Because we are freelancers and most jobs do not take out taxes, when tax season comes most of the time you won't get a return. It's not like a day job where the government takes out taxes every week from your pay and at the end of the year you get it back. Most of the time you will probably owe the IRS money. How much money? Well that all depends on how much you worked and the amount you made that year That's why it's important to keep your receipts.
At the end of the year (or the beginning of the new year), the companies you worked for will send you a tax form only if you made $500 and above. If you worked for X Company one time in 2011 and only made $400, they are not obligated to send you a tax form and you don't have to claim that in your taxes. But if you worked for X Company 10 times and made $4,000, then by law they are entitled to send you a tax form (make sure they do) and you must claim it in your taxes. If it goes unclaimed, I promise you it will come back to you the following year to bite you in the butt.
You will get multiple tax forms so make sure to keep them in a safe place until every single company you worked for sends you a form. Once you have them all in your possession, that's when you take it to your accountant. Discuss with him/her what would be best for you (depending on your status). Are you married, single, kids, no kids, do you want to file joint or separate etc.
Any and every time you make a purchase for your kit, for a client, for a production, you must keep all of your receipts. This can help your taxes when filing for a return (if any). You purchased these things to get the job done, therefore it counts as part of your work expenses. Type of receipts to keep:
- Transportation - If you took a train, a bus, a ferry, a plane or even if you drove there and filled up your tank.
- Makeup/Hair Products - A can of spray, a simple eyeliner or a sponge.
- Literature - Any magazine or a book you purchased for reference or to help you create a character.
- Food - If you were on the job and you bought an iced coffee or a sandwich.
It is best to keep your work expenses separate from your daily life/home expenses. It's just easier for you and everyone else at the end of the year when you have to calculate everything. If you go to Target and buy a lamp and a mascara, have the lamp on one receipt and the mascara on another.
Now lets say you worked a job in December of 2011 but your paycheck doesn't come in until February 2012 (and it's dated 2012), you will not get a tax form from that company until early 2013. Technically it doesn't count as a 2011 job. Because the date on the check says 2012, that's the year that it applies to.
I recently just found a wonderful app for my iPhone called Shoeboxed. I wish I would have found it sooner, would have definitely made my 2011 receipt tracking a lot easier and more organized (I admit, I lost some receipts along the way). This lovely app keeps all of your expenses tidy and tied in a little bow. All you do is take a picture of your receipt, press submit and the lovely shoeboxed team does the rest (they input the date of purchase, amount, name of store...all that jazz). Once the receipt has been processed they send you a friendly email pretty much letting you know that they're awesome and that everything is finished. Best part? The app is FREE. You can email yourself reports and even log on from a computer. Here are some pics I captured from my iPhone app.
Now at the end of 2012, I don't have to calculate anything. Shoeboxed does it for me and I have less stress and more time to do other things...like shopping!
NOTE: After some research (and a very good question from a blog reader) I read in the reviews (not in the info section of the app) that you get up to five free receipts per month. You will then have to purchase additional receipt storage at .50 cents a pop OR $9.95/month. Personally I think it's worth it (I only shop when I need).
Please note that this is how I do my taxes. Different states have different laws.
If anyone has any questions at all, I'm always more than happy to respond and help to the best of my ability.