Tracking and recording business income and expenses that meet IRS record-keeping requirements can be a duanting and stressful task.  This self-employment organizer will help guide you through this process in a step-by-step process. 

How to Use this Organizer
Our goal is to prepare a tax return that accurately reflects your business income and all legally allowed deductions.  This organizer helps us meet this goal by:

1. Asking questions IRS and state taxing agencies require us to ask.
2. Informing you about important record-keeping requirements.
3. Allowing you to submit required accounting records and tax documents to us.
4. Giving you the opportunity to provide additional information you believe we need.
5. Providing space for you to ask tax questions you would like your preparer to answer for you.

We encourage you to take time to carefully review and answer all questions in this organizer.  Where indicated, please attach or otherwise deliver requested documentation and records.  You can stop and save your progress, then return to this organizer at a later time.

Record-Keeping Requirements
The IRS enforces reporting and record-keeping rules required by federal law.  All businesses are required to maintain income and expense records.  Record-keeping requirements are described in IRS Pub 583 Starting a Business and Keeping Records, which we encourage you to read. 

Generally IRS requires you keep two kinds of records for all business expenses you incur or pay:

1. Proof of the expense - such as a receipt or log, and
2. Proof you paid the expense - such as a cancelled check, bank statement, or credit card statement.

If you have questions about recordkeeping requirements or need guidance on how to prepare your records prior to delivering them to us, please schedule a Business Consultation or Intake Interview.  with our staff.

Categorizing Business Expenses
IRS requires businesses to categorize expenses. Personal living expenses should never be included or mixed in with business expenses.  Examples of business expense categories identified by IRS include:

• Advertising, promotional, and marketing
• Depreciation and amortization
• Wages and salaries
• Rent - Buildings (not home office)
• Rent - Equipment
• Interest on loan funds used for business purposes
• Travel
• Meals
• Entertainment
• Auto
• Repairs and maintenance
• Continuing education to maintain or advance knowledge required for your business

Personal expenses
Personal expenses are not deductible as business expenses, although certain personal expenses may be deducted on Schedule A, or claimed as a tax credit.  Examples of personal expenses that should never be included as business expenses include:

• Charitable contributions
• Mortgage interest
• Property taxes
• Commute expenses (auto, bus, tolls, parking)
• Education to qualify for a new profession, such as obtaining a college degree
• Meals, including meals eaten while you work

Business Use of Home
Expenses related to business use of your home should not be included with business expenses.  If you used your home for business, you will need to provide information about expenses you pay to keep up your home.  We ask for these expenses in the Business Use of Home part of this Organizer.

Correcting mingling of personal & business expenses
Sometimes business owners will pay a personal expense from their business account, or pay a business expense from their personal account. Care should be taken to properly record these events in the business records, as shown in the table below.

Use of funds	Identify transaction as:
Personal expense is paid from business account	Owner Draw
Funds are transferred from business account to personal account	Owner Draw
Business expense is paid from personal funds	Owner Contribution
Money is transferred from personal account to business account	Owner Contrbution

Most fields in this Organizer are mandatory and must be completed.  You will not be able to submit this Organizer if required fields are not completed.

At the end of this Organizer you can click "Review" to see if you have missed entering required information. You need to correct all RED fields before you can submit.

Occassionally there will be an error message that you cannot see.  If this happens:

1. Use the "Save" and "Email" buttons at the bottom of the Organizer to save your work and email yourself a copy.  
2. Go to your email box and click on the link to reopen this Organizer.
3. Click "Review" again to see error messages.
4. Complete/fix error messages and then submit.

 

Record-Keeping Requirements
It is permissible to keep your business records in a variety of ways, so long as the records accurately reflect business income and expenses. Many small businesses subscribe to online accounting applications such as Wave Accounting or QuickBooks Online.

Online Accounting Applications
If you use Wave, QuickBooks or another online accounting application, please send an accountant invitation to view your online accounting records to: quickbooks@pnwtax.com.

QuickBooks Desktop
If you use the desktop version of QuickBooks, please upload an "Accountant Backup" to your secure portal, or deliver it on a UBS drive to our offices.

Excel, Google Sheets, Numbers or other spreadsheet
We need you to attach an Excel (xls) or csv formatted copy of your spreadsheet. Please do NOT send invitations to login your shared spreadsheet.  

NOTE: If you use Apple Numbers, please export your spreadsheet into a cvs or xls format that can be opened in Microsoft Excel.

Federal Reporting
Federal treatment of income and expenses may vary depending on where your business had income and the type of income it had.

