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Self employment brings freedom and increased financial responsibility. It would be wonderful if everyone could afford a bookkeeper and accountant for records and taxes, however in an effort to cut costs the self employed often find themselves adding these tasks to an ever growing “to do list.” A little organization and planning throughout the year will go a long way in simplifying record keeping and tax preparation.
The first step in becoming organized is to record all financial transactions. If the business is a single handed operation time is of the essence so, we will focus on the simplest methods available. The easiest way to track self employment expenses is to use one debit or credit card for all daily and monthly expenses.
The monthly statement is a perfect record of how much was spent and where it was spent. This makes it simple to categorize business expenses at the end of the year. One account may not prove feasible, but the fewer payment methods available to the business the simpler record keeping will be.
If debit or credit accounts are not available it will be necessary to retain all receipts. These can quickly be stored in monthly or weekly labeled envelopes for scheduled sorting into expense types. Short notes can be written on each receipt for future clarification.
It is customary to provide clients with a receipt and retain a copy for your records. These copies can be the simplest source of business income recording from self employment. Receipts can be totaled on a weekly, monthly or yearly basis. The more often new records are sorted, totaled and filed the less time is involved in the process. Records may be transferred to bookkeeping software for future ease of reference and or hard copies may be stored in simple files.
The record keeping process need not become overwhelming. Daily, weekly or monthly scheduled, short time slots can be considered business appointments necessary to self employment profitability. Setting aside ten minutes at the end of the day, half an hour at the end of the week and one hour at the end of the month will greatly increase record keeping productivity.
The IRS website is user friendly and holds an abundance of free self employment tax tips. For details on sorting expense payments by expense type, refer to schedule C and its accompanying instructions. The IRS also offers a free online small business tax course for individuals. The more informed a self employed person is, the less daunting record keeping becomes.
Article Source: Free Self Employment Income Tax Tips
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