Tax Tips Archives - Amy Northard, CPA - The Accountant for Creatives®

Check Tax Refund Status

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How to check your state and federal tax refund status.

You (and/or your accountant) has put blood, sweat, and mostly tears into getting those darn taxes finished, and by some miracle, you get money back!! If this is you, you may be wondering when that money is going to hit your bank account.

Our friends at the IRS have created this handy dandy tool where we can check on it (instead of bugging them).

Check Federal Tax Refund Status

To check the status of your federal tax return, visit  You will need the following information to check on your return:

  • Social security number or ITIN
  • Your filing status (single, married…)
  • Your exact refund amount

Check State Tax Refund Status

Want to check your state tax refund status? Click on the state below and follow the instructions to check on your refund status.

Everything you need to know about 1099s

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What’s the deadline?
The 1099 deadline (specifically 1099-MISC) is January 31, 2018. You must send all 1099s to the recipients AND file them with the IRS by this deadline. This is a change from previous years, so take note!

Who receives one?
If you paid $600 or more to an unincorporated person or vendor for services related to your business using cash, check, or bank transfer (ACH) you need to issue them a 1099-MISC.

What if I paid them with PayPal or credit card?
If you paid an unincorporated vendor using PayPal, credit card, or other third party merchant, the payment service is responsible for reporting this information (usually by issuing a 1099-K). You don’t have to do a thing!

What if I paid them with the PayPal Friends and Family option?
If you paid a person or business via PayPal’s Friends and Family option, you will need to issue 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.

How do I file a 1099-MISC?

  1. Make a list of those who meet the qualifications for receiving a 1099-MISC.
  2. Send them a W-9 to collect their Taxpayer ID Number, address, and business name.
  3. Create an account with
  4. Create a payer which will be your business information.
  5. Create the payees. This is everyone who needs to receive a 1099 (Use W-9 info).
  6. Enter the amount of “nonemployee compensation” each person received.
  7. Choose the option to have the 1099 mailed to the recipient. Huge time saver.
  8. File the 1099s after carefully reviewing them.

What happens if I’m supposed to receive a 1099, but don’t?
You should report all income received, whether you receive a 1099 or not. No need to file one for yourself or delay your tax filing if someone doesn’t send you a 1099 or sends you a late one.

What happens if I’m supposed to issue a 1099, but don’t?
You may have to pay a penalty to the IRS. The amount of the penalty is based on when you file the correct information with the IRS and the contractor.

Do I have to prepare a 1099-Misc for a foreign contractor?

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Do I need to issue a 1099-Misc to foreign contractors?

As a virtual accountant for creative business owners, I see a lot of really impressive remote employer/contractor relationships.  As my clients continue to grow their business, they often time seek virtual assistants and other talented contractors abroad.  One question that always comes up around tax time is “Do I have to prepare a 1099-Misc for a foreign contractor?“.

Answer: If the foreign contractor is not a U.S. taxpayer, and all of the contracted services were performed outside the U.S., a Form 1099 is not required. Instead, you will need to ask the contractor to complete a Form W-8BEN.  The Form W-8BEN certifies that they foreign contractor is not a U.S. taxpayer.  The Form W-8BEN is never submitted to the IRS, however it needs to be held in your files in case of an audit.  If you are audited by the IRS, the Form W-8BEN will support your reasoning for not issuing a 1099.

The Tax Benefits of 529 Plans

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Tax Benefits of 529 Plans

The Tax Benefits of 529 Plans

What is a 529 plan?

A 529 plan is a saving plan which provides tax advantages to encourage saving for college. 529 plans are sponsored by states, state agencies, or educational institutions. There are two types of 529 plans: Prepaid Plans and College Savings Plans.

Plan Types

  • The 529 College Savings Plans grows tax-free and can be withdrawn tax-free for educational expenses like tuition, room and board, and required textbooks and computers.
  • The 529 Prepaid Plans allow you to prepay part or all of an in-state public tuition, locking in the tuition at time of payment.

Your 529 plan investment will grow tax-deferred, and qualified withdrawals are federally tax-free and state-tax exempt in many states. 34 states offer tax deductions or credits on contributions to 529 plans. Click on the map below to see if your state offers a tax deduction or credit.


Can I pick a 529 plan in a different state?

