How well do you track your expenses?

It’s that time again to start thinking (and doing something) about your taxes. So we’re kicking off the new month with the first in a series of posts from our favorite resource, Rockstar CPA, who will be speaking at the Creative Freelancer Conference this year in Boston, June 21-22, 2012. (Early bird registration ends March 30. Sign up now and take the tax deduction!)

This tax season, we at Rockstar CPA want to encourage you to take full advantage of the resources at your disposal to make tax time a snap and to get your taxes to the lowest possible rate. Here are a few things not to forget this tax season:

  1. Don’t Cut Yourself Short: Just because you work in a t-shirt at the cafe or your pjs in your apartment doesn’t mean we can’t treat you like a business when it comes to your taxes. And that’s exactly what we want to do. Why? If you’re not a business, you’re a hobby—and hobbies aren’t allowed to deduct losses. So if you’re thinking of not reporting your freelance career because you’re not “making enough” yet, just remember, that money you’re losing in this year can be offset against income from all other sources. Get the credit you deserve!
  2. Be Aggressive On Research Expenses: Research can include anything that makes you better at what you do or inspires the work you create in some way. As creative professionals, hopefully your wheels are spinning already thinking of possibilities… Be aggressive about reporting these expenses, but be equally diligent about tracking the connection between each expense and your work.
  3. Mixing Business and Pleasure: When traveling for work, it’s very common to include some time for fun. Just get to a firm number of work days vs. personal days and have something on paper (e.g. calendar) to back it up. Then add up all your travel costs for the trip (flight, ground transport, meals, etc) and multiply it by (work days / total days). Easy!
  4. Your Bank Statement is NOT a Receipt: The IRS looks at bank statements as “secondary” evidence of a transaction. Why? A debit card swiped at the drug store will only have a total on it, and while you might have used it to grab batteries for your camera, there’s no way to prove that. So keep the paper—or use a system to digitize it for you so you can at least refer back if needed. We’ve developed an app, The Rockstar CPA Tax Tracker, just for you:
    http://bit.ly/osPj51

2 thoughts on “How well do you track your expenses?

  1. Adam

    I’ve always found it hard to keep track of all my expenses or to even know what I can claim on expenses. I’ve recently changed to a new company of contractor accountants in the UK and they have helped me to keep on top of all my costs as well as what I can claim back from the dreaded tax man.

    Based on my experience (and slip ups with the inland revenue), I believe that every freelancer should have their own accountant. It may cost a bit more, but it provides a lot more safety.

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