Keeping track of income and expenses is essential, even if you don't own a business. And if you do own a business, things get even more complicated. There are paychecks to issue, taxes to track, and subcontractors to pay out. All of these details are a whole lot less challenging when you hire an accountant to oversee them. However, it is still important to know a little bit about accounting yourself. Dig into the articles on this website, and you'll gain a better understanding of accounting principles, what services accountants really offer, and the benefits of hiring these professionals to assist with your finances.
Are you going into the potentially lucrative business of building a social media or blogging presence? Modern entrepreneurs have more opportunities than ever before to earn money at home, doing things that they love. But just as with any commercial endeavor, it's important to understand how to stay within the tax rules in order to avoid legal and financial trouble.
So, what should you know about taxes as you grow your branded business? Here are four of the most important things to remember.
1. Report All Compensation. Compensation, as the IRS and your state tax agency views it, consists of anything you received for your work that has a financial benefit. This goes beyond just cash and checks. You'll need to declare the value of gift cards, comped travel or meals, free stuff (over a 'de minimis' amount), products received, or services that you bartered for. Remember that your business is intentionally public and will be available for all to see, so keep your reporting on the 'up and up'.
2. Track Expenses. Keeping track of business expenses is the most important thing you can do to lower your taxes. Expenses for social media businesses and bloggers includes things like technology or equipment used for their business, subscriptions and services, and advertising fees. But it can also include trips in your vehicle for business needs, travel for networking, conferences, and meals with others. Keep records of everything — including the date, amount, and purpose of the expense — and discuss them all with your tax preparer.
3. Don't Rely on Forms. Depending on how you get income, you may receive forms (such as Form 1099-MISC or Form 1099-K) declaring certain income. This is good backup, but don't rely on these outside sources to determine how much you report. These forms will likely not represent all your earnings. In the case of Form 1099-K, they may include duplicated information from other sources.
4. Hire Outside Assistance. Even if you're on a tight budget at first, your business needs help with some financial tasks. Filing income tax forms is one such area, as this can be very confusing for someone not used to business reporting. Work with an experienced accountant or bookkeeper throughout the year, and choose a good tax preparer in the spring. Consult with your financial team before you make financial decisions.
If you follow these four tax tips, you won't have to fear tax time. You'll be growing your social media business smarter and more strategically. Learn more today by meeting with a qualified accountant in your area for income tax assistance.