Yes, however your state’s 529 plan may offer incentives to win your business. For instance, in the state of Indiana taxpayers can earn a state income tax credit equal to 20% of their contributions to a CollegeChoice 529 account, up to $1,000 per year. Since I’m a resident of Indiana, I will receive a $1,000 state income tax credit if I were to contribute $5,000 to the Indiana 529 plan. These incentives are state specific.

Can I use my 529 plan on non-educational expenses?

No, if you withdraw money from a 529 plan and do not use it on a qualifying eligible college expense, you will be subject to income tax and an additional 10% federal tax penalty on earnings.

Who is eligible for a 529 plan?

Any U.S. taxpayer can open a 529 plan for a U.S. Citizen or Resident Alien, including themselves. There is no limit to the number of plans you set up, and there are no income restrictions.

Whose name should I put on the 529 plan?

Whoever purchases the 529 plan is the custodian and controls the funds until they are withdrawn. You, as the custodian of the plan, will ultimately decide when the funds are released and what they are used for. You will set a beneficiary when you create the plan, however there is no penalty if you decide to change the beneficiary in the future.

Can I write off my car payment and expenses on my taxes?

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Auto expense deduction for small businesses

Unless you only work out of your home office, there could be a whole lot of driving going on for your business. All this driving can really rack up the expenses and if you track them thoroughly, you’re eligible to take a very helpful deduction.

The auto deduction will help reduce your taxable income, which will reduce the tax owed at the end of the year. The downside: it takes a little work to track.

There are a lot of rumors going around in Facebook groups about deducting the entire cost and expenses associated with a vehicle because they use it occasionally for business purposes. First, let’s clear up the confusion on this topic. This is a direct quote from the IRS website:

“If you use your car in your job or business and you use it ONLY for that purpose, you may deduct its entire cost of operation. However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use.”

The key term here is ONLY. Now that we’ve cleared that myth up – here’s the skinny on the two options available when it comes to deducting car and truck expenses:

Option One
The first option is pretty obvious.  You start by tracking the actual expenses you incur to operate your vehicle for business purposes – hey, running out to get more latte’s won’t cut it!  You need to keep tracking only things like gasoline, oil changes, lease payments, insurance, registration fees, tolls, parking fees, tires, repairs, depreciation, and garage rent.  You can handle that, right?

This option does not include down payments or monthly payments for a car loan but you can deduct the business use of your lovely vehicle’s expenses listed above. So, grab a pencil and paper or your favorite spreadsheet program and let’s get a handle on how much is for business use.  It’s all in the tracking of your business versus personal trips and that can be figured out by tracking your mileage.  Stick with me and I’ll explain the details of how to do that in a minute.

Option Two
If you aren’t into all that tracking, don’t fret it.  Here is that second option I told you about:  Just take a deduction based on your mileage. One caveat… If you want to use the mileage deduction, you must use it in the first year of business.  After that first year, you can then switch between the two methods.

In 2017, the deduction is 53.5 cents per business mile.  The frosting on this cupcake is that you can also add on parking fees and tolls.  For example, you’re meeting a client at a local coffee shop downtown. You can count the miles to and from the coffee shop as well as money paid to the parking meter.

What should you keep track of on your mileage log? You’ll want the trip’s date, destination, business purpose, and mileage to and from your starting location. You can keep a log book in your purse or car, but I’ve found that using an app on your phone can be just as effective because it uses your phone’s GPS. You just tell it when to start recording mileage and when to stop.  My favorite app is MileIQ and it works on Android and IOS. Use the code ANOR697A and you’ll receive 20% off their annual plan.

All of this may seem like a lot of work, but it’s worth it in the end!

P.S. Want to join a Facebook Group that provides reliable tax advice from yours truly, a Certified Public Accountant? Consider joining my Be Your Own CFO program:

Interview with an CPA for Creative Entrepreneurs

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Accountant for Creative Entrepreneurs

For this interview I partnered with Idealust, a business coaching resource to help photographers and other creative entrepreneurs grow and scale their small businesses.

Q: Creative people and solo-preneurs tend to be very good at the creative stuff, and less pro-active about the financial stuff. What advantages do creative entrepreneurs access when they hire an accountant? At what point are they losing more money than they’re saving by not hiring an accountant?

