10 Things You Should Keep for Tax Purposes
Posted November 24, 2008 in Business 12 Comments »
With the holidays right around the corner, income taxes are probably the very last thing that you want to think about.
Contrary to how festive you might be feeling, however, now is actually the perfect time to get your paperwork in order for this year’s income taxes.
With everything together and organized by January 1st, you will be able to file your 2008 tax form quickly and (nearly) painlessly. If you are due for a tax refund, filing early can help you get your money back as soon as possible.
So, gather up all those unfiled papers now and start to sort through them. Starting on taxes early also gives you a chance to find or ask for copies of any records that you are missing.
(Note: The post is geared towards taxpayers living in the United States, though others may still benefit. This post does NOT constitute specific professional accounting advice. For help with your particular tax question, consult a tax specialist.)
Here are 10 things you should keep for tax purposes:
- Receipts for office supplies – Generally speaking, office supplies that you use for business purposes are tax deductible. Office supplies can include anything from paper for your printer to postage for your business letters.
- Receipts for equipment. Did you purchase any new equipment for your business this year? If you bought a new computer or a new printer (or other equipment) in the past year, then you may be able to deduct the cost of the purchase over several years through depreciation.
- Receipts for business-related entertainment. If you took a client out to lunch or dinner and if the occasion was business-related, then you may be able to deduct up to 50 percent of the meal’s cost.
- Receipts for business-related travel. If you had to travel to meet with a client or to perform work, then your business-related travel is fully deductible. Be careful, however, automobile and transportation expenses must be split between personal use (which is not deductible) and business use.
- Receipts for professional training. Did you take a training course to expand your business skills this year? Professional development and training is deductible.
- Records pertaining to your use of a home office. Many freelancers want to take the home office deduction, which can also allow them to deduct a portion of the utilities and other home office related expenses. That is fine, but remember that there may be restrictions on taking the deduction if you also use your home office space in a non-business capacity.
- Pay stubs. If you have clients that still use paper checks, be sure to gather up any pay stubs that you have received. U.S. Clients are required to send a Form 1099-MISC if they have paid you over $600 in a calendar year, but many will forget to send the form or are unaware of the requirement. Regardless of whether you receive a 1099 form, you must still report the income.
- Health Insurance premiums. If you are not eligible for health insurance from your employer or your spouse’s employer, then you may be able to take the cost of your health insurance premiums as a tax deduction.
- Record of contributions to your retirement plan. Contributions to many types of retirement plans, such as IRAs or SEPs, provide you with many tax advantages. Check your specific plan to see if it qualifies.
- Record of quarterly tax payments. If you are self-employed, then odds are that you should be paying quarterly estimated tax payments. If you have overpaid on your estimated, then you may be due a refund.
Plus – Last year’s tax return. It is a good idea to review last year’s tax return to make sure that you have not missed anything.
The above is general list of tax information that most freelancers need. Instead, it is designed to give you a head start on your tax planning. It is not intended to be a comprehensive list of every possible document that you might need to complete your income taxes.
About the author: Laura Spencer is a freelance writer from North Central Texas with over 19 years of professional business writing experience. If you liked this post, then you may also enjoy Laura’s blog about her freelance writing experiences, WritingThoughts
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12 Comments
Gabe
November 24th, 2008 at 11:10 amThanks for the great list. I’m always wondering what I need to keep, and what is just becoming more clutter. I’ve been erring on the side of caution and keeping most everything. 2008 is my first year doing substantial freelance work, I’m interested to see what kind of head aches I run into as I file taxes. Hopefully this list will minimize those head aches.
Preston Lee
November 24th, 2008 at 11:18 amThanks for the advice. I’m pretty new to the whole “running my own business” unless of course you count lemonade stands. Articles like these help me to organize myself like i should. I’m with Gabe, but i think better to err on the side of having too much than not enough. Taxes are inevitably a headache no matter what but these tips should help fix that a little. Thanks.
Amy
November 24th, 2008 at 2:46 pmExcellent article. I was actually wondering the other day about health insurance and how it would fit into freelancing. On another note of interest, how does invoices for clients fit into this? We are supposed to be file them away here in Netherlands, I’m still new to it.
Frank Lee
November 24th, 2008 at 3:46 pmThese tips are great for the beginner but anyone who’s been doing this for more than a year already knows all this.
Mason Hipp
November 24th, 2008 at 4:37 pmThis is definitely a great list of tax basics for beginners.
I think (hope) that most of the more experienced freelancers have been doing this. Otherwise you might want to watch your back :-)
Of course, everyone could probably benefit from getting started earlier this year.
Laura Spencer
November 24th, 2008 at 5:41 pmIt’s true that the list is mostly geared towards beginners – although it may also serve as a checklist reminder for anyone who has been freelancing for a while.
I hope that readers find it helpful!
Lee Munroe
November 24th, 2008 at 9:27 pmUseful list for beginners. I remember starting out and I didn’t know anything about tax returns. Although 1-5 could probably be summed up in 1 “Receipts for anything business related”.
Mia
November 25th, 2008 at 9:59 amThank you for the advices!
Laura Spencer
November 25th, 2008 at 10:54 amLee – You’re exactly right. In fact, I suppose one could say “when in doubt, keep it.”
MargaretMontet
November 25th, 2008 at 12:37 pmThis kind of list is always helpful for me since I tend to forget a detail or two from year to year. Seeing this information now is a good reminder to get my stuff together so that I can file early for a change!
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