Posts Tagged ‘accounting’
The reason you track mileage is because you are likely running your business as a sole proprietorship, and therefore, you qualify for a lot of tax deductions. One of them is a deduction for how much you use your car for your business. If you do not keep track of how much you use your vehicle, you cannot reasonably deduct the use on your business.
This is what I recommend you do:
Purchase a notebook and get a pencil (helpful in cold climates)
On the first page, put your mileage the day you start your business, or the first of the year. Record the mileage on the last day of the year as well.
Going forward record the following on each line:
Date Starting Mileage Ending Mileage Destination
Jan 5 100,235 100,263 Jane’s Party
I do not worry about calculating how much distance I went, as I enter this information into Excel at the end of the year and it takes care of the math for me.
When it comes to tax time, you take your ending mileage less your starting mileage, and you know how much driving you did for the year. You can then take how much you drove for business (say 750) out of how much mileage you put on your car total (say 2000) and you will find 38% of the miles on your car were for business.
As a result, you can then use 38% of your vehicle expenses on your taxes. You may be able to claim a flat fee instead for the miles you drove, which may be more beneficial. You will want to discuss this with your tax person.
Books at DWSA are on sale!
PeachTree Accounting – A great software package for your accounting, and for $23 bucks, you truly cannot go wrong! The only problem with using slightly older software is payroll issues, but this likely is not an issue with your direct sales business.
PeachTree First Edition 2012 – This version is for a business starting out or more basic, which may be just fine for your direct sales business. But, the full version is actually a much better deal right now!
Maybe a book to help you learn PeachTree might be a good idea.
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Need your own domain name? Head on over to GoDaddy! Always deals happening!
Hopefully you have been keeping track of all your bills for the year, and that will make your task easier. Gather up everything that you have and take it with you to whoever does your taxes, or if you do your own, it will help as well.
Organize your paperwork by type – expenses together, sales together, etc – and add each one up. You may also have categories such as advertising, supplies, giveaways and others.
Mileage – Figure out how many miles you drove, and what how many are business and how many are personal
Household Bills – If you can use any of your household bills, take these as well
House Costs – Depending on where you live, you may be able to deduct a portion of your house. If so, you need to figure out what portion of your home is used for business.
Remember, January 1 is a new year, so you need to start a new box of paperwork.
- Note: I am not a tax accountant, so make sure to talk to your tax preparer for advice.
You have embarked on the journey of self employment. The time flew by. You meant to keep track of all your income and deductions but you just did not know where to start. Now, it’s tax time and you are worried about the 1099’s that are starting to appear in your mailbox.
Stop worrying. It is not as hard as it looks.
With your Federal Income Tax Form 1040 you are going to need to file a Schedule C – Profit and Loss from a Business.
First, you will want to gather your bank statement, credit card statements and cash receipts that are related to the business. Using excel you can make lists of each of the categories I am about to discuss here. These totals will be places on the various sections on the tax form.
Next, gather all your 1099s and statement of accounts from clients/companies you received money from but did not receive a 1099 from. All income has to be reported.
The actual instructions on how to enter a 1099 will vary according to what tax program you are using. There will be a section, usually “Income” where you enter W-2’s. A 1099 will work in the same manner. The tax program should have a special section to enter the 1099. You will fill in all the information.
It will then take you to the Schedule C and it will go line by line. You will fill in these blanks from the totals you calculated on your excel sheet.
So what exactly can you deduct?
- Advertising expense, including business cards
- Auto expense if you use your car for your business
- Commissions and fees you pay to others for work
- Depreciation of office equipment
- Self employment medical insurance coverage
- Business insurance such as fire, theft, flood or other casualty.
- Legal and professional fees
- Office expense
- Rent or lease of office space
- Business related meals, entertainment and travel
Keeping good records will help you keep track of these deductible expenses. Making tax time much less stressful and who doesn’t like that idea?
