How can I keep better tax records this year?

Question

I'm single, self-employed, doubtful and scared of audit if I claim a home office, travel a lot for work (car, plane, hotels), have to eat on the road a lot, but usually alone, have a 401(k), member of professional associations, medium credit card debt, minor bits of work equipment, moving from Los Angeles to New York this year.

I welcome general hints but especially interested in links to more complete resources.

I have heard that receipts under a certain amount aren't necessary. Just record the amount.

I have heard that a home office needs to be architecturally separate and reserved only for business use if it's a home office, and I've heard that claiming a home office is a guaranteed flag for an IRS audit.

Answer 1

If you don't want to spring for software you can use excel to keep track of expenses and revenues. A home office does not have to be separate. You basically take the percentage of square feet you use of your home as your office and that percentage is what you will use to calculate how much of your electric bill, rent or mortgage, telephone, internet access, and other home expenses you can deduct for you business. You need to keep mileage records as well as any receipts while traveling. Any money that is spent on your business needs to be kept in some form. You can also deduct for your vehicle, depreciation on equipment, and moving expenses. Just keep everything that pertains to your business and I would take it to a credible CPA or someone with an Accounting degree and they know how to interpret the IRS code. I would do this especially if your business is growing and actually making money and if you expect to hire more employees. This way you will have a business relationship with an accountant that can help you with payroll as well. Good luck

Answer 2

I suggest that you use either Quicken or Quickbooks. Quicken can be used for business and personal finances, Quickbooks is generally just for business.
I would suggest also that you keep as many receipt es as possible. You should work with a good CPA to get you set-up for what you will need to keep track of for you business as well as your personal tax items. Your business account should be separate from your personal accounts.
If you spent money to earn money deduct it. I would not worry about an audit unless you are always losing money. An audit is concerned with your having reported your receipts and expenses properly, it is not an evaluation of how efficient you run your business. The travel and meals needs to be receipted as much as possible, you need to show who, what, when, where and why the expense was incurred.
Since you are moving I would keep track of the items you have while in CA and the items you have while in NY. You will need this in order to prepare the two state returns. Moving expenses go to the state you are moving to not the state you are moving from.
Good Luck.

Answer 3

Depending on what tools you already have the biggest thing I would recommend is keeping track of your receipts. Go to Walmart and buy a file filder that is portable, fexible and allows you to sort by expenses. I would also recommend using software like Quicken or Microsoft Money so you can really track things. It's isn't hard to do, and I think once you get into the habit you'll find it takes very little effort.

Answer 4

Put your checking and credit cards on Quicken or MS Money and save your receipts.

Answer 5

i have a daycare in my home and i am able to claim 1/3 of my rent on my taxes so you might want to look into that when the time comes,keep all your receipts even co-payments for docs visits,everything.