Few people would call preparing your taxes enjoyable, but there are several ways to make the process less stressful at the end of the year. Keisha Rondeno, certified public accountant and managing principal of Keisha L. Rondeno, CPA in Houston, offers these tips to help you have a better experience.
Know Your Deadlines. If you are an independent contractor, you’re required to pay estimated quarterly taxes on your net income on January 15, April 15, June 15, and September 15.
At the end of the year, independent contractors must pay any remaining estimated taxes and file their taxes. When you file depends on your business structure: S-corporations and partnerships file on March 15, while sole proprietors, LLCs, and corporations file on April 15.
Remember Your W-9s and 1099s. If you paid an independent contractor more than $600 this year, they must give you a signed W-9 form so you can give them a 1099 form before the end of January.
In a perfect world, you should record your information and the money going in and out on a weekly or monthly basis.
– Keisha Rondeno
Keep Track of Your Vehicle Expenses. Track your mileage throughout the year. Write down starting and ending mileage every time you drive for business. Showings, client meetings, and even potential client meetings count. Document your gas purchases, vehicle repairs, new tires, and registration—all of this may be partially deductible.
Deduct Home Office Expenses. “Working from your home office, there are expenses on the personal side that you can utilize for tax purposes,” Rondeno says. Rent, utilities, insurance, and repairs may be partially deducted from your taxes.
Your home office must be a dedicated workspace. You cannot deduct your children’s playroom, but you could if you had a dedicated space in that room where you only worked on real estate.
Save Those Restaurant Receipts. Through December 31, 2022, you or your business can deduct 100% of your food and beverage expenses at restaurants as long as you or the business owner is present when the food or beverages are provided, the expense is not lavish under the circumstances, and the meeting is with a client or prospective client. “Make sure you have a receipt for the meal you purchased. You have to say who you were with and what the purpose of the meeting was. You can simply write on the receipt, ‘Met with Jane Doe about the property she’s purchasing.’”
The pre-existing 50% deduction remains for buying food or beverages at businesses that sell primarily pre-packed food or beverages not for immediate consumption, such as grocery stores, convenience stores, and vending machines.
Listen to Experts, Not Social Media. There’s a lot of financial misinformation and misleading business advice on social media. Some influencers don’t explain how to implement the advice they’re describing. Rondeno recommends working with a tax professional or CPA who can correctly report deductions.
Keep Up with Your Bookkeeping. “The one thing that would help a lot of real estate agents that I always recommend is the earlier you start gathering your items together, the better. The longer you wait, the more tedious and difficult it will become. In a perfect world, you should record your information and the money going in and out on a weekly or monthly basis.” she says. Knowing where you stand with your finances helps you make smart business decisions because you know exactly how much money you are working with.
If you do not keep up with your bookkeeping and accounting, you tend to fall behind. “The hardest thing is having expenses from February or March and trying to remember what they were for in October or November.” When you fall behind, you are more likely to miss deductions you could have taken.