It’s the bane of existence for many business owners; often forgotten, and more often procrastinated, it’s time to talk about expenses. Because tax season is just around the corner, we’re sharing how you can easily track your business expenses, so that pile of receipts stuffed in your desk drawer doesn’t creep up on you when it’s time to file.
As of January 2023, payment app providers such as PayPal, Venmo, and platforms like GlossGenius, will be required to report a user's business transactions (defined as payment for a good or service) if they total $600 or more for the year – drastically lower than the $20,000 limit last year. Prior to this, third-party payment apps were only required to send 1099s to businesses with 200-plus transactions or $20,000-plus a year.
What does this mean for you? According to CNN Business, the biggest change will be increased visibility that the IRS will have into business income transactions, “both those that have always been reported by the income recipient and those that haven't been.” In reality, unless you’re evading taxes, the biggest issue that may arise could be some administrative hassles. For example, you could possibly receive a 1099 from your payment provider that overlaps income reported on a 1099 that you may receive for freelance or contract work. You’ll want to keep a close eye on everything that’s coming and going into your business this year to be able to rectify any duplicates. All the more reason you should be keeping track of all transactions with a reliable reporting process.
As we get into the expensing process, let’s first define what a business expense is. In short, an expense is considered any operating costs of your business, and they are tax-deductible.
The IRS states that a deductible business expense must be both ordinary and necessary. Their website states: “An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.”
Tax strategist and former IRS auditor Kenesha Coleman (aka @TheBeautyCPA), shared her simple rule of thumb in our post on making your taxes easier than ever. Her take: If it relates to your business (even partially), deduct it.
"If it's legit, take it! Do not voluntarily overpay in tax because of your fear of the IRS,” Kenesha shared. “... the IRS does not have a malicious agenda to prey on small business owners. They understand that you are entitled to every legit business tax deduction no matter how big, small, or unusual it looks on your tax return.”
As you prepare for your taxes this year, go through all of the expenditures that made running your business possible and make sure you have accounted for each one on your reports. Consider looking outside of your physical workspace as well – even costs such as childcare can be considered a business expense if the care of a qualifying dependent enables you to work!
Other tax-deductible expenses you don’t want to overlook:
Note: As of the 2023 tax year, only 80% of the cost of qualified expenses can be deducted from your taxes.
Whether you’re a pen and paper kind of person or prefer to file your expenses digitally (we highly recommend the latter), there are a few key elements you want to keep track of for each cost: category, date, description, and details of the receipt. With GlossGenius’ Expenses feature, each of these can be swiftly uploaded – including a photo of your receipt – with a few taps.
If you’re currently using GlossGenius and want to take advantage of our easy-to-use Expenses feature, all you need to do is navigate to the “More” tab and then the “Expenses” icon to get started. From there, you’ll be able to track all of your expenses in one place, categorize them, store receipts, and keep an eye on what you’re spending, all at your fingertips.
For monthly expenses, there’s an option to Make Expense Recurring that can be toggled on so you don’t have to repeatedly record items such as rent or insurance. For items that may not be easily categorized, you can simply choose “Other” or create your own custom category within the app by tapping the “+” within the Categories screen.
Tax time is so much easier when you have everything in one place – as a business owner or independent beauty professional, make it a habit to create a simple-to-share P&L report detailing all of the incoming and outgoing funds that you can hand off to your tax preparer when the time comes. With GlossGenius, you can run Sales and Expenses reports for All Staff or individually by Staff Member (for independent professionals on your team), that will be delivered to your inbox in an easy to read document that will make both you and your tax professional’s lives a little easier this year.
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