“Ah, yes… working for myself! No one constantly telling me what to do. No more accounting department making out my checks. Wait… That means that I have to pay myself and pay my own taxes?” Take a deep breath, my…
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Can I deduct Starbucks as a business expense? Answer: You cannot deduct your Starbucks, that is a personal expense. If you use your business bank account or credit card to purchase your drink, you’ll need to code it as a…
Can I deduct clothing that’s used by my clients in photoshoots? Answer: You cannot deduct the clothing that you (the photographer) wears, however if you buy or rent clothing for a special shoot, you can deduct those “props” as a…
Can I deduct donations of my time to charitable organizations? Answer: No, you cannot deduct the value of your time or services. If you are donating your time to a nonprofit, you can deduct you mileage and any out of…
Is the $25 tax deduction limit for gifts per person or couple? Answer: The $25 limit is per person, for the year. If you are giving gifts to clients (who are a couple), each person could qualify for the $25…
Question: Can I deduct the computer I bought last year, if I didn’t start my business until this year? Answer: You will be able to deduct the cost of the computer, but you will need to figure out the market…
On your profit and loss statement (income statement), the payments that you make to yourself are not expenses. When you pay yourself, these transactions are called owners draws, and they will show up on your balance sheet. These transactions will not impact your bottom line profit, which is why the profit/loss on your income statement is different than the amount in your bank account.
How do I track mileage for taxes? Answer: I recommend creating a spreadsheet and putting in all of the meetings you traveled to over the year. You can download my IRS compliant mileage tracker below, or create your own spreadsheet…
You do not have to issue the contractor a 1099. PayPal is considered a third-party merchant and they are required to issue their own 1099 forms, called a 1099-K. If you pay a person or business via PayPal’s Friends and Family option, you will need to a 1099-MISC to them. When you use this method to transfer funds, PayPal assumes it’s a non-business transaction and doesn’t include it in their 1099-K.
Question: If you’re a single member LLC, how do you record paying yourself? Answer: You can record this an owners’ draw from your business. This is not an expense. You can write yourself a check, or just make a transfer…