What to Do If You Weren't Tracking Your Business Expenses in 2018
If you’re self-employed, deducting business expenses like mileage, lunches with clients, software, and so much more, can literally save you thousands of dollars at tax time. That’s because you only have to pay taxes on your business profit, which is your business income minus any of your business expenses. Anytime you deduct a business expense, you’re essentially lowering the amount of money you’ll be taxed on… and putting those savings right back into your pocket.
Tracking business expenses throughout the year is the best way to manage your deductions. When you record your expenses as you pay for them, you make sure you don’t miss out on any savings. Plus, it makes filing your taxes a lot simpler and faster because you have all of your business expense records in once place.
I Wasn’t Tracking My Business Expenses; What Now?
If you weren’t tracking your business expenses throughout the year, you’re not out of luck. With some extra work, you can still track down those savings! Here’s what to do:
1. Get to Know Common Deductible Expenses in Your Line of Work
In order to be deductible, a business expense must be both ordinary (commonly accepted in your trade) and necessary (helpful and appropriate for your business). Some common expenses most 1099’ers can deduct include:
Cell phone costs (if you use your phone for work)
Business licenses or certifications
There are also expenses that are unique to different types of self-employed work. For example, rideshare drivers can deduct the water bottles and mints they keep in their cars for passengers. Use our guide to identify common expenses in your line of work.
2. Track Down Proof of Your Business Expenses
Once you’re up to speed on the types of expenses you can deduct, it’s time to track down which of those expenses you spent money on during the year. Remember that the IRS requires documentation that shows the amount, time, place, and purpose of every expense your deduct. This is where receipts really come in handy.
Stride tip → Keep any business receipts for at least three years after you file your taxes in case you’re ever audited.
If you don’t have paper receipts, you can still deduct those expenses, but you’ll need to do some digging:
Cross reference your itemized credit card statements, your calendar, and your business records to find proof of business-related transactions, like coffee with a client or a monthly Spotify subscription.
Don’t forget that many expenses, like your phone, utility, and health insurance bills, are often recorded online; log into your different accounts to find when and how much you paid throughout the year.
If you also forgot to track your business mileage during the year, we have a few tricks up our sleeve, like using old maintenance receipts to find past odometer readings. Read this guide for more tips.
Want a Headache-free Tax Season Next Year?
It’s never too late to start tracking your business expenses! Our free app Stride Tax makes it simpler than ever to find deductible expenses, take pictures of receipts, and track mileage for bigger savings at tax time. Plus, it automatically prepares an IRS-ready expense summary for your easiest tax season yet.