If you run your business as a “sole proprietorship,” your fiscal year ended on December 31 – which means the countdown is on until your date with the tax man. Are you ready?
Staying above the pile of paperwork is something a lot of freelancers struggle with, especially when it comes to tracking expenses during the year. Sound familiar? Here are some tools to help get last year's documents in order, and maybe make this fiscal year just a bit easier to manage.
In the past, oDesk has provided a lot of solid tax tips for freelancers. For example, you should:
Mark off a business-only space. If you work from home, designating a certain room of your house as your office can allow you to deduct a portion of your home expenses, calculated by the size of the room as a percentage of the house's total square footage. Keep in mind that the IRS requires the room to be used "exclusively and regularly" for business. You can refer to this IRS page for more information.
Create a paper trail. Whether it's stacking your business receipts, filing every bill or tracking any medical expenses, make sure you have a record of anything you might be able to claim or deduct when it comes to tax time.
Consider professional help. If you have a hard time wrapping your mind around the numbers, consider getting professional help – for example, an accountant or tax preparation software. These resources will help you get your documentation right; especially if this is your first year as a freelancer, a professional can really help you make sense of everything.
Some of this advice is tried and true. But is there anything new that might make the paper trail seem a little less like a landslide?
Expense-tracking tools for the app-friendly freelancer
Shoeboxed: If you have a smartphone in your pocket and a random assortment of receipts in a box at home, Shoeboxed could be your new best friend. With their free app for Android or iOS – which does not require an account – recording expenses is as easy as taking a picture. And that box of receipts? For a fee, Shoeboxed will look after that for you, too – just mail in your documents using their prepaid envelopes, and they will scan and categorize them for you.
Receipt Bank: London-based Receipt Bank also offers to take that box of paper and turn it into something you and your accountant will love. Like Shoeboxed, Receipt Bank has a free app, but please note that this app does require an account.
Lemon: If you want a better way to manage your paper and electronic receipts, Lemon might be for you. This newer start-up will give you a Lemon.com email address; send electronic invoices to this address and they will be filed with receipts you have added using the mobile app. They will not enter your paper receipts for you, but the service is free – with premium options on the way – and you can run as many receipts as you want through the app.
One last piece of advice: Confirm how long you need to hold on to all these newly organized documents. For example, in Canada, small businesses need to hold onto records for a minimum of six years and obtain written permission to destroy records before that time is up.
There are new expense-tracking apps coming out all the time. Have you used any? Share your own advice in the comments section below.