How to Categorize Common ecommerce Expenses on the Schedule C Advertising Capital Expenditures Commissions and fees Don't track Insurance Keep in own category Expenses Included Website Creation Domain Name Registration & Hosting Flyers and Brochures Blog Giveaways Business Gifts to Clients/Contractors Computer Camera Company car PayPal Fees Self-Employment Tax Home Insurance Business Insurance Health Insurance Medical Expenses Home Office Deduction for Home Storage of Notes Website costs are almost universal for small businesses today. While a website serves many purposes, the essential reason to have most websites is to promote the business, so I believe advertising is the most appropriate category. Computers purchases should be capitalized and can be written off as a Section 179 deduction. Small items such as parts and accessories can be written off as office expense. Camera purchases should be capitalized and can be written off as a Section 179 deduction. Vehicles that are 100% owned by the business should be capitalized and depreciated. You do not track self employment tax as it is calculated as a part of figuring your total tax liability on Form 1040. You do however get to deduct 1/2 of your self employment tax from Adjusted Gross Income. Only insurance that you purchase just for your business is deductible on Schedule C. Your standard homeowners or renter's policy can be included with your home office expense on Form 8829 Health insurance is a unique deduction for the self employed. The expense actually is a separate deduction on Form 1040 and Schedule SE. Medical