don’t know much about it. since i’m still part time freelance and full time at a corporate job i’ve found gold ol’ h&r block to be okay for me. i file once a year in person with a nice woman named deborah. i keep all my receipts (or try) so i can write off things like supplies or travel. anything that has to do with my freelance work i write off. anything. i rented “made in the u.s.a.” on iTunes one night. the colors and culture later inspired me to design a new collection of stationery so i wrote it off as research development.
say you make $80,000 at the end of the year, but you spent $30,000 on supplies, travel, advertising, etc. you technically only made $50,000 so if you have all the receipts to back up your expenses, you’ll only get taxed on the $50,000 you keep.
if and when i go full time freelance i will find an accountant that works with freelancers and knows the ins and outs so i’m prepared. i’m sure there are so many tricks and little things that would benefit me that i just don’t know. living in new york is frustrating when it comes to taxes. we pay city, federal and state. it makes me a little sick to my stomach when i see how much of my income i don’t actually get.
TIP: if a retail shop asks if you want your receipt emailed, say YES! then you can catalog it electronically in your “for taxes” folder. do it with all your online purchases as well. when it comes to tax time, click that folder and wah-la! it is such a time save for me.
i am not sure i feel perfectly equipped to answer this question, but let me give it a shot and tell you what’s happening around here. this year i got really into google docs. i have a separate tab for each month that breaks down my incoming cashflow in different categories. I have one that’s DESIGN, one that’s BLOG/ADS, one that’s BLOGSHOP. there is a box that I check off when the money is due and if it was paid. i am meeting with my accountant this week actually to move it all over to quickbooks (which by the way has an amazing app that lets you invoice through your phone) for right now, i use mint.com. it’s free and fairly easy to navigate & categorize and to see what you are spending your money on. the google docs is a really good place to start and organize beforehand though.
like katie said, I started being much more careful with keeping my receipts and something that helped me tremendously was opening up a seperate business credit card. if i go out to eat with a client, it goes on that card. if i am buying my cats some toys, it’s the personal one. luckily, most of my meals I am blogging about, tweeting about, talking business etc so those are mostly on the business card. I try (and sometimes forget) to write on the top of the reciept who i was at lunch with and maybe what project we were discussing – just as a reminder to myself. but at least i know that all my transactions on that card were business which makes it much easier to track.
it’s really all about categories for me. if i break it down that way it feels less overwhelming. if i just have to go through the mint site and look for cable/internet bills for that category it feels a little like a video game and less like a daunting task. but that’s just me. i get pretty anxious about these things because it all feels like a guessing game. also, i do quarterly taxes so that it keeps me on a deadline and forces me to stay organized. i have tried waiting till the end of the year and wanted to pass out when i saw how much money i had to hand over. quarterly feels like less of a blow to the wallet.
email me if you are in LA and want the name of my tax gal. she’s really calm and makes it all feel like a piece of cake (as much as she can) and really knows how to work with freelancers. like i said, i am no pro at this…it was time to call for backup.