Most people starting a home service business have little extra money for anything more than just the basic supplies required to run their particular service. Even the most basic accounting software can be overwhelming to someone new to tracking income and expenses for tax purposes. As long as you realize that handing everything over to an accountant at the end of the year will cost you anywhere from $250 to $800 for a basic business filing, in addition to your personal filing fee, there’s nothing wrong with it. But, if all you’ve made from your new business is $600 to $1,000.00, guess who got all your hard-earned money.

Take heart. There is a simpler way to handle this odious task and you may even discover that you can file your own taxes at the end of the year. Yes, it can be done. You’re a basic service business, without all the bells and whistles that Donald Trump or Bill Gates have facing them at year’s end. What you do have in common is that every one in business files the same Schedule C, before adding any supplemental forms, such as, depreciation, royalties, dividend income, etc.

Keeping track is really not difficult, if you understand that you only need to keep totals for those Schedule C line items that you actually use. And, of course, hang on to any receipts to back up your information. Use a good spreadsheet or a simple accounting software program and create categories for those line items, only! Then, at the end of your business day, make entering the new expenses or income part of your closing down routine.

You will learn the categories you specifically use very quickly and will start marking each receipt and check stub, automatically – for the rest of your business life! One word of caution. If you purchase a variety of items from a super store similar to Wal-Mart, you will have to separate the business and personal items. The smart thing would be to do that the very day you make your purchase. A pocket highlighter is ideal for this purpose.

Of course, once you have created categories for your major Schedule C line items, you can sub-categorize them willy-nilly, if you want, to make really fancy reports that will give you a sense that you are doing great things. The following chart should help.

MCRP © 2005

Income: Salaries Create a SubCategory: For each separate source of salary. (Any Payment where taxes are taken out for you and you get a W-2 at EOY) Examples: ABC-DayJob1 Type: Income Subcategory. (Click radio button) EFG-DayJob2 Type: Income Subcategory. (Click radio button) BookContract2 Type: Income Subcategory. (Click radio button) MajorJob3 Type: Income Subcategory. (Click radio button) MCRP © 2005

Income: Other Create a SubCategory for each and every separate Other source of gross income that you receive a 1099 from at EOY. Examples: (break them down, if you want to keep track of where your money is coming from. You can have as many as you wish. MyEditing MyCopywriting MyProofreading MyWorkshops MySeminars MyQueries MyBooks, MyWhatever (You get the idea. When you get really comfortable, you can actually create sub-sub-categories within these, but that’s only if you want to keep track of individual payments from clients. For instance, you could have the sub-category Editing. You can make sub Editing categories like: Editing: Subcategories: ABC Company Power Maker.com John Doe But, that can become a lot of work, after awhile, and there are other ways to get the information. Put these names in the description area and you can get reports from this source.

Expenses: (To match IRS Schedule C) Monthly Liabilities: Pre-paid Items, Loans, Long-term) If you really want to keep track of these items per specific jobs, you can create an income category ABCClient, then each expense item can have a separate subcategory for ABCClient. It’s easier if you are using QuickBooks®, but It’s very workable in Quicken®. Your Invoices should have a breakdown of your services, so you don’t want to bog yourself down here. Expenses: You will have most of these categories already available in Quicken®. But, say you want to track postage charges for certain services: Editing, books, queries. You would create a subcategory under Office/Postage, which is Line 18 on Schedule C, Subcategory: MyEditing It will show up on your “check” description line as: Postage L18:MyEditing If you want to follow a particular client’s postage expenses, you would create a subcategory under Postage L18:MyEditing Sub-Subcategory of Postage L18:MyEditing: ABCClient It would look like this: Postage L18:MyEditing:ABCClient and would track all the postage expenses for this client, separate and apart from other postage fees, but would still go to the Schedule C Line 18 total.