This may come as a surprise to you, but your accountant does NOT want your shoebox full of receipts at the end of the year! I can't tell you how many clients I've had walk through my office with - what looked like - every single piece of paper they could find from their desk, filing cabinet, recycling bin, child's homework, magazine clippings, old mail, latest issue of Women's Health...okay, now I'm exaggerating, but you get the idea.
Here's what your accountant wants to see:
I had this much revenue $xxxxx.xx (Hopefully, you have lots of x's ;-)
I purchased the following, qualified items for business expenses: (a deductible business expense is anything that is ORDINARY & NECESSARY for running your business.) Also, remember from last week, that you need to have paper or digital copies of receipts for these items!
- Cost of Goods Sold (prints, actions/presets, templates - here is a definition: the cost of anything that goes into producing a finished product that you sell)
- Operating Expenses - Office Supplies, the Internet, Telephone, Advertising, Studio Rent, Website Expense, etc.
- Large Purchases - these are items that you will use over a longer period of time: computers, cameras, lenses, studio props, etc. Your accountant needs to know the date of purchase and the cost of the item to be able to properly depreciate it (that means spreading the cost out over the life of the asset)
Your homework this week is to put all of these numbers together in an easy-to-read format such as a spreadsheet - Google Sheets is wonderful and free!
More to come next week! Stay tuned. We promise that if you follow these simple steps, this could be your easiest tax season yet!