Pay Less to Uncle Sam Later by Tracking Your Tax Write-Offs Now

Last week I wrote about how, like it or not, keeping track of tax deductions is a year-round job for freelance writers. Yes, I know. Yuck. Don’t you hate when people are part of the problem and not part of the solution? For that reason, I decided to follow up with a post about what you need to know about keeping track of those pesky deductions throughout the year.

Hang on to Receipts

First, keep receipts or invoices for anything you purchase that could even remotely be considered part of your business. Even if you aren’t sure whether your book on stress management is a deductible business expense, a savvy accountant can help you sort it all out at the end of the year.

If you have trouble managing your receipts, a service like Shoeboxed can be your best friend. This Durham, NC-based company sends you a friendly blue envelope, allows you to stuff all of your paper receipts inside, pays your postage, scans and digitizes them for you, then stores them on the cloud in an easily searchable format. Believe me, at the end of the year, your accountant will appreciate you using Shoeboxed for your receipts much more than she will appreciate you using a box for shoes.

Be Your Own Bookkeeper

Okay, or hire somebody. Either way, keep track of all of your business expenses as you go along. Don’t be like me.  When preparing my 2008 tax return last year, I found myself logged into Paypal eyeballing mysterious transactions from places like “HistoryImage” and trying to remember what on earth they were for. Were they business expenses or had I bought a framed print of a turn-of-the-century preteen bicycle messenger smoking a hand rolled cigarette? (It turns out I had, but that’s a story for a different day.) If I’d taken the time every week or month to jot down my business expenses, I wouldn’t have had to face my entire sordid 2008 internet purchase history.

Expenses such as utilities are also much easier to manage if you record them as they come in rather than trying to search through your bills (and calculate percentages) at the end of the year. You don’t want to let a single business expense slip through your fingers because every expense you record means that you get to keep more money in your pocket at tax time.

Write it Down

As for my own bookkeeping, I started out keeping track of all my business income and expenses in an Excel spreadsheet. If you’re spreadsheet savvy and have few expenses, you can probably get away with simply recording every transaction on your spreadsheet. Just make sure that you note what each expense was for. By the end of the year, you’ll forget why you spent $19.77 at “Rami Campus.”

I would share my own rudimentary Excel template, but my accountant made me promise never to foist such a horrendous document on the world ever again.  I did find a few income and expense tracking spreadsheets online, but all of them would require modification to suit a freelancer’s needs, so I suggest creating your own or surfing around until you find the one that works best for you.

That is, unless you don’t want to bother with spreadsheet creation. As soon as I realized that my spreadsheet was hopelessly convoluted, I moved on to tracking my income and expenses in, a service designed with sole-proprietors just like me in mind. (Full disclosure: is my client, though I was a user first.) A previous FWJ posts covers the ins and outs of for freelance writers, but suffice it to say that is a free online application that helps freelancers easily record income and expenses without the spreadsheet.

No matter what solution seems right for you, be sure that you keep your receipts and record your income and expenses throughout the year. Come tax time, you’ll be glad you plucked all of those juicy write-offs out of business expense obscurity.


5 responses
  1. Phil Avatar

    I would recommend looking into a bookkeeping/accounting program. Like you, I started out with a spreadsheet (Lotus 1-2-3). I went to Quicken for a while, but the base program treated me like an idiot, and could handle payables and receivables — this was before Quicken for Home and Business was introduced. I moved from the spreadsheet to Quickbooks several years ago, using the memo section in various parts of the program (e.g., checks for remibursed expenses) to more closely track items. There might be better programs out there today, and a Quicken-like program might be enough for some.

    Even if you use an outside bookkkeeper or service, I highly recommend learning a little about bookkeeping/accounting. It lets you know if you’re really making money and provides a simple double-check on any outside service you use.

    1. Jennifer Escalona Avatar

      I use as my bookkeeping program. It’s perfect for me because I’m not incorporated and so only have very straightforward income and expenses. It also imports my Paypal, credit card, etc. so I don’t even have to do data entry! (Again, full disclosure: they’re a client, though I was a user first.)
      .-= Jennifer Escalona´s last blog ..My Best Advice to New Freelance Writers =-.

  2. Chris Mower Avatar

    Shoeboxed is a great idea. I’ve been using NeatReciepts for a while and have found it very helpful.
    .-= Chris Mower´s last blog ..A Networking Casestudy with Northwestern Mutual =-.

    1. Jennifer Escalona Avatar

      I didn’t know about Neat Receipts, but will have to check it out, too. Anything that keeps me from using an actual shoe box is a friend of mine.
      .-= Jennifer Escalona´s last blog ..My Best Advice to New Freelance Writers =-.

  3. Chris Mower Avatar

    Shoeboxed is a great idea. I’ve been using NeatReceipts for a while and have found it very helpful.
    .-= Chris Mower´s last blog ..A Networking Casestudy with Northwestern Mutual =-.

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