How could anyone forget Belgium’s Ikke.be’s amazing Crying Invoices — paper invoices for freelance workers that literally cry like an angry baby when not exposed to light? (Handy if you are not taking advantage of a service like oDesk, which gets you your payment within two weeks of completed work — but I digress.) The fact is, it’s nearly April, and if you are a US citizen that means it’s tax time. If you are not U.S.-based, you should take the opportunity to get your 2010 finances in order and your 2011 on track as well.
Here are some tips to make closing out one financial year and beginning another a little easier:
1. Buy an organizer — one that will fit in your purse, laptop bag or briefcase — for your deductible receipts. For the self-employed worker, these receipts can include everything from buying your cholesterol medication to the cost of painting the home office to the coffee you drank at Starbucks during a Skype conference interview with a potential employer. Keep track of these expenses, by making sure these tiny slips of paper make it home with you. Something akin to a coupon organizer (sturdy envelope-like folders with several sections and plenty of room for stuffing in receipts) should serve you well, and is often much better than cramming them in your wallet.
2. Have a safe place for your deductible receipts once they get to your home office. If you can barely manage organization, get yourself a box — a big one, like a hat box — and drop all deductible receipts into it as the year goes by and that little organizer you carry around with you (see #1) fills up. If you are a little more aggressive in your need for order, I can recommend buying a small plastic (or leather, if you like things fancy) file box. Label pockets or file folders according to the type of expense and drop your receipts in accordingly as the year goes by. At the end of the year, you’ll be so glad you were this organized!
3. Keep track of clients, invoices, work-related bank transfers, and remittance check stubs in one folder or binder. After years of filing for a living in my past life as an office clerk, I came to detest the paper cuts and raw fingertips that come along with filing in traditional hanging file folders — not to mention the way the papers stick out and are so easily set into disarray. Since that time I have embraced the sheer beauty of an industrial-sized three-hole punch and a very big three-ring binder. You label the the binder, you punch holes into documents as needed, you fill the binder accordingly, and you put it neatly on your shelf next to similarly labeled and organized binders. It’s a thing to behold, for those of us who like organization. (Be sure you collect your client’s complete contact information, not just what they owe you — you might need it if they drop off the grid without paying you or without sending you your 1099-Misc.)
4. If you have a home office, keep mortgage or rent invoices along with all utilities and other expenses in another folder or binder. Again, I can’t recommend the three-ring binder approach enough. It is much harder to lose important documents when they are tethered neatly in this way, sitting on a shelf next to your self-employment records (see #3). If you have a home office, practically every expense related to your home is counted, deducted by the percentage of your home that is not your office, and then considered tax deductible. So don’t lose the receipt for the earthquake insurance. Don’t lose the invoice for the air conditioning repair. It all adds up, and you’ll want access to it come tax season.
Once you’ve got your receipts and self-employment paperwork in order, get guidance from a self-employment tax pro (like the tips provided online at JuneWalkerOnline.com).
What online resources do you use for self-employment tax advice in the US or in another country? Let us know in the comments below and if you are a US citizen, please check out the IRS.gov site for self-employment tax documents and articles.