Video:Tax Organization Tips For Freelancerswith Debbie Anderson
Freelancers have a lot to keep track of, but that doesn't mean tax time should be a total headache. See how you can organize your income and expense files so doing your taxes will be a breeze.See Transcript
Transcript:Tax Organization Tips For FreelancersHi! I'm Debbie Anderson for About.com. If you are living the freelance life, you know that keeping yourself organized is half the battle to success – and when it comes to preparing your records for tax season, the same is true as well. So, today I am going to show you a few tips on how to maintain your records so you are ready when tax season arrives.
Keep Track of Freelance IncomeTo get started, the two most important things you need to know at all times are how much money you are making and how much money you are spending on business expenses over the course of the tax year.
To keep track of your income, one of the best ways to maintain these records is by creating invoices for every client project you are paid for.
Create Freelance Project InvoicesWhether you create these invoices in a word processing computer application and then print out a hard copy to file away later, or merely maintain these invoice records in a computer software application; the key is to make sure you keep track of how much work you are doing and whether or not you were paid for your work by the end of the year.
At the end of the year, add up the total amount of income you generated from these invoices to keep track of whether or not the money you think you made from each client is the same number as what the Client reported to the IRS on your 1099 at year-end.
Keep Receipts for All Freelance ExpensesWith respect to tracking your expenses - although I highly recommend you ask your CPA (accountant) exactly which expenses you can deduct on your tax return, as a general rule – any business expenses you need to account for at tax time need to have a receipt or paper trail attached to that expense.
Always keep your purchase receipts in a separate envelope organized by month, fiscal quarter, or year.
Keep any financial statements associated with your business expenses, such as business credit card and bank statements.
Using your receipts and business financial statements to give you the data, create a spreadsheet with columns for each expenses date, payee, and expense category you need to keep track of to organize this information.
Track Expenses RegularlyTo make this process less labor some, be sure to set aside time so you consistently maintain this spreadsheet throughout the year, either on a weekly, monthly, or quarterly basis. This way you have an organized electronic record of your expenses for your CPA at all times and for year-end.
Organize Freelance Tax DocumentsOnce you have all of this information tracked, use a file container, and file folders to create a filing system that can hold all of your business related documents during the course of the year so that it is easier to find your records at tax season.
With a little organization for your income and expense records, next tax season should be much easier to deal with!
Thank you for watching. To learn more, please visit us on the Web at money.about.com.