Chrystal Mahan - Selfemployedwriter.com thetaxqueen.com
Filing your federal tax return is probably either your favorite time of year or a tedious task that depletes your savings account. If you’re self-employed, you may have already figured out that you can deduct all sorts of things when April rolls around. Independent contractors who work in direct sales enjoy many different benefits at tax time, including deductions for business-related expenses and the ability to write off debts from self-employment. Make sure that you only deduct applicable expenses if you don’t want to find your tax return on the local auditor’s desk.
Don’t Get Greedy
Make sure you’re only claiming real deductions as you fill out your federal return. It’s okay to claim meal expenses and mileage for some professions, but review current IRS rules first. Auditors are said to have a strong interest in returns filled with deductions, so keep that in mind before you take off a few bucks for that lunch at Applebee’s.
Don’t Tell Them More Than They Need to Know
When you file a federal return, there’s no reason to mail in receipts or a copy of your self-employment earnings. If the IRS wants this info, they’ll ask for it. Don’t trigger an audit by offering extra documents or information.
Don’t File Too Early or Too Late
Self-employed folks should avoid filing on the first day of tax season or preparing a return long after April 15th has passed. Play it safe and file in February or March with the majority of the other taxpayers. Avoid doing anything to call attention to your return, like requesting extension after extension or amending it at the last possible minute.
Tax time is never fun, but it’s even more stressful if your expenses are audited. Play by the rules and keep an eye on your deductions to avoid receiving an unexpected letter from the IRS months after submitting your return.
It’s the New Year! While I know you are busy working on getting sales going again and keeping those resolutions, one thing that you should be thinking about is getting your taxes ready. I know some people like to file as soon as they possibly can in February so here is some past articles about taxes to help you either finish off your 2012 year or to get 2013 started on the right foot.
These articles cover all sorts of topics from what you can and cannot use as a business write off, how to keep track of everything through the year so you are not as overwhelmed and how to get the most bang for your buck. Of course, please remember that I am not a tax accountant and that you are best to talk to your personal accountant to know what will work best for you and your situation.
|A Quick Tax Overview – Direct Sales|
|Keeping Track of Papers for Tax Time|
|Tax Information – Advertising Write Offs|
|Tax Information – Vehicle Write offs|
As you know, once you have started your direct sales business the paperwork starts to pile up. The longer you leave it, the more daunting it becomes and the more you want to continue avoiding it. But unfortunately, it needs to be dealt with at some point, if for no other reason than for tax season.
While you may think that an accountant is an extra expense that you cannot afford, think about why you cannot afford to not hire an accountant.
Organization – For many accountants, a stack of paper is a great treat that they cannot wait to get into and sort. Well, maybe not that great of a treat, but they enjoy organization and having everything in its place.
Knowledge – You may think you are hiring an accountant just to sort your paper but you are hiring their knowledge and expertise. They will get that paper organized and recorded in a lot less time than you will.
Frustration – Have you ever tried to balance your check book and give up in frustration? Doing your books is a lot like that but more involved. Save yourself the headache and get someone else to do it for you.
Accuracy – many people think that doing their books is not too difficult. But chances are, once you get started you will realize that you do not know what you need to (especially if you start by trying to do your taxes). By having a trained professional do your books, you know that they are correct.
Future Savings – Not only will they help to get your papers organized today, but they will likely give you tips for the next time so that you can save yourself time and money. Your first visit will likely be the most expensive but it will get cheaper the next time, I promise.
Rules – Another big factor is that hiring a professional means they know the rules of where you live. While you know that Betty can claim X, she lives in a different state/province than you do and you may not be allowed the same deduction where you live. This is more important if Betty is in a different country.
Taxes – Not only will they help you get your books in order and organized, but they will be able to help you figure out what you can use on your taxes and how to use them. This can end up causing you to get a significant refund that you may not have found on your own!
While it may be difficult to find the funds to pay for someone to help or do your books, if you look around you hopefully can find someone who fits your budget. And if nothing else, you could try bartering instead.
