Wednesday, December 17, 2008

Tax Tips For Digital Entrepreneurs

As tax season approaches, I thought it would be useful to offer some advice on taxes for those who make most of their money as online entrepreneurs. Here are five tips that I’ve found to be priceless in the long run. Hopefully, you can save time and stress with these 5 easy suggestions:

  1. Send in quarterly payments so that you don’t get stuck with a massive tax bill at the end of the year.
  2. Keep all receipts (not just ones that were obvious business purchases), determine “business expense” later. You might be surprised at what you can deduct.
  3. File receipts. File your receipts by the end of the day (trust me on this) in a folder penciled with the current month. If the ink is unclear, make a notation in dark ink somewhere on the receipt.
  4. Log business activities in a day planner. Record the occurrence of any business-related meetings in a day planner in ink, as well as in a digital file. These will help you or your accountant decide whether a particular expense is tax deductible or not.
  5. Keep a spreadsheet. In addition to daily filing of receipts, enter the information in a spreadsheet. If you don’t like or have Microsoft Excel, use OpenOffice. You could also use web-based spreadsheets like Zoho Sheet or Google Docs.
Bonus Tip 1: If you work out of your home, remember that you can deduct a nice amount for utilities (you are heating your home during the day in the winter *so that* you can work).

Bonus Tip 2: Try to keep all of your purchases on a single business credit card (not your personal card). This gives you a backup record in case the IRS comes knocking.

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