Thursday, November 7, 2019

Organize Your Freelance Career Finances

As a freelancer, you understand that you need to keep an attentive eye on your expenses. Indeed, when you don’t work in an office, it can be difficult to differentiate essential work-related expenses from everyday costs. Typically freelancers track their tech costs as part of their professional activities. Other expenses, such as the purchase of equipment for your home office, can also be added as a deductible amount on your tax return. 
However, for freelancers, the difference between social and professional investments is sometimes challenging to make. Should your recent haircut before meeting a critical client be part of your professional cost, or is it just vanity expenses for your own pleasure? When the lines are blurry, it’s best to stay on the safe side and avoid extensive communication with the tax authorities to justify your choices. 
However, there is room for interpretation. These are the three types of private expenses that can be put under your business activities. 

Do you need to commute to meet your clients? 
If you need to drive extensively to meet your clients and to perform your services, you probably need to consider taking on business car insurance cover to protect your vehicle during your commutes. More importantly, vehicle-related costs are deductible, as long as you can justify that the car is used for your business activities. Additionally, travel costs, such as fuel, parking tickets, and even food on the go can also be listed as part of your professional expenses. In other words, if you don’t use your vehicle outside of to meet with your clients, it’s a good idea to consider commercial cover. 

Are fashion expenses work-related?
Every stay-at-home freelancer can confirm that working in your PJs is the worst thing you can do for your motivation. You need to get dressed for the day to get yourself in the right mood to work. Depending on your career choice, you might need to invest in specialist clothes. For instance, if a corporate company has recently contracted you for a long-term project, you might find yourself forced to buy a suit to blend in the office environment. If the item is required as part of your day-to-day job, you can put it under your professional expenses. However, casual fashion items to feel more confident when you’re staying at home are not suitable for your tax return calculations! 

Do you need a business grocery list?
As a freelancer, you can’t put grocery shopping on your list of deductible expenses. While businesses can maintain a filled kitchen for their staff, as a freelancer, you don’t have the opportunity to claim that food expenses would be work-related. There are, however, two exceptions to the rule. Firstly, if you’ve bought food as part of business travel activities, you can keep your receipts and use them to cut down your taxes. Secondly, if you are inviting clients to your premises – whether you home or a local office that is rented for the occasion – you can also claim your grocery shopping list as part of your business-related taxes. Making a cup of coffee to a client, for example, can become tax-deductible.

As a freelancer, you have to be attentive to the expenses that can change your tax return and the money you owe the IRS. While there are many exceptions, you can, in certain conditions, claim back your car, outfit, and food costs. 

No comments:

Post a Comment

Talk to me!