Did you sense the sarcasm in that title? Personally, I do not mind doing taxes, but I have done my own ever since I started working and I also work in accounting so they are not the scariest thing to me. But for many people, they are not comfortable with doing accounting or taxes for their direct sales business. Hopefully this guide will give you some ideas to take the scare factor away.
Revenues – You need to claim the funds that you made from your business. This is the proceeds that you made on your sales. For instance, if you made $100 on a sale but your cost was $75, then you need to claim that $25. If you had a team, then you may have made commissions on them which will also need to be claimed. Your company will issue you a tax receipt when the money they have paid to you is over $600, regardless of the mix between revenue from parties or team commissions.
Deductions – There are lots of deductions that you can take with a home based business. Various expenses to keep your house running, costs associated with your mortgage, expenses associated with your vehicle and of course, those that are encountered in the course of your business. For many people, these deductions make the difference between owing money and paying in. It is always best to consult your tax agency or tax accountant to find out what is and is not deductible and what you qualify for. The deductions that I get may not be the same as the people on my direct sales team.
Expenses – Not only do you get deductions from your home and your car, you have legitimate business expenses. Did you purchase postage to mail out catalogues? How about paid for advertising in the form of business cards or a car decal? Did you give away any product for raffles, hostess gifts or just to allow people to try the product? All of these are valid expenses and ones that you need to keep track of for tax time.
- What Are Itemized Tax Deductions? (turbotax.intuit.com)
- Can Cellphone Expenses Be Tax Deductible With a Business? (turbotax.intuit.com)
A lot of receipts and you don’t know what to do with them? Find a few envelopes and we will get you square in no time!
You need to sort your receipts into different piles so you know what is what. Here are a few suggestions – you may find you need different categories.
- Meetings – Team members, Potential team members, customers, fundraisers
- Car Expenses
If you have a lot of receipts in a pile, then you likely want to create it an envelope for itself. If you only have a few, then you can combine it. You could also smaller envelopes for each category and then put them all into a larger envelope.
Label each envelope with whatever is inside it as well as the time frame. If your receipts are all for one year, you can label it “Car Expenses – 2011” or “Giveaways/Training/Meetings – November 2011”, whatever method works for you.
Once everything is sorted and in its envelope, you need to put it somewhere so that you can input it into your accounting system. If you do not input anything, but give it all to your accountant, then they may advise you how they would like the receipts sorted.
- Keeping up on your Direct Sales Accounting (directsaleshelp.com)
While accounting is not high on most people’s lists of things to do for their direct sales business, it is still something that is important to do. And if you do it on a regular basis, it is that much less painful at the end of the year when it has to be done.
Do What You Can – Depending on your company and your business, you may have a hard time keeping your books done up 100%. But chances are there are things that you can keep up to date. For instance, I update my credit card and banking records every month once my statements are generated. This task only takes me about twenty minutes a month so they are easy to do.
Collect Data – Even if you cannot input anything for whatever reason, you can make sure that you have all the information you need. If you tend to have receipts floating all over your house, gather them up and put them all in one spot. Find an envelope and label it “Receipts to Input” and then leave it somewhere for you to enter when you have the time.
File – Filing seems to be one of the worst jobs when it comes to running your business, but it is important to do. The more you pay attention to it, the less you have to do later and the less painful it is. This is a great task to do when you are on hold somewhere or you are waiting for something and you do not have time to get into something which requires a lot of attention.
Remembering – Need another reason to do your accounting on a regular basis? Have you ever sat down to work on the books and you look at a receipt and cannot remember what it was for? And it was six months ago? Chances are, you are going to give up on it and move on, and hope for a sudden brain flash later. At least make notes when you encounter the item and input it later.
Regardless, if you only have a few minutes, you can get some basic accounting tasks done. If you have more time, then you can get more done. Try to schedule a few hours each month for your accounting and see how much better it goes.
PS – This is my first year doing this, in oohh.. 4 years of direct sales. It is so much better!