Tax Time: How to Categorize Expenses

Posted on 3/27/2009 by Julia Dudnik Stern | Printable Version | Comments (0)

As tax time draws near in the U.S.,, the Web’s only free bookkeeping, accounting and tax software service specifically designed for the solopreneur, offers photographers advice on the hardest-to-classify business deductions.

Photographers who have been in business for themselves for longer than a year probably know that business cards and Web-site hosting expenses should be categorized in the advertising category of expenses on your tax returns. However, there are many deductions that are not so obvious.

For example, if you used a Web designer or other contractors, do you classify them as professional services or contract labor? According to Outright, the latter, because professional services are generally used only for legal, accounting/tax/payroll and business consultancy. Outright also reminds you to be sure to have the contractor complete form W-9 and send out 1099s, where appropriate.

If you forked over the money to purchase the latest version of Adobe Creative Suite, do you choose supplies, office expense of depreciation/section 179? Apparently, the latter. Software purchases are a depreciable item, unless the program has a useful life of less than one year—which is relatively rare.

Many are confused by the “other expenses” category of their tax returns. According to Outright, common self-employed expenses that should be placed in this category include ATM fees, survey and research costs, professional how-to books, and miscellaneous expenses, such as unusually large postage/shipping costs not typical for the business.

Developed by formed Intuit employees, Outright aims to be a simple-to-use Web service that helps self-employed individuals, work-at-home people, sole proprietors, micro-businesses and anyone that files a Schedule C tax return manage their business finances. Outright tracks income and expenses and helps its users pay estimated taxes on time. Its key selling point? It is designed expressly for people who have minimal computer skills and hate doing their taxes.

Copyright © 2009 Julia Dudnik Stern. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-461-7627, e-mail: wvz@fpcubgbf.pbz


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