Wednesday, April 8, 2015

Bookkeeping and You

Much of my time in the past month or so has been taking up with sorting through piles of paper and doing taxes. Something I'm sure we all love to do. I got behind this year due to my poor health, but I decided that I'm not going in the direction any more. Losing and not tracking receipts can cost you money by making your income from being self-employed higher than it really was. Every year I try to find better ways of dealing with the paperwork involved with running 2 businesses that my husband has. It is tough. There is a lot to keep track of of the rules are ever changing.

When it comes to selling on line, or having your own business of any kind there are many things that you need to be aware of from the point of your own business being an idea in your head so that you can track expenses and then as you start selling, your income. While you may want an accountant or tax preparer to do your taxes, YOU need to be aware of the government rules  so that you save the proper paperwork to give to your tax person. They can't take a deduction for you is they don't have any paperwork showing that you paid for something.

Over the years on many forums I have seen many people that don't want to be bothered with tracking income and expenses because they don't think they are in a business, this is just a 'hobby' to them. However, what happens when that 'hobby' begins to take up 40 hours a week? It has gone past the point of a hobby and into the realm of being a job or your own business. Treating your hobby as a business from the beginning can help you keep more of your income because there are more deductions available to a business than to hobby income. The best thing to get is a current copy of IRS Publication 334 Read it. Don't understand it? Read it again. I have done my family's taxes for my entire adult life and I still have to read up on the rules and any changes. And yes, it is confusing but it doesn't mean you get a 'get out of jail free card' just because you don't understand the rules. The IRS doesn't care if you don't understand something, they expect you to follow the rules anyhow.

I'm not suggesting that you become an IRS expert, but that you understand the basics, such as what is considered an expense, what is income, and those sorts of things. Read through the Publication 334 paying special attention to chapters 6-8. Copy those pages out and go through them with a highlighter. Many rules are there for multi-million dollar companies and most of us who are making some money on line aren't probably going to get there, but we don't want to miss those deductions that we can take.

Now I'm taking my own advice and going back to my tax forms with 334 to be sure I did everything correctly.

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