“Write-offs”—also referred to as “deductions” or “business expenses”—are tax breaks that help you lower your tax bill. If you’re self-employed, you almost certainly have write-offs.
The purchases that you’re making to keep your business running smoothly are considered “business expenses.” You can use those business expenses to reduce the amount of income that you’ll pay taxes on.
Here’s how it works: When you file your taxes, you’ll report all of your forms of income—like W-2 wages, unemployment, and lots of others—on your tax return, including your business income. You won’t be taxed on the total amount of business income that you received throughout the year; you’ll actually only be taxed on your profit.
For example: If your painting business makes $10,000 in a given year, but you spend $4,000 on paint, canvases, and advertising, then your profit is only $6,000. That $6,000 is what you’ll be taxed on.
That’s why it’s important to keep track of all of your business expenses; every time you lose track of an expense, you miss out on a chance to reduce your tax bill!
Tracking expenses can sound daunting, but Found will help you. Any time you use your Found card for a business purchase, the details of that purchase will be automatically recorded in your account so that you can easily deduct those purchases at tax time. We recommend making your business purchases with your Found card as often as possible, so that you don’t miss out on any deductions. Keeping updated expense records through your Found account is a great way to keep your expense documentation IRS-ready.
Any time you record a business expense, your profit will decrease, and so will your tax bill. You can quickly view your current tax bill under the taxes icon, as well as your business profit, in the navigation bar inthe Found app. You can also see the full details of your business profit (or loss) under the “Business reports” tab of your app menu, under “Profit and loss statement.”
Questions about how taxes work when you’re self-employed? Contact us at email@example.com and we’d be happy to help!