Account and Tax Write-Off Ideas
Let me start this article off by saying that I am neither an accountant nor a lawyer so none of what you are about to read should be taken as legal or professional advice. I have, however, been in this business a while and have been fully self employed for a while so the info I’m going to pass on is some stuff I have learned (in some cases the hard way) that you may find useful and helpful in making your business run smoother and making your accounting and tax filing a little less stressful.
KEEPING TRACK
There are several things you should be keeping close track of as you work. First and foremost is your income. Misreporting your income is a very serious matter, even if it is by mistake. One thing you need to understand is that many companies will not send you a 1099 form at the end of the year showing what you made from them. Last year I got checks from a total of 25 different programs and I actually got 6 1099s. So if I were to go off of that alone it wouldn’t work out too well. In the end you are responsible for keeping track of your income. I personally have created a spreadsheet that I use to track mine. Whenever I get a payment either via check, Epassporte or whatever I put it in the spreadsheet with a note of who it was from, when I got it and any other info I feel is pertinent to it. For me this works great because by the end of the year I have my entire income listed right on one sheet, the spreadsheet adds it all up and I have that part of my accounting done fast. It also helps me to pay my quarterly taxes. Some people keep check stubs or a register. Whatever works for you is fine, but you should devise a way to track income so you stay out of trouble.
Second is tracking your expenses. Again I use a spreadsheet that has the date, how much the item/services cost and any notes I need for it. For me this works better than just keeping a collection of receipts. I do still keep the receipts, but this way I don’t have to try to dig through them at the end of the year and add stuff up or try to remember why I bought a certain item.
WHAT DO I WRITE OFF?
Well, this is a good question and as I said before I’m not an accountant so you will want to hire an accountant and ask them what all you can or can’t claim, but there are some simple things that some people forget about. You can write off your hosting bill, the cost of any content you purchased, if you paid to have work done like a designer or script coder, any physical stuff you need for you business like office supplies, postal supplies, printer paper and things like that. You can write of domains you bought or renewed, if you have a separate phone line for a fax or business line and things like that, those are deductible as well.
There are other things like software and computer stuff that is a little different story. Some software you can write off fully when you buy it and other pieces of software you have to write off over a collection of years. Computers that are used only for work can have depreciation on them you can claim and you can often write off any hardware upgrades or replacements that you may have bought for them. My rule of thumb when it comes to computers and software is to keep track of it and then ask the accountant. They get paid to figure out what to write off and how to do it; I get paid to sell memberships to porn sites. Home offices are also another slippery slope. Some people write them off others don’t, that is something you will again want to talk to an accountant about. Also there is travel. You can write off the mileage you travel on a business trip. The food and lodging you can write off, to a point, but I don’t know how much of it or how you go about claiming it. Also there are shared things. Like your internet connection. If all you use the internet for is work, you can write off 100% of it. But if you work from your house and you use it for other things, then you can only write off a percentage of it and you need to keep logs of how much you use it for work verses leisure. It can be a pain in the ass, but if you use some spreadsheets or come up with a good tracking plan it can make it easier for you.
GET A BANK ACCOUNT
One thing my accountant drilled into my head was getting a business bank account and using it only for business. It helps to track income and spending and if any questions arise it will be easy to see what you spent business money on and what you spent personal money on. I deposit all my checks or do bank transfers for all my Epassporte payments into my business account then every couple of weeks I write myself a check for personal money that I use to pay bills and buy food and spend on all my non-business non-deductible purchases.
PAY IT QUARTERLY
This is a lesson I learned the hard way. When you are self employed you should be paying your estimated taxes quarterly otherwise at the end of the year you will owe a lot and you will have accrued possible penalties and interest. My first year as a full time webmaster was an accounting disaster. I had never been self employed before and always just did a 1040 EZ form. I didn’t pay any quarterly taxes. I didn’t keep track of anything I bought so with no proof I had very few write-offs and I didn’t realize that as a self employed person you have to pay self employment tax. Needless to say when my accountant told me how much I owed I nearly passed out. I was lucky enough that he gave me a good stern lecture on book keeping and keeping track of expenses and such that made the next year seem like a cake walk compared to the previous year.
For many this article may break down to being about common sense, but if just one new webmaster reads this and learns some thing to help them out, my job will be done. Working for yourself can be a blast and for many, like me, it is a dream come true. But if can quickly become a nightmare if you don’t do things properly. My rule of thumb is a simple one. Keep track of every penny of income you get and keep track of every penny you spend. If you have any question about whether or not something can be a write-off, keep track of it and ask your accountant. You aren’t out anything but a few minutes of time to file it so you can ask later and you never know, you might be able to claim it and save yourself a few dollars. Just because you may work at home it doesn’t mean that you are not a business because you are. In order to be successful you need to take a little time and create an easy to use and upkeep record keeping system so that you stay out of trouble, out of debt and you allow yourself to spend as much time as possible selling porn not digging through check stubs, receipts and hand written notes that you have laying everywhere.