A: When a creative entrepreneur takes the plunge and hires an accountant, they can stop stressing about the accounting and tax side of their business and put more energy back into the part they love – the creative part. An accountant can remind creatives about tax deadlines, assist in the case of a stressful audit, and be a resource for you to ask questions to as you continue to learn more and more about accounting and tax.

There’s a point where you’re spending so much time researching and trying to understand tax laws, deductions and that’s the time to call in an expert. A question, like “How to deduct business mileage?” may take you several hours to research, and it may take your accountant a few minutes to email you an explanation.

Q: As a CPA you see a side of things that creatives would love to ignore: the realities of financial decisions. What are the most common financial mistakes or omissions you see creatives making?

A: In my work with Creatives, I find that it is a common mistake to not plan for the tax due from the income their business generated during the year. By working with your accountant throughout the year and not just when your tax return is due, a plan can be made so taxes are paid in periodically or money is saved in anticipation of the taxes being due.

Q: Are there best-practices that you see creatives commonly neglecting or ignoring concerning tax time?

A: It’s easy, even for me, to want to put off the bookkeeping and focus on income-generating activities. The problem is that this makes tax time incredibly stressful because not only will you likely have a large payment due, you also have to set aside a huge chunk of time to organize a year’s worth of income and expenses. By setting aside an hour each week, or a couple hours a month, to get your bookkeeping squared away, you can see how your business is performing throughout the year and you won’t have an overwhelming amount of work to do at the end of the year.

Q: A lot of creatives do what they love on a part-time basis. Are there exemptions or write-offs they could be taking advantage of that they might never have considered?

A: There are a couple deductions some creatives forget to take or are nervous to take in fear they will cause an audit. The first is “car and truck expense.” This can be calculated by adding up all auto expenses and deducting a percentage of the total amount or it can be simply calculated by tracking all business miles you drive. It takes discipline to track each business trip and the business purpose, but with the help of smart phone apps, some of the hassle has been lessened.

The other deduction is for the home office. I hear time and again that the creative entrepreneur would rather just not take the deduction because they’re nervous it will cause an audit. With more and more people working for themselves and working from home, this deduction does not raise eyebrows with the IRS like it has been rumored to in the past. It requires a little work in tracking home utilities, repairs, and other home expenses, but it will be worth it if you’re able to lower your taxable income.

Q: What kind of tax savings are your clients commonly missing out on by not maximizing retirement savings?

A: There are several retirement savings options available to self-employed creatives. SEP IRAs, SIMPLE IRAs and individual 401(k)s all allow you to skip the tax on contributions made now, and pay the tax later, when you’re ready to use it in retirement. Depending on the size of the contribution, this can be a sizeable tax savings. ROTH IRA plans don’t get a tax break when you make a contribution now, but instead, you are able to let your money grow and use it in retirement, tax free! Either way, if you aren’t putting any money away, you’re missing out on the opportunity for tax savings.

What kind of tax savings or other benefits can creative entrepreneurs realize by incorporating? At what point should they be considering incorporation?

If a creative entrepreneur is considering becoming a Limited Liability Corporation and they are the only member, they would be considered a “single-member LLC” and would be treated, for tax purposes, exactly the same as a sole proprietor. If making the switch to an LLC, there is a benefit of limited liability protection. This means creditors can’t come after personal assets of the owner to pay the business’s debts.

When considering becoming an S Corporation, there are several factors to look at. As an S Corporation, tax savings occur when the business is producing enough income to pay the shareholder employees a reasonable salary, pay expenses, and have enough left over for distributions. While the salary is subject to payroll taxes, the distributions are not.

Q: Are there other ways creatives could be more proactive in their finances?

A: Take time to learn about the business side of your business. It’s the less glamorous side of being a business owner, but the better armed you are with information, the better you’ll be at making decisions for your business. For example, thinking about hiring someone? Knowing the difference between an employee and a contractor can have a huge impact on how you report their earnings and whether or not you are required to withhold employment taxes. While it can be necessary to hand work off to others (bookkeeping to a bookkeeper, etc.) you still want to knowledgeable enough to question the person if something looks odd.

Q: How much should creatives be setting aside in anticipation of tax time?

A: While everyone’s situation is different, I generally recommend setting aside (or paying as a quarterly estimated payment) about 30-35% of net income (income less expenses).

