Tuesday, April 10, 2012

Taxes First-Timer

With less than 10 days to spare I finally got around to filing my taxes. Since this is the first time I've ever filed my own taxes (thanks Mom) and the first year I was self-employed, I really had no idea what to expect. I did know 2010 was the last year I'd ever get a tax return, and from now on I'd only be paying come April 15. I'm happy to report the whole process when rather smoothly and with all my deductions I'm under what I previously thought I'd be paying! So, in a nutshell, here's what I learned:

1) Keep all your receipts.  This seems obviously, but really, it isn't. I had a bucket full of receipts and thought I was going overboard for sure. But in all reality, you can write it all (okay, within reason – you can't write off a new boat) off!

2) Keep a mileage journal in your car.  I'm kicking myself for not keeping better calculations of all driving I've done for work in the past seven months. At first I was doing an excellent job (if I say so myself), but the errands to Michaels, Hancocks and a bazillion thrift stores never quite made the list. I've invested ($1) in a little notebook that sits in my driver side car door to keep track of all these miles. It will work!

3) File your taxes quarterly.  I didn't quite rack in the dough last year, and I didn't officially start working for myself until May so this wasn't quite necessary for me. But there are (I'm positive) lots of things I could have written off that I just didn't remember, couldn't locate the receipt or wasn't completely sure would have mattered.

4) My desktop folder.  There are lots of things I paid for online (Etsy bill, airfare, program fees, etc), but didn't always have the means to print the receipt. Instead, I kept a folder on my desktop labeled "Tax Write-offs" where I kept PDF files, screengrabs or JPGs of the bills. Saving the environment and making tax write-offs at the same time...winning!

5) Earned Income Tax Credit.  Yes, you have to be kinda poor to be eligible for this. But if your adjusted gross income is less than 13,660, you will probably qualify. Even if you're not sure, check it out, you might be pleasantly surprised!

6) Depreciation.  I'm working off my computer from 2008, yet I received a deduction for the lessening value of the machine (as well as my phone and camera) since they are used 100% for my business.

And last, but not least, keep all your receipts (see #1).