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How To Clean Up Your Quickbooks Online Account Before Tax Season

I logged into my Quickbooks Online account this morning to get everything ready for this years taxes. I quickly realized that everything was a mess. Expenses were categorized under the wrong things, some things weren’t logged at all, and more than anything – I wasn’t even sure how it was supposed to be organized. While whining, asked my husband for help and ended up with tears down my face out of stress. I kept saying that I wasn’t an accountant. I didn’t start this business to BE an accountant – I CAN’T DO THIS. Once the waterworks stopped, my husband was able to calm me down and clean everything up.

This was my first year using Quickbooks, and as excited as I was, I still didn’t know what I was doing. In the beginning of 2017, I spent time placing my expenses in the wrong categories. I made up categories because I thought it would help me stay more organized. (I made up categories for my vendors, for clip art, etc.) While it is still possible to log everything this way, it isn’t as efficient come tax season. So, after my pity party, my husband cleaned everything up AND prepared me for 2019.

Tax Categories for Small Business Owners:

We file everything through FreeTaxUSA at the end of the year. It is very straightforward and easy to navigate. They break down all of the numbers for small business owners into categories. I have listed their categories below:

Other Income & Returns:
-Gross Sales
-Returns & Allowances

Inventory & Cost of Goods Sold
-Beginning Inventory (from previous year)
-Purchases Towards Goods
-Labor for Goods
-Materials and Supplies for Goods
-Other Costs for Goods

Business Expenses
-Advertising
-Fees
-Contract Labor
-Employee Benefit Programs
-Insurance
-Legal/Professional Services
-Office Expenses & Software
-Repairs and Maintenance
-Supplies
-Taxes and Licenses
-Business Travel
-Utilities
-Wages

What category does _______ fall under?

I took a client out to lunch to discuss their business goals and plans for Q3 last year. Where should I categorize it?” Meals and Entertainment. When you pay for a work outing or meal for you + a client or employee, it should be placed here. If you only paid for your own meal, it does not count as a business expense.

I have an office in my home that I use for business. Can I include that in my taxes?” If your home office is 300 sq ft or less and you opt to take the simplified deduction, the IRS gives you a deduction of $5 per square foot of your home that is used for business, up to a maximum of $1,500 for a 300-square-foot space. You must use the space on a regular basis. I suggest talking to your accountant and refer to the IRS website if you are unsure on the amount you can deduct.

“I design art prints and get them printed through a third party. My business ships the prints we get from them directly to my clients. What expense category should I mark the charge from the printer as?”  This would be under the Cost of Goods Sold Umbrella in the ‘Purchases’ category.

All that being said, I am not an accountant. I, too, get a headache and stressed when thinking about the number side of my business. You should talk with your CPA if you are unsure about anything, but my hope is that this helped you wrap your head around the basics for the upcoming tax season.

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