Taxes, Taxes, Taxes

So how do you all keep track of your business expenses? Do you save receipts or deduct standard mileage costs? What are some tax deductions that I can make which I haven't yet thought of?

Here are a few I've gathered:

GPS purchase
Insurance premiums
Paint supplies of course
Telephone bills
Internet service costs
Fuel for work related trips
The computer and printer purchase
Website fees
Marketing supplies (biz cards, promo materials)
Photo printing costs for menu boards

Any other ideas?

If you have receipts for lunches with more than just you, if you mention business related stuff or it's a potential client..you can deduct it.

Any 'favors' or gifts you have given to kids/clients.
Hair supplies (clips and spray and or tie backs), Mirrors, table and chairs, Other makeup (lip glosses, mascara with disposable brushes, etc), Coffee/tea you might have in your booth or other consumables.

Business Licencse renewal/start up fees. Any tents or power supplies you use outdoors during events.

If you want to deal with the hassle, and store paint or have supplies in your home or meet with clients, you can deduct that square footage you use for your 'business' as a percent of your mortgage.

This will be my first year to do taxes for Facepainting for last year...but when I had an office space I also deducted plants for decorations, and art.
I also had a mini fridge I used for water bottles I gave away and deducted that and a 'candy jar' for clients to help themselves to treats.

I can't think of anything else. Some of these you probabaly already have covered under one of your titles...but wanted to add them jic! Every little bit helps!

I finally have they hubby's W-2, so need to get started on this myself!

The spreadsheet on my Resources page might help. It categorizes most expenses.

I am afraid I am going to have to claim a nice profit this year, even with deductions. It's so depressing! Being in a service industry is hard, because you can't make deductions for the blood, sweat and tears you put into your business, and that's the majority of my investment.

On the flip side, I'm very happy to have made some money with this business, when most businesses lose money their first several years. And heck... I love what I do so I shouldn't complain...

Shannon Fennell wrote:The spreadsheet on my Resources page might help. It categorizes most expenses.

Thanks Shannon, this is helpful!

You can deduct uniform costs. Aprons, Special shirts, or anything you use as your face paint getup. I work as a CNA a few days a week and found out I can even deduct the cost of my nursing scrubs too.

Oh, here is a good one I just found out:

You can 'hire' your own children as helpers, up to $5300 per year...you do have to actually pay them, but they don't have to file or pay ss taxes and all that stuff. It'd be a way to get money into their savings account for school down the road, rather than have Uncle Sam take it.

Food for thought

Great stuff! But could you do this as a sole proprietor?

Well, I filed my taxes just a few minutes ago, and by the time I finished my deductions I did fairly well. This year I'll know more what to look for, what to save, and should do even better.

Auto expenses are saving me... my vehicle is registered as business use and is insured for business use so all related expenses are a business expense. Last year my tax refund was almost $5000.

Angie,

I've not looked into it as I'd already filed my taxes for last year and have the money in my hot little hands...well I did..it's mostly 'spent'...but

I believe it's find for a sole proprietor and it's like hiring 'temp help' or something. Since it's a child and they don't have to pay Medicare, Social Security Taxes or any of that other stuff if you keep it under the $5k thing (check as that number can change)...it's treated like an 'expense'. You just need to show that you 'paid' them and that the money didn't just go back into your own bank account.

I opened a savings account for each of my children when they were born and periodically 'stick' money in it for them. I believe you could show 'deposits' made into the account and list what it was for (ie, modeling a new design...helping clean up your painting area...whatever 'job' you hired them for.) If you have a child old enough to 'baby sit', I guess you could write that off to them too.

I'm going to check into this more, as I have 3 boys and definitely would love to make more deposits into their bank accounts for them. They are already doing the work...they might as well get 'paid' for it! ;D

Found this on a "TAX HELP" board for Sole Proprietors:

Question was:

I understand one can hire his/her own children, 7 to 18
years old, to help his/her sole proprietary business. Where
do I show this expense in Schedule C? Is there a special
form to fill out for this expense?


Here are two answers:
1)
If you hire them, you haveto pay them a wage. You need to
file quarterly and annual payroll tax forms, including a
W-2. Then show the gross wages on Schedule C under the
Salaries and Wages line.