Q: Are there online tools, apps, or resources to which you point clients to help them better track and manage their finances?

There are so many great resources out there for creative entrepreneurs. A few of my favorites are:

  • TripLog is a mileage tracking app available for Android and iPhone that will automatically start tracking your trip when you are moving 5 mph or faster. Thanks to this feature, forgetting to track a trip to meet a client, or a trip to Staples to pick up supplies doesn’t happen anymore.
  • Freshbooks, a cloud accounting program, is a very simple program that pulls in your bank transactions. Their app allows you to take pictures of receipts so you never forget or lose one and you can categorize it instantly or while you’re waiting at the dentist office.
  • Xero is another option for cloud accounting and their app, similar to Freshbooks’ app, allows you to manage your business finances outside of the office.

Q: A client just asked you what 3 things she could be doing right now that would make the biggest difference to her at the end of the year, what do you tell her?


  1. Keep your bookkeeping up to date, or hire someone to do it for you. The power from knowing how your business is doing throughout the year, rather than just at the end of the year can be huge.
  2. Make a plan for your money. This includes saving money for taxes, money for retirement, money for expenses, and money for yourself. Finding the right balance will take time but you will learn what works best through experience and a little chat with your accountant.
  3. Instead of putting receipts in a big pile, organize them by month so at the end of the year, if you or your accountant needs more information about a specific expense, you won’t spend hours searching through a mountain of receipts. I put mine in document-sized envelopes labeled with the month but you could also snap pictures and save them in Evernote (another great tool for creatives).

Self-Employment Taxes Explained and Simplified

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A simple guide to Self-Employment Taxes

Self-employment taxes are one of the unglamorous, and let’s be honest, annoying parts of owning your own business. But I have good news for you! Once you get a system in place for taking care of them, it’s one less thing you need to worry about. I’ll explain some basics about the tax as well as how you can make sure you always have money in the bank to pay them.

Let’s get started by talking about what self-employment taxes actually are. The tax is made up of two parts – part 1: Social Security tax (12.4%) and part 2: Medicare tax (2.9%). For 2017, the Social Security tax is on the first $127,200 of earnings (self-employment earnings and employee earnings combined). Keep in mind though, there’s income tax (which varies from person to person) on top of this self-employment tax and there isn’t an employer withholding it for you! Go here for an easy-to-read table if you want to estimate the income tax.

Now that you know how to calculate the self-employment tax, let’s talk about who has to pay it. If your net self-employment income is $400 or more, you will be required to pay the tax. If you fall below that amount for the year, you won’t be assessed the tax.

If you’re looking for a way to save tax, my best advice is to make sure you are taking all of the business deductions you’re entitled to. Some of these commonly missed deductions are: home office, health insurance, mileage and education. Each of these could be a whole article on their own, so I’ll save those details for another day. Just don’t dismiss them because you don’t feel like tracking or you’re afraid of an audit. If the expenses are truly a business expense and you have documentation, you should never fear an audit!

Here’s where I share how to make sure you’ve always got money in the bank to pay both your self-employment and income taxes. Create a separate savings account to set aside your taxes in. Usually moving 30% of your net income (income less expenses) out of your day-to-day checking account is enough to cover the taxes you’ll be assessed. To get a more exact number to save, you’ll want to talk to your accountant so they can take into account several other factors.

Federal and State estimated tax payments that will cover your self-employment tax and income tax can be made quarterly. These payments are optional and only required if the tax due on your Federal return will be more than $1,000 . Each state has their own rules on this, so check with the state’s department of revenue. The Federal estimated payments can be made online at and are due on the following dates:

Quarter 1 – April 15
Quarter 2 – June 15
Quarter 3 – September 15
Quarter 4 – January 15

The due dates may change slightly from year-to-year depending on if they fall on a Sunday or holiday.

Now that you have the tools to plan for your self-employment tax and income tax, hopefully you can rest a little easier tonight!

Bookkeeping and Taxes for Creative Entrepreneurs

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Bookkeeping and Taxes for Creative Entrepreneurs

The three things we’ll be going over today are creating a usable bookkeeping system, what some commonly forgotten tax deductions are, and an easy tax time checklist so you can make sure you’ve got everything you need or your accountant needs for your taxes.

