A llist of business expenses to track for taxes from my Accountant

I just got off the phone with my Accountant and he gave me some good advice about tracking expenses for my business. It may vary from state to state but the IRS has a great web page that you can reference as to what is deductible and what isnt. It is: http://www.irs.gov/publications/p334/ch08.html#en_US_publink100025401

Ill give you a for-instance: Some of my expenses Im tracking are:

Mileage (55 cents a mile)
Education (trip to Fabbulas)
Liability Insurance
Advertising
Business cards
Supplies/Materials/Paints
Postage
Office Expenses
Booth Rental
Tent/Signage/chairs
Cost of tax preparation
Business phone
Taxes paid quarterly

We figured my home office is 11% of my home. So based on that:

11% of Mortgage
11% of Homeowners Ins.
11% of Gas, Electric, Water & Sewer
11% of Home repairs, lawn maintenance, etc.
11% of Home improvements

This is just part of the "potential" list but it gives you an idea of what this entails. I keep a book handy and log all of my gigs, the mileage, how much the booth cost was, and how much I made on the gig in it. You should always keep your reciepts. This is a lot of work but come tax time, may be a money saver in the end.

I also get credit for freebies/donated services!

That's pretty much all included in the spreadsheet I made up that is available on my resources page... all ready to use if you want (the link is in my signature.)

And in Canada you can only use donated services as a write-off if it is a gift in kind. If you get ANYTHING in return, like a sponsor acknowledgement you can't use it as a write-off.

I love your spreadsheet, Shannon. Very helpful!

Here is the site from the Canada Revenue Agency that lists and explains allowable business expenses for us Canadians:
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/bsnssxpnss/menu-eng.html

Lori, the CRA doesn't allow us to just claim a certain amount per mile. If we use our vehicle for both business and personal use, we have to calculate motor vehicle expenses in a fairly complex way, to prorate the use. But when I was self-employed previously, I did it and it wasn't that hard once I got used to keeping track of all the vehicle expenses as well as the mileage.

Shannon, I remember reading that you got a car wrap. Does that mean that you are able to just claim all your vehicle expenses without having to prorate any, because it is a moving billboard? I wonder what the rules are on that, like how much of the vehicle has to be covered with advertising for it to count.

My vehicle is registered commercial/business use and I pay business use insurance rates. I give my accountant my log, my gas/repair receipts and he takes care of it for me. I think it is pro-rata based on my business/personal usage.

how do you do/keep track of the mileage thing?

im sorry ive never done taxes in my life!...this is my first job ever! I dont think im going to do it until next year...but i want to be ready when the time comes haha ....ive been reading here and there about the business and the taxes and all but the mileage is something i just dont get! lol so Help please!

-thanks!

You can buy mileage logs at office supply stores. Basically you record your odometer readings for every trip and all expenses.

I do mine differently as I just never remember to write in a log... I keep a spreadsheet of all my business use trips and the total kilometers for each then take my odometer reading Jan 1 every year, total the business use, the rest is personal use, calculate the ratio of busines to personal use, and give than to my accountant.

He says it should hold up to an audit as I have all the receipts and invoices that match the trip log.

Abril, in the U.S you can only track and claim mileage for gigs if you have a dedicated home office. That means that you have a room that has only business related things in it, and no personal objects like a bed, clothes, tv, etc. I have a spare bedroom that has all of my office and painting supplies in it, but it also houses a spare bed which means I can not claim that I have a home office, and therefor can not claim mileage on my taxes. Basicly, your first daily commute to your office is not tax deductible, so if you are going from your house to a gig that is your first trip. If you go from one gig to another then you can count the second trip. If you have a dedicated home office then technically you are "going to the office" at home, and from the office to a gig is tax deductible. Does that make sense? It's good to keep track anyway, even without being able to claim it all though.

Yes! thank you!

Like i said..i just want to be prepared when the time comes to do my taxes...so i will start looking into that..thank you!

Amanda wrote:Abril, in the U.S you can only track and claim mileage for gigs if you have a dedicated home office. That means that you have a room that has only business related things in it, and no personal objects like a bed, clothes, tv, etc. I have a spare bedroom that has all of my office and painting supplies in it, but it also houses a spare bed which means I can not claim that I have a home office, and therefor can not claim mileage on my taxes. Basicly, your first daily commute to your office is not tax deductible, so if you are going from your house to a gig that is your first trip. If you go from one gig to another then you can count the second trip. If you have a dedicated home office then technically you are "going to the office" at home, and from the office to a gig is tax deductible. Does that make sense? It's good to keep track anyway, even without being able to claim it all though.

If you remove the bed and replace it with a pull out sofa would it then be considered an office?
I suppose that wouldn't be ethical however

I think you can have a couch, as long as it isn't accompanied by a tv. Some peoples offices do have couches. My accountant (who is also my mom) keeps telling me to move the bed out of the spare room so I can claim it but I dont have anywhere else to put it, and it does get used. Oh well.

Amanda wrote:I think you can have a couch, as long as it isn't accompanied by a tv. Some peoples offices do have couches. My accountant (who is also my mom) keeps telling me to move the bed out of the spare room so I can claim it but I dont have anywhere else to put it, and it does get used. Oh well.

haha ...probably replace that with the sofa..you can still use that as bed..and claim the space as office...i wish i had someone close to guide me do the whole taxes thing without thinking im just wasting money! and who will actually try to help me out instead of just "do my taxes"

In Canada I'm not sure if you have to DEDICATE a room to the home based business... My accountant only asked for square footage of the house that is used for my business purposes out of the whole square footage. And then prorates the utilities.

I actually do have a dedicated office (a bedroom on the main floor) and a studio in the basement. The basement studio incorporates a kitchen/bath and seating area...

Abril-check out the Small Business Administration, SBA.gov and SCORE.org. They have both been very helpful to me and you can get FREE help with taxes, advice, mentoring...anything business related. Good luck to you!

Isn't that the bed you have mommies lay on for belly painting? Jes' wonderin'

Amanda,
You could get a super nice couch sleeper with the money you would save.

Ahhh, a fouton couch/bed! that solves that problem!

Super helpful and timely !

Thank you

I have one whole wall in the family room...but that probably does not count! I don't doubt that I take up 11% of my house with my face painting stuff!

amen!

Ditto on the amen! I get spread out all over the house and then the sinks in the bathrooms and kitchen will have paint splatters everywhere. My desk has splatters all over it and my lap top even gets pain on it as I watch youtube videos and paint at the same time. I think I use more like... about 70% of my house. My pillow has even gotten paint on it due to late night practice and being too tired to get it all off.

I am in Canada and the way I track and report my car/gas/mileage is I buy a purse calendar and whenever I go anywhere for business, I mark my km. At the end of the year, I tally up the km and mark them down as .52/km.
My brother in law is a CA and he is the one that does this for me. I have never had any issues. If I am audited, I have receipts and work contracts to co-inside with all the mileage booked.
Hope this helps.

Shannon, I took an intro to book keeping course here in Ontario last fall, they did say that if you have ANYTHING in the room other than work, or if the room is ever used for other purposes, it can't be claimed as an office. Eg A dining room that is taken over by office but still has a table and is used on Holidays, or the spare bedroom that is an office except when guests are over...

If your clowning and doing characters too along with your face painting you can file as an entertainer then you can take off everything you get inspiration from books, mags, newspapers, cable or satellite tv, movies. So how can they say you can't have a tv in your office? How else but from you guys and our wii can we figure out how to paint Mario, Sonic, and Zelda.