2)
If they are YOUR children (natural or adopted), and under
the age of 18, their income is exempt from FICA W/H, exempt
from the company match of FICA and exempt from FUTA and
usually SUTA taxes. Once they turn 18, the next pay, all
that stuff kicks in.

Their earnings are considered gross income, its not
taxed for Soc Sec or Unemployment. On the W-2, enter the
total wages in Box 1. If there was Fed W/H, enter that in
Box 2, and if none, enter "-0-" . Then enter "-0-" in Box 3
and Box 5 for Medicare and Soc Sec wages. Usually, the Box 1
amount goes in Boxes 17 and 19 as state and local gross
income. That's it. You'll need a W-3.

Paying a child is a great tax planning tool, as they can
then open an traditional IRA and exclude all the income up
to the $4000 limit, and still learn about savings and tax
planning. If you pay them more, they can spend their own
money, rather than asking for an allowance, and it is tax
deductible on your Sch C, reducing your income tax and your
soc sec tax. You must be able to justify the pay rate and
hours worked if the IRS asks, and it must be reasonable, and
ordinary and necessary ... such as taking out trash,
cleaning, answering the phone, filing transcribing phone
messages, handling internet requests, designing websites and
updating them ..... etc.

Hope that helps. If you have an accountant I'd consult with them. I usually do my own, but I might look into this in more detail before I start having to deal with issuing W-2 Forms! I love the idea of them having their own IRAs!! Wow, they'd be way ahead of the financial game and retirement funds if they got started this young!

Thanks, this is a really good option for helping to level things out. You're right, my kids are both already working, whether it's modeling for me or helping out at events. Heck, I already have to pay them to use their face these days! I might as well be able to deduct it!

Wow this is incredible topic, and I know my kids will be exstatic to find out about this one. I know this is an old topic, but well worth bringing up again!

I would imagine that conventions and all the expenses that go along with that should be able to be deducted.

Shannon: Do you have to have another vehicle that's considered 'personal use'?

Judy - just log the km used on your personal vehicle as business use.

I racked up 13,000km on my car last year, but kept a log book and realised that 10,000 of them were work related! As long as you're keeping track of everything, you're cool. (This includes not only trips to and from events, but also to Michael's for new supplies, to the bank to do deposits, to the post office to drop off thank you postcards...)

I'm writing off everything relating to the Vegas convention for my 2010 taxes

My accountant told me eating out can be very tricky to claim. You have to be a certain distance from your home before you can claim it. Like when I was at FABAIC I claimed all food costs, but if I hit up a Wendy's after a job 20 miles away; can't claim it.
To claim mileage on your car, you need to write down your starting mileage at the beginning of the year.
Also, write the date & $ amount on all your receipts. Some like Targets fade before the years out & then you have no clue what you bought or the cost.

What if you're going from job to job and you stop for food, even though you're in the 20 mile range?

My accountant hasn't said anything to me about that...yet. Haha. Keep in mind if you train people you can claim that as a business expense as well - if I bring pizza home during a training session, or take them out for lunch after a gig, I claim those.

I've claimed meals when I take my crew out. My accountant has never said I couldn't.

I was bummed when she told me, but she said if I ever get audited, they almost always argue it. I'm just telling what I was told when I tried to claim drive through food while working.

Judy wrote:
Shannon: Do you have to have another vehicle that's considered 'personal use'?

No. I switched from personal use to commercial use when I had the wrap put on my vehicle. You can use it for personal use, you just have to keep a log.

I keep a spreadsheet of all trips and the mileage for the trip. At the top is the beginning mileage for the year as of Jan 1, then I log ALL business trips/mileage. At the bottom the total business use is totalled and deducted from the TOTAL mileage for the year as of Dec 31. Then all car expenses are expensed based on the percentage of business use... say 75% of the use was business, then 75% of all my car expenses are business.

I just give my accountant the spreadsheet with my tax stuff and he deals with it.

Just curious... how much does it cost to have your vehical wrapped? I was thinking about it since I drive a mini-van.

Heather Timmons wrote:Oh, here is a good one I just found out:

You can 'hire' your own children as helpers, up to $5300 per year...you do have to actually pay them, but they don't have to file or pay ss taxes and all that stuff. It'd be a way to get money into their savings account for school down the road, rather than have Uncle Sam take it.

Food for thought

How would you do this?