Are you a Self-Employed Entrepreneur? Here are some Schedule C tax tips for you

If you are self-employed or own a Sole Proprietorship, the IRS expects to see a Schedule C which shows all your income, and all your expenses which leaves your profits for which taxes are figured.

Good, clean, record keeping is an absolute must. Record every dime that comes into your business, income, and every penny that goes out, expense. The best way to accomplish this is by separating bank accounts from your business and home. Do not mingle your accounts in hopes of remembering which transactions are for business versus personal. If everything is recorded, there should be no problem at tax time.

Income, the money coming into your business, includes all cash, checks, credit and debit card transactions including the value of trades, barterings, or collectibles. If payment is in a non-traditional form, then careful explanations are expected to be recorded at the time of the exchange showing the current value of goods or services.

Expenses are the cost of engaging in your business. Everything you spend money for, in order to keep your business going are deductible from your income. Large or small expenses add up, so being thorough and recording every expense is well worth your time and effort. Little things like business cards or pens and pencils for office use. Advertising and of course more expensive items like computers or printers, chairs, tables, software or internet expenses and utilities are all expenses. Depending on the type of business you’re involved in will determine how extensive your deductions become.

There are areas that should be of particular importance regarding your business deductions. In our current “gig” economy, auto expenses are of primary concern. For example, if you are an Uber or Door Dash driver the value for each mile driven can be deducted at an IRS determined rate. For 2023, the rate was 65.5 cents per mile and for 2024 the rate has been determined to be 67 cents per mile. Because miles driven are required to be carefully reported, both Uber and Door Dash provide apps that help track your mileage. During periods of high inflation, sometimes the mileage rate is one rate the first six months of the year and a different rate the last six months of the year.

Your tax professional will know the application of the different rates.

For a more complete set of rules you can download the Schedule C and instructions by going to irs.gov and click on “forms and publication.”Questions? Call Michael Imlah, Beaverton Tax Service: 503-332-0938