If this is the year that you decided to take the big leap into self-employment and open a freelance graphic design business, then it is important you know how to handle issues related to its income tax liabilities. Since there are many differences between filing your taxes as an individual and filing as a business, following these tips will help you:
Tip: Don't Mix Your Personal Money with Your Business Money
Even if your business only has a few clients at this point, you still need to open up a business checking account to keep your personal money and business money separated from each other. This allows you to see your business's banking transactions all in one place and makes filing your taxes a whole lot easier.
Tip: Keep All Business Expense Receipts in One Place
Every time you spend money for your business for things like a new laptop, design software, or office supplies, then those expenses are deductible on your business's tax return. In general, the more deductions you have, then the less money you will have to pay the tax authorities. For this reason, you need to save all of your receipts in one place so your accountant can review them for proper deductions.
Tip: Keep a Driving Log for All Business Travel in Your Personal Vehicle
If you do a lot of driving to meet with clients for your graphic design business, then you will be pleased to learn that all of your mileage is deductible on your business's taxes. In fact, even your last-minute trips to the office supply store are deductible.
The best way to track all of your mileage is to get a small notebook and each time you get in your car for a business purpose write down each of the following:
- the trip's reason
- the date/time
- the location
- how many miles you drove
With this written record, all your tax accountant needs to do is tally up the miles and deduct them on your business's tax return.
Tip: Speak with a Local Certified Tax Accountant for Information About Industry-Specific Deductions
Finally, since tax laws for small business owners are continually changing, you should consult with a local certified tax accountant about any industry-specific deductions your graphic design business is eligible to receive. Meeting with an accountant when you open for business is the best time, because it allows them the chance to tell you what documents they will need from you come tax time.
Contact a professional like Matthew S. Abrams, CPA to learn more.