Friday, February 18, 2011
Uhm yeah, taxes- My top 10 tips
I am not a professional, and in no way should the tips offered here be followed in lieu of following professional tax accountant help. But, I have done my own taxes for years.
I started when I had my first job and I had to file a 1040EZ. Dad made sure I knew how to do it. My friend's fathers were doing their taxes from their pitiful first jobs, but me, no I did my own.
By the time I was in college I had a had my own small (ok micro) business and I had to file a 1040, and a schedule C. So, when my roommate freaked out because she didn't know how to file a 1040EZ, cause Dad always did it, and Dad decided she needed to grow up and do it, I was sailing through a huge book, on put this number here, and that number there.
I never really made enough at my micro biz, but enough to claim it. And unfortunately, once in the long form you can never go back to the EZ, well ok someone told me and I believed them. Anyway within a few more years I was "working" for myself so it didn't really matter.
My first year out of college, after my short stint as an intern I was on my own. I couldn't find a job, but I could find projects, so I ran with it. Man I had Moxie in spades back then. I cold called like a fiend, I gave everyone and their uncle my resume. My resume rocked. And I did my own taxes with the help of Mac-n-Tax. Yeah it cost extra, after all I was on a Mac, but it didn't cost as much as a professional. After all, I was making enough to help with the rent, and cover food. Right off or not, professional tax help was not an option.
So now, as I work to grow my hobby (its not a hobby its a calling) into a stronger money maker, I am reading all kinds of fun little articles. Some are helpful, a ton don't really say anything--they are more blathering blogs (just like this one). And now that it is "tax season" a bunch are giving tax tips.
I am pleased to say I have yet to read a tip I didn't really know before.
Here are some tips that I haven't seen this year, I AM NOT A PROFESSIONAL TAX PERSON, I am sharing from having learned these lessons the hard way. Someone should benefit from my pain, so it wasn't all in vain.
1• If you own a house you have access to a whole lot more deductions than as a renter.
2• If you work from home, in your home, calculate the percentage of time you are "at work" vs the percentage that is "being at home." You can take that work percentage and figure out how much of your electricity and other utilities are "office expenses."
3• Calculate the square footage of your office space, vs the total square footage of your home. That percentage is your office rent, from your rent--of course when your "office" is a desk in a shared room you are limited to the desk space. --Yeah I learned that one AFTER we converted my full room office into a bed room for a baby. And my office percentage ended up being something lame like $5 a month.
4• Track your business calls in a little notebook. Go through your phone records with a highlighter, all those out of network calls to clients count. But they need to be documented. AND the printed statements from the phone company are way smaller, and take less paper than your printing it and using all your printer ink at home. Green for them costs you paper and ink.
5• You need to have support documentation for milage, if that is how you calculate your auto expenses. Even if its one of those cheap little pocket calendars (and right now those are dirt cheap on sale) where you write your travel info down. This little paper trail can easily fit into the file folder where you keep other tax documents--and its not on your smart phone or your palm pilot (anyone still have those?)
6• If you plan on tracking entertaining, or business meetings that involve food, make a note on the receipt then and there. Notes last longer than your memory.
7• The first year you actually make "a lot" of money and didn't put any aside for your Social Security taxes, and that last minute put 2 grand in an IRA will give you a huge deduction is just a point and laugh situation, because you haven't seen $2,000 in one place, let alone within 2 months, you can make monthly payments to the IRS. But they won't tell you about that. They want you to pay them in one bank breaking, credit card maxing swoop, and by the 15th of April. Well you can make payments, you have to file extra forms, you have to ask for those forms--this is one of those forms that is not out on the table at the library.
8• All those listing fees, and transaction fees on Ebay, Etsy, PayPal are deductible--the cost of doing business.
9• Those professional tax-in -the-box places will charge you a higher percentage if you run a business. I know several people who work those seasonal tax places, they are not professional accountants or tax people. They have been trained to run the software, and its just a propriety version of the type of software you get with Turbo Tax. If you need professional tax help, get a real--full time, all year long, professional tax person.
10• You need to be organized throughout the year. This will make tax time so much easier. Collect and document your receipts every month to 6 weeks to quarter. Document the receipts the same way every year based on the listings in your taxes. I use Excel, the categories in my spread sheet match the categories in my taxes. Its a major time saver.
Good luck, and remember to file early to get into the system early, and your refund faster.