This past year was the first year that I was fortunate enough to work from my home. Working from my home has been a wonderful change for both personal and professional reasons. The only thing that caused a slight issue was the tax filing changes that I had to endure. The office in my home was now considered a tax deduction. I had to get some help learning how to deduct the things that are allowed on my federal taxes. If you are new to working from home and have a home office, this blog can help you learn what you need to know before tax time rolls around.
You know what's the worst? Forgetting a deductible expense on your taxes. It's not just annoying; it can also be costly. For example, if you're self-employed and don't claim travel expenses for work you did as a freelancer in Hong Kong, your taxes will be higher than they need to be. Here is a list of five accounting tips every freelancer should know before filing their taxes at the end of each year.
Keep track of all your expenses
It's easy to forget about small things, like the cost of printing out business cards or buying a new pen when you're getting started as a freelancer.
But if you don't record these expenses and keep them separate from other personal expenses, it can be difficult to calculate how much money you need to pay yourself each month at the end of the year—and even harder for an accountant or tax professional who might be looking over your books!
So make sure that every time something related to your freelance work (such as buying new equipment), jot down what it was and where it came from so that everything gets recorded properly later on.
Understand the difference between a deductible and a non-deductible expense
You need to understand the difference between a deductible and a non-deductible expense. A deductible expense is any cost that can be written off on your tax return, and it's usually an itemized deduction (you'll have to claim it). Examples of deductible expenses include:
office supplies
software and subscriptions
travel expenses for business purposes
home office rental costs
On the other hand, non-deductible expenses are those you cannot write off on your tax return because they don't fall into one of these categories:
Personal or living expenses (like food)
Medical expenses in excess of 10% of your adjusted gross income
Interest on student loans
Consider setting up a business bank account and credit card
A business bank account is the best way to keep your money organized and secure. You can set up a separate checking account for your freelance work, which will help you track your income and expenses more easily.
A business credit card can also be helpful, especially if you're starting out as a freelancer with little or no credit history. Having one of these cards will make it easier for clients who pay by invoice (rather than a direct deposit) to pay their bills on time without worrying about forgetting or delaying payment because they don't have access to an online payment system.
Use software to help with bookkeeping and taxes
There are many types of accounting software, but the one you choose should be able to help you keep track of your expenses and prepare your taxes.
If you're new to freelancing or don't have a lot of experience with bookkeeping, it's wise to start with an inexpensive program that will help make sense of everything as it happens. Once things are organized and running smoothly—and if there's still some time left before tax season—it might be worth investing in a more robust bookkeeping program.
In the end, it's important to remember that these are just tips. There are no hard and fast rules when it comes to freelancing and taxes. You can always get help from an accountant or tax preparer if you need it!
For more information, contact accounting services near you.
Share9 March 2023
