Are You Keeping Track of Your Expenses?

Many solopreneurs start their business as a sideline initially. They may have a regular job but they are doing extra work on the side, possibly doing something different or something they love. Pretty quickly they realize that “hey, I could really make this into a business”. Recordkeeping is key no matter the size of the business.

It is essential to keep personal and business expenses separate from the start. According to the Internal Revenue Service, 35% of audits of small businesses are triggered by the commingling of personal and business expenses on the business owner’s tax return. I worked with a client recently who had just started a business part-time and I helped him setup his books. When reviewing his expenses, I found where he was paying business expenses personally (which would cause a loss of a legitimate business tax deduction) as well as paying personal expenses through the business (which is a definite no-no). I advised him on what expenses are deductible and showed him how to record them correctly. If you are new in business, make sure that you have an accurate bookkeeping system and that you are recording the business expenses correctly.