You know what I’m talking about.
It’s tax season!
(Queue the scary horror music.)
If you’re like me, you’re self-employed. Which hopefully means that you were prepared for this time. If not than I would highly recommend starting now! It’s never too late and you will save yourself a huge headache later.
Filing your taxes can be confusing and nerve wracking. There’s a lot of different paperwork involved plus deductions, expenses, and fee’s. And no one enjoys forking over their hard earned cash to the government. (But we all gotta do it!)
So where do you start?
I am going to gloss over everything you’ll need to make sure your assets are covered and ready for another year of business success!
Now to begin with, as a person living in the United States, you have to file a federal income tax return. And that’s something everyone has to do. It’s where you report your income for the year and if you are a small business owner (a sole proprietorship, LLC or S corporation) then your business income/expenses are also filed alongside this.
And if you’re wondering why that is, it’s because those small business entities I listed above are considered “pass-through” entities which is when your business income/expenses are reported as a part of your federal return.
If you were for example, a C corporation (a multinational corporation like Amazon) then you’re looking at filing taxes separately (which then starts going into double taxation).
As a small business owner in the state of Washington, you also have to file a return via the state. Because Washington state does not have a personal or business income tax, they have a tax structure that includes: a Business & Occupation tax, sales and use taxes, property taxes and a variety of other industry-specific taxes.
Now my state tax information is all based off of Washington state (but you can easily look up your own state online via a quick Google search).
In Washington state you need to file an excise tax return with the Department of Revenue. How often you file this one is based off of how much money you will owe. That could vary from once a year to monthly to quarterly.
And if you’re wondering where all those receipts and invoices you saved from things that you bought for your business come into play, it’s when you do your federal income tax return. Make sure you are working with a knowledgeable tax professional or accountant or CPA to go over all of this.
And trust me, you want to keep track of all those expenses that went towards your business because it’s what will save you a TON of money when you pay your taxes.
Expenses can include a variety of things including: gas/mileage, rent and utilities bills (a percentage can be written off based on how much square footage in your home you’re using as a home office and whatnot), meals (for all those business meetings), books, office supplies, equipment, travel expenses etc. etc.
And if you’re like me, you still owe money for those lovely student loans that got you the education to start this business. The interest you pay on those payments is also deductible.
A great tool that I like to use for bookkeeping and tracking expenses and income is Wave. A fellow photographer/friend of mine, Karlyn, recommended this one to me and I have absolutely loved it.
You can easily connect your bank accounts and credit cards and set it up to record your transactions and categorize them (so labeling ones as things like “Meals” or “Vehicle Fuel” or “Computer Software” etc. When you’re ready you can set it up to print out all the proper reports or download them digitally to take over for tax filing! The best part is that it's FREE to use! So you literally have no excuse to easy bookkeeping.
Hopefully that puts a little bit of your stress at ease.
If not, well, it’s going to be okay! You’re doing a great job. :)
Until next time,