Save as Much as You Can on your Taxes, Quick Tip on How to Record All Deductable Business Expenses
I used to work as a Tax Preparer, and today I decided to find a way to organize and record my business expenses, so this tax year will be much less painful for me than the previous year was.
Note: If you haven't learned it yet, US Government taxes business at much higher rate than regular employees, so you must record and claim every legally allowed tax deductible expense to make sure you don't lose all of your money that you worked so hard for, comes the beginning of next year.
As I was doing my personal research, I realized that many of the warriors (especially US based ones) can benefit from this information as well. So here you go.
1. Selecting a Platform
I needed a platform to keep track of my expenses on. I decided to use Google Docs because I work on many different computers. Any spreadsheet type of service would work though.
2. Organizing the Data
I went to Schedule C - a form used by US small business to report their income and expenses at the end of the year (study it) - and noted down all of the categories for deductible expenses.
- Advertising
- Car and truck expenses
- Commissions and fees
- Contract labor
- Depletion
- Employee benefit programs
- Insurance (other than health)
- Interest paid
- Mortgage (paid to banks, etc.)
- Legal and professional services
- Office expense
- Pension and profit-sharing plans
- Rent or lease (see instructions)
- Repairs and maintenance
- Supplies
- Taxes and licenses
- Travel, meals, and entertainment:
- Utilities
- Wages Paid (less employment credits)
- Other expenses
Next I created a spreadsheet with the following column headings (copy and paste should work if you are making your own version)
Date Category Description Income Expense Total
4. Adding the Categories
I pasted the mentioned before deductible categories to the right side of the newly created table, see image bellow. That way I will be able to just copy and paste data into the category column:
5. Keeping Total Count
For the total cell of the first line I used the following formula: F2=D2-E2
This formula subtracted Expenses from Income, and placed the result into the total category.
For next total cell I used the following formula: F3=F2+D3-E3
What it does, is takes the result of the previous total line, adds in expenses from this line, and subtracts expenses from this line, so you get an updated total.
Then all I had to do is simply drug down the cornet of the cell, to auto update all of the following total cells, with relevant formula.
6. Conclusion
That's it. Now all I have to do, is make one quick entry whenever I get a business income/expense relevant email and I am done.
I hope you find this post helpful. Feel free to ask me any additional questions, or may be share some of your own tips with the rest of us
7. Additional Info
Giving credit where its due, I was inspired by the following blog post: http://www.providentplan.com/3072/fr...or-schedule-c/ .
There author provides more detailed background on every deductible category and a free spreadsheet that you can download for your own use. (It is similar to mine, but I think my design is more simple. And I like simple).
Mad link juice, but I think he deserves it.
If you want to copy and paste the deductible categories into your spreadsheet, here they are again without the bullet points:
Advertising
Car and truck expenses
Commissions and fees
Contract labor
Depletion
Employee benefit programs
Insurance (other than health)
Interest paid
Mortgage (paid to banks, etc.)
Legal and professional services
Office expense
Pension and profit-sharing plans
Rent or lease (see instructions)
Repairs and maintenance
Supplies
Taxes and licenses
Travel, meals, and entertainment:
Utilities
Wages Paid (less employment credits)
Other expenses
I am not a guru, nor do I pretend to be one. I am here to learn and to share my experience. Everything that I say, I say from my heart.
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I am not a guru, nor do I pretend to be one. I am here to learn and to share my experience. Everything that I say, I say from my heart.
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I am not a guru, nor do I pretend to be one. I am here to learn and to share my experience. Everything that I say, I say from my heart.
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