Recordkeeping and Deductions

As you may remember, I recently partnered up with Making Work at Home Work as a blogger.

Recordkeeping and Deductions
By Mary ByersAuthor, Speaker Mary Byer’s created this program after the release of her book, Making Work at Home Work: Successfully growing a business and a family under one roof, to help other Work at Home Moms (WAHM) conquer some of the struggles that she herself has been through. Mary says, “I feel really privileged that I was able to write this book. I wrote it with Work at Home Moms in mind. There are so many unique challenges about working at home that only another work-at-homer can understand!” I would like to encourage you to explore their website for some great advice and some much-needed encouragement. If you would like to become a Making Work at Home Work blogger, go here.Mary Byers is the author of Making Work at Home Work: Successfully Growing a Business and a Family Under One Roof. You can learn more about making work at home work by subscribing to Mary’s free blog at www.makingworkathomework.com.

The number one rule for moms who work at home is this: Do not mingle your personal and business finances. Open a separate checking account for your business. And, if necessary, secure a separate credit card so that you can keep your personal and business-related expenses separate. Deposit all of your income in the checking account. Pay all of your expenses out of the checking account. When you do, at the end of the year you’ll have an accurate record of income and expenses.

Check with your bank before your open your checking account. They may require proof that you’ve filed a “Doing Business As” form with your local or county government. Your banker may also be able to alert you to other regulations specific to your area.

I personally believe it’s essential to stay on top of your business’ finances on a monthly basis. Though it’s not my favorite chore, I use a simple software program to track income and spending. I can compare this year’s figures to last year’s to find out how I’m doing comparatively as well as monitor my year-to-date performance. There are many easy-to- use software programs on the market (such as Quicken and Quick Books) that make it possible for business owners to track and access their financial data.

In addition to inputting my financial data, I take time to organize my expense receipts each month. It takes less than a half hour to file them but doing so insure that my end-of-year tax preparation will run smoothly. Plus, I’ll have necessary proof if I’m ever audited.

Once your record keeping is in order, you should take the time to learn what’s allowable as an expense deduction for you as a self-employed individual. The more you deduct, the less your profit. The less your profit, the less you pay in taxes. The less you pay in taxes, the more you keep for yourself.

According to the Internal Revenue Service, “To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is appropriate and helpful for your business. An expense does not have to be indispensable to be considered necessary.”

The challenge in determining what’s deductible is that it differs based on your occupation. Day care providers can write off the cost of toys they buy for their charges and a computer game designer can deduct the cost of purchasing competing games for review and critique.

If you’re interested in learning more about deductible expenses, consider picking up a copy of June’s Walker’s Self-Employed Tax Solutions. It’s an excellent resource, as is June’s website at www.junewalkeronline.com. Her blog is worth subscribing to if you’re interested in learning how to keep more of what you make.

Of course, if you’re uncertain as to whether something is deductible, check with your personal tax advisor. And if you don’t have one, get one. I personally waited too long to do this and wish I would have done it sooner.

Here’s how to make the most of your deductions:
Know what’s deductible. Take the time to learn what’s deductible. You may be surprised by what you can write off. For example, authors and playwrights may deduct the cost of the plays and movies they see if they are doing so to better learn the craft of plot, story and character. If you conduct business on the way to or from your family vacation, you may be able to write off a portion of your travel expenses.

If in doubt, ask. This is where a tax reference book or good accountant comes in. While it may be easier not to ask, doing so may well cost you money that would be better placed in your retirement account or a child’s college fund.

Realize that small deductions add up. My bank is 5.6 miles away. With the current IRS standard mileage deduction of 50.5 cents per mile, every trip to the bank for a business related transaction results in a deduction of $2.83 (50.5 cents x 5.6 miles). Last year alone my mileage deduction totaled $1,971. (I record each trip in a mileage log in order to provide documentation for the IRS.) Remember, deductions decrease taxable income, and lower taxable income means paying less tax.

Keep your receipts. Develop a simple record keeping system that’s easy to use. You’ll need to keep your records for seven years after the relevant tax return is filed. (Though the receipts only need to be kept temporarily, you should keep your tax returns forever.)

If you need help developing a working system, get it. Though recordkeeping and taxes can be both tedious and boring, they represent an area in which solo-preneurs can make a huge difference in the bottom line. You owe it to yourself and your family to excel in this area. If you’re intimidated or uncertain in this regard, make a commitment to learn what you need to know–starting today.

To Work or Not to Work: that is the question

Why is it when you actually wake up when you intended all your children wake up 1hour early? That is how my morning is starting off. To make it even better I have thrush (yeast infection on the nipple and/or milk ducts). So my nipple hurts, and I have shooting pains in my breast. But with my treatment DJ and I will soon be back to normal.

When I went to college, I envisioned my 26 year old self to be a career woman, possibly in school getting my doctorate in psychology (Psy D.).  Never in a million years did I imagine having my first child at 21.  After graduating, I searched for a job that would allow me use my degree, while being able to spend quality time with Kaleah. Needless to say I never found what I was looking for and ended up staying home (which was the best thing I could have done). After I had Kiara I started looking for something I could do at home with the kids, while earning some extra money. With reservations I became a Mary Kay consultant, and had very successful start.   Kaleah was 3 1/2, Kiara was 9 months, I was able to work my business 2 days a week with no problems.  I loved my business. Then life threw us another curve ball, DJ.  Through out my pregnancy I really didn’t feel like working, and I really didn’t.  Fast forward to now.  For the last two months I have picked up my business again and things have been great. In fact I’m working on earning my car! 

So whats wrong? I keep asking my self that.  Why do I feel so out of balance?  Don’t get me wrong, I have no problem leaving the kids for a while (trust me with 3 kids I need the break). It has been hard maintaining a non-chaotic life. On the days I do work, I’m running around like a chicken with my head cut off trying to get ready.  Maybe its just me, I know some moms with small kids who don’t have a problem. One might say if you don’t need the money, don’t work. Good idea.

But, on the other hand, I still have the drive and motivation for a career of my own.  Its almost a no win situation. I work, and feel pulled in a million different directions, or I don’t and wish that was.  I don’t know the answer to this question.  But, I do know that the most important job is to raise my children and to be good to Duan. I’m coming to realize that I have so caught up trying to work that I have neglected myself.  The time I should spend on myself spiritually and physically (working out) has been used to work. 

Many woman would argue that in our “progressive” society woman can have it all; the husband, career, and children. In the end something has to give, and most of the time it is not the career that is does.  Usually the one that suffers is the mother who is so over stressed they seldom have true quality time with the ones they love.  I’m not saying that women can’t lead a fulfilled life working and raising children, its just that something in their life is left un-attended (usually the woman).

I would like to think that the purpose of life is not money or the material things it can buy, but the relationships we build and maintain. As get my life back in balance I’m going to keep that in mind.  I need to make sure that I keep myself and my family before any chance to advance my career. With that said I’m going to enjoy the May snow day (Colorado weather is crazy), grab a cup of hot chocolate and play with my children! Have a wonderful day and don’t forget who is really important in your life.

Much Love, Reneca 😉

* I welcome any comments that may help me find the answer!