Being self-employed could be overwhelming but proper planning you can stay ahead of the game. The expense tracker template was specifically designed for self employed individuals who have no system of keeping track of expenses.
The first step to a successful tax year, in preparation and savings, is getting and keeping organized financially. It is very easy to lose track of expenses during the year. Use templates like the expense tracker template to keep track of your expenses including home office deductions. The expense tracker template uses the same expense categories as the IRS form schedule C. To start using the expense tracker template:
- Get an envelope for each category that applies to you ( see below for categories).
- In front of the envelope write the name of the category
- Use the envelope to sort receipts. Each time you have a business expense, put it in the envelope with the right label for that expense.
- Once a month, enter these expenses in the expense tracker template to see how much you have spent in each category.
This could give you new insights on the business. Rather than waiting till tax time to track profits, you can now use the expense tracker template to track it on a regular basis. Besides, at tax time you no longer need to be overwhelmed.
Here is a list of some categories to keep track of:
- Cost of goods sold: The cost of products you buy to resell. These includes the cost of the materials, labor and any associated overhead.
- Advertising: cost of advertising your business.
- Car and truck expenses: the automobile expenses are calculated using standard mileage rate.
- Commissions and fees: This does not include commissions paid to employees. Any employee compensation such as wages and salaries should be reported on Line 26. This item is commission and fees paid to non-employees, such as an independent contractor.
- Contract labor: In this line item, enter any other compensation paid to non-employees except for commissions and fees.
- Depreciation: depreciation is the way we expense assets. Assets are purchases we intend to use for more than one year. For example, when you buy a computer, you intend to use it for at least 3 years, as a result you depreciate the computer or take the expense each year you are using the asset. The IRS also allows you to take the expense all at once. This is called section 179.
- Employee benefit programs: This line item is for benefits you give your employee except wages, pension and profit sharing plans. These items have their own line. In this item you can include accident and health insurance plans to your employees (not to you), group term life insurance plans and dependent care assistance programs.
- Insurance: this is premiums for insurance paid for various types of business insurance and not health insurance. This includes liability insurance, malpractice insurance, workers compensation insurance and business interruption insurance.
- Mortgage: if you bought your office space, enter the mortgage interest from your form 1098.
- Legal and professional services: these include the cost paid to lawyers and accountants for giving business advice or automating your tax form
- Office expenses: these are expenses directly related to running the business office. These include staplers, pens, ink, paper, toner, paper clips, folders, etc.
- Rent or lease: The cost of renting or leasing office space or equipment.
- Repairs and maintenance: This is the cost of fixing broken items. The expense must not increase the value or life of the item. Big repairs like this are depreciated over time.
- Supplies: Supplies are expenses related to making a product. However, this expense should not be overlapped with expenses in the cost of goods sold line. Supplies refers to those items indirectly related to producing the end product, and are used in small amounts (are not easily traceable to the product). Items that are easily traceable to the product should be included in materials in the cost of goods line.
- Taxes and licenses: This is taxes you pay for payroll or to state tax authorities. It also includes the fees for any professional licenses needed to run your business. Federal income taxes are not deductible. This includes federal estimated taxes and federal tax due on your income taxes.
- Travel and meal: Most meals are subject to 50% deduction. However, meals provided for the benefit of the employer can be 100% deductible.
- Utilities: This is utilities for office space outside your home.
- Wages: wages paid to employees
- Other expenses: In general, any expense that is ordinary and necessary to conduct the business is deductible. Capture all other expenses that do not fit into any of the line items described above.
If you are self-employed, the expense tracker software can be used to get you ready for tax time and keep track of your profitability throughout the year.
Get the template here