State Reporting
If you did business in more than one state, you will need to provide us with a breadown showing the amount of income earned in or from each state.   Generally, you are considered to have earned income in a state if any of the following apply:

1. You provided services in the state
2. You shipped products a state and had "Economic Nexus" under the laws of that state
3. You had employees in the state
4. You had a business location in the state

Regional Reporting
Some localities impose local income taxes, sales taxes, and/or gross receipts taxes.  If you had income from a locality that imposes taxes, you will need to provide us with the amount of income earned inside that locality.  Examples of locality taxes include:

Multnomah County - Preschool for All Income Tax
Multnomah County - Business Income Tax (BIT)

Metro - Supportive Housing Services Tax

Trimet - Payroll and Self Employment Tax

Lane County - Payroll and Self Employment Tax

County Income taxes are assessed by some counties in the following states:

• Indiana
• Colorado
• Iowa
• Kansas
• Kentucky
• Maryland
• Michigan
• Missouri
• New Jersey
• Oregon
• Pennsylvania
• West Virginia

City Reporting
Some cities impose income taxes on businesses operating inside their boundaries.  If your business received income from services or other operations conducted inside a city that imposes an income tax, you may need to file a return with that city.  Examples of cities with income taxes include:

• Portland, OR
• Louisville, KY
• Ohio, nearly all cities have a tax
• New York, NY
• Washington D.C
• Baltimore, MD
• Kasas City and St. Louis, MO
• Philidelphia and Pittsburg, PA
• Wilmington, Delaware

Business-use of Auto
If you used your automobile for active conduct of your business, you can claim expenses for business use of your vehicle, subject to the following conditions:

1. You must have proof of business use in the form of a mileage log or a written calendar unless you can show your vehicle was 100% business use.
2. You may be eligible to claim a standard mileage rate or claim actual operational expenses for your vehicle. 
3. Commute expenses are not deductible.  Commute expenses are costs you incur driving from your home to your regular place of work and any parking expenses you pay at your regular work location.

Records You Must Keep
Regardless of which method (standard mileage rate or acutal expenses) you use, you must maintain written records to support your deduction.  

Standard mileage rate records you must keep include:

1. Mileage log or calendar showing places and distances you traveled to for your business, and
2. Oil change and service records that show odometer readings taken at the time your vehicle was serviced, and
3. Interest paid on a loan you took out to purchase the vehicle, and
4. Parking and toll receipts, and
5. Records from the purchase or sale of the vehicle

Actual expense records you must keep include:

1. All of the same records required for the standard mileage rate, plus
2. Bank or credit card records showing you paid auto expenses, and
3. Receipts for auto expenses, such as gas, oil changes, maintenance, repairs, etc.

Business such as restaurants, retail sales and manufacturing generally must account for cost of goods sold (COGS).  COGS includes all costs associated with manufacturing a product or purchasing inventory for resale.

You must subtract from COGS, the cost of any items withheld for personal use.

 

Depreciable Assets

Amounts you paid to purchase a fixed asset that has a useful life of more than one year must be depreciated and should not be included with the cost of supplies and materials.  Examples of assets that typically must be depreciated include:

• Buildings
• Computers
• Equipment
• Fixtures
• Furniture
• Land
• Leasehold improvements
• Vehicles

If you had this type of expense, it needs to be separately tracked and reported on a depreciation schedule.  Information that must be tracked and reported for each asset includes:

1. Description (such as computer model, property address, or other identifier)
2. Purchase date
3. Cost (including delivery and installation)
4. Percentage business use

Asset sales

The following information is needed for any business-use assets that were sold or otherwise disposed of during the year.

1. Description of asset sold
2. Date purchased
3. Prior depreciation claimed
4. Date sold
5. Sales price

You may be able to claim expenses for business use of your home if one of the following is true:

1. You maintain a space in your home that is exclusively used for your business, or
2. You store inventory in your home, or
3. You operate a child daycare business from your home.

Travel Expenses

You can claim costs of traveling outside of the area of your tax home for business purposes. 

Record-Keeping Requirements

Travel expenses must be clearly categorized.  To claim travel expenses, you must keep the following records:

1. Proof of the expense (such as a receipt, invoice or online vendor record)
2. Proof you paid the expenses (such as bank or credit card statement)
3. Proof of the business purpose of the expense (such as a calendar showing how you spent your time while traveling for business.

Categorizing Travel Expenses

Travel expenses must be categorized as follows:

1. Transportation (such as airfare, bus, taxi, train, car rental)
2. Meals and incidentals
3. Entertainment
4. Lodging

If you charged meals, entertainment or other purchases to your room, these amounts must be subtracted from the cost of lodging and properly allocated to their correct categories.

Meal Per Diem Allowance

You can claim the actual cost of meals or you can claim a daily meal allowance.  You can alternate between these methods, for each business trip, however for any one trip, you must claim actual or daily allowance, not both.

For your own travel, you may claim a daily meal allowance instead of claiming the actual cost of your meals.  The daily per diem amount varies depending on the city and country you traveled to.

Travel expenses of employees, you may choose between claiming the actual cost of employee meals and lodging; or you can reimburse the employee a daily per diem amount for meals and
lodging.

Information needed to claim meal per diem

The following information is needed to figure your daily meal per diem:

1. City you traveled to
2. Number of days in the city
3. Departure and return days from home