Today you decide you’re going to work from a cafe. You get there and realize you forgot your pen. You hop in the car, drive up the road and buy one. You return to the cafe and draft a killer article.
What’s wrong with this series of events? There’s no mention of you tracking your expenses.
But what if the store was only a quarter-mile and the pen was only a buck-99? Is it really worth it?
The answer is yes.
A lot of people have a laid-back attitude toward small sums of money. And when they’re self-employed, that attitude often affects how they track and claim expenses on their taxes. Some freelancers under-deduct their expenses. Others don’t deduct any expenses at all, which is nuts.
I cannot stress enough how important it is to be a stickler about accounting for every cent of every expense you have. You probably don’t realize just how much small expenses add up over the year, especially mileage. But start strictly tracking them and you’ll see.
I used to be an under-deducter. But not anymore. Not since I vowed to work on it and saw how the numbers on my tax return changed. Now, for something as simple as printing a couple pages at the public library, which costs 20 cents in my area, I log it.
When you fail to track and claim your expenses, do you know what you’re really doing? You’re making yourself liable for tax you don’t owe.
The government basically views your business expenses (or the tax-deductible portion) as money you never earned. Why in the world would you want to pay tax you don’t owe?
If you get a tax refund, this may seem like a non-issue. But that’s not that case. You need to track your expenses too because it could earn you a bigger refund.
There’s sometimes when you have to get boss-mode on yourself, and this may be one of them. If you were working for a company, when it came to handling their money you would do it the right way (I assume). Why should you treat your money any differently?
See Also: Freelance Tax Mistakes You Should Avoid
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