Creating a useable bookkeeping system

Let’s start by going through the steps of creating a usable bookkeeping system. The term “usable” is really key here because if you aren’t using the system on a regular basis, it gets overwhelming and very easy to put off month after month.

I can speak from personal experience here. Just last year, I kept putting my own bookkeeping to the side to work with my clients on theirs. Every month bookkeeping felt like a daunting task because my expenses were spread out in PayPal, a personal checking account, a business checking account and my personal credit card. I knew I needed to simplify my process and stop using personal accounts for business expenses. I got that taken care of and then I started using Quickbooks for my bookkeeping instead of the manual process I was using before. I just keep up the Quickbooks Online window as one of the millions of tabs on my browser and click over to it every couple of days to see if any transactions need to be categorized. By doing this, all I have to do at the end of the month is reconcile my accounts and I’m good to go.

The first step of the process is to open a separate business bank account, then organize your receipts, choose a program to record your transactions, reconcile your accounts monthly and then time to analyze and celebrate!

Open a separate business bank account

If you don’t already have separate bank accounts for your business transactions, this is the first thing you need to do to create a usable bookkeeping system. It makes bookkeeping easier because you aren’t filtering through your day-to-day personal expenses trying to mark what’s business and what’s personal. You already know!

If your business is any structure other than a sole proprietorship, you must have separate accounts. To hold onto the protection that a Limited Liability Company or S-corporation offers, you must treat your business as a separate entity and avoid mixing business and personal expenses.

In addition to opening a business checking account, you may want to open a separate business savings account. I use this account to hold onto money for my quarterly taxes. This way it’s out of sight, out of mind and ready when I need to make a quarterly payment.

Organize receipts

The next step is to organize your receipts. There are so many ways you can do this, so if one method isn’t working for you, switch it up.

Just make sure you follow these two rules:

  • The first rule: keep a copy of the receipt as a paper copy or a scanned electronic copy and remember: bank statements don’t count as a receipt.
  • The second rule: keep receipts for at least 3 years. But, keep in mind that if there are substantial errors on your tax return, the IRS could audit you up to 6 years after you file your return.

For my paper receipts, I’ve labeled 12 envelopes with the months and I use those to stash receipts instead of letting them collect in my purse or get lost in my office. For electronic receipts, I save them to a folder in my email that I’ve labeled “receipts.” With this method, when I’m doing my bookkeeping, I always have two places to check for expenses: either my paper files or my emailed receipts. If you don’t like paper hanging around, you can always scan your receipts and then toss them. Just be careful that you have this information backed up and not stored in one place.

Choose a program to record transactions

Now that you’ve got an organizational system in place for your receipts, it’s time to choose an accounting program. If you don’t have a lot of transactions, you can usually get by using a spreadsheet to record your income and expenses. The downside to this is that it can be a lot of manual work and if it takes too much of your time, you won’t want to do it and then it will be something that gets procrastinated month after month.

If you’ve got more transactions than you’d like to manually type into a spreadsheet, I recommend you check out a cloud accounting program. There are so many to choose from. These are just a few of the ones my clients like to use. Most have a monthly fee and allow you to use their program for a trial period before paying so you can get a feel for what you like.

The nice thing about the cloud accounting programs is that they automatically pull the transactions that show up in your bank account, PayPal account, or several other types of accounts into the program. Then, all you have to do is assign categories to the transactions. Most programs also have a feature where they recognize expenses and assign the transaction a category for you. Then, all you have to do is review it to make sure it’s correct.

If a category you need isn’t listed in their pre-populated list of expense categories, you can always add what you need. Don’t be afraid to make up expense categories.

Reconcile accounts monthly

Now we’re at the second to last step, which is reconciling your accounts monthly.

Think of reconciling like balancing a checkbook. You’re making sure everything that’s showing up in your accounting program is matching what’s on your bank statement. If something doesn’t match, that’s a red flag to you that something was entered incorrectly, a transaction was entered twice, or maybe accidentally left out.

You’ll do this process for any business accounts you have linked to your accounting program.

Analyze and celebrate!

Now that you’ve completed bookkeeping in your new system for a month, it’s time to analyze and celebrate!

As part of your analysis, review your profit and loss statement. This will show you if you’ve made money or not. If you have, congratulations! Now you need to set aside some of that profit for taxes. I usually recommend 25-30% to cover Federal and State quarterly taxes.

This is also a good time to compare your current numbers to your budgeted numbers. Are you on track for your budgeted income?

The last and most fun item on this slide is to pay yourself. The amount and frequency you pay yourself will be different for everyone. Just keep in mind that if you’re a sole proprietor or single-member LLC, any income left after expenses are taxed, not just the money you transfer to your personal bank account.

Now, I just want to take a minute to talk to those people who already have a bookkeeping system in place and they’re ready to outsource. I think this is a great option for people who have done their own bookkeeping for a while and feel like they have a pretty good handle on what the numbers mean. They’ve reached a point where their time can be better spent working on other things within their business, but they still feel comfortable with the numbers side of their business.

Start by asking your friends and colleagues for recommendations. If you aren’t finding anything with that route, a lot of the online accounting programs have accountant networks. You can usually search by location and find someone nearby. When interviewing them to see if they would be a good fit for you, make sure they have some experience in your industry or at least with similar business structures.

Commonly forgotten tax deductions

Now that we’ve gone through the steps of creating a usable bookkeeping system, I’d like to go over three commonly forgotten tax deductions.

They are:

Tax Time Checklist

  • Profit and loss statement (also called income statement)
  • Any assets purchased or sold during the year
  • Auto expense information (mileage or actual expenses)
  • Home office deduction information
  • Receipts for all deductions (paper or electronic)

The first is a profit and loss statement. This can also be called an income statement. This shows the total income for the year, any refunds you issued and all your expenses.

You’ll also need to have a list of any assets your purchased or sold during the year. When you are trying to figure out what qualifies as an asset, remember that they are generally high-cost purchases that will last more than a year. Some examples are a computer, a printer or a camera. Low cost items or items that aren’t expected to last more than a year, like office supplies are considered expenses. On this list of assets, include the date purchased, the name of the asset and the amount your purchased it for. If you sold an asset, list the date it was sold and the amount you sold it for.

If you drove your car for business purposes, include auto expense information. What’s included just depends on which method you choose.

If your business has a profit for the year and you had a home office, include the appropriate home office information based on which method you choose.

The last note is to make sure you have receipts for all the deductions you’re claiming. There’s no need to send the receipts or even copies of the receipts to your accountant unless they ask for them, just make sure you have them available.

Business Use of Personal Cell Phone

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A simple guide to the Cell Phone Tax Deduction

A deduction a lot of people forget to take on their small business taxes is the business use of your personal cell phone.

To take this deduction, you’ll calculate the business use percentage and then multiply that by your actual cell phone expense. There’s no exact rule from the IRS on how to calculate your business use, so use your best judgement. If you have an itemized monthly statement, look back at the minutes and numbers called for business purposes. If you don’t have an itemized statement, it’s ok to estimate. Just be reasonable.

Auto Expense Deduction

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A simple guide to the Auto Expense Tax Deduction

A commonly forgotten deduction on small business taxes is the auto expense deduction. I think a big reason this one is left off of tax returns is that people forget to track their mileage throughout the year so they don’t even want to bother with it.

Let’s go over the calculation of the deduction first, then I’ll share some tips for keeping track of your trips through the year.

There are two methods to calculating this deduction. The mileage method is probably the most commonly used method I see my clients using. You simply add up all business miles driven for the year and multiply the total by whatever the rate is for the year. The standard mileage rates for the use of a car (also vans, pickups or panel trucks) is 53.5 cents per mile for business miles driven, down from 54 cents for 2016. Then, you can add parking fees and tolls to the total. Keep in mind, if you want to use this method in the future, you must use it in your first year of business.

The other method is multiplying your actual vehicle expenses by the business use % of your car. You will determine the business use % by dividing the business miles driven for the year by the total miles driven in the car.

Here is an example of the information you need to track for your trips.

  • Date
  • Purpose of Trip
  • Destination
  • Miles Driven

If you don’t track the miles on your car’s speedometer, you can always use a program like Google Maps to figure out the miles. Don’t forget, you need to record the miles to the destination and home from the destination.

You can track in a notebook, on your calendar, or a mileage tracking app. All work, but the key is to use whatever you choose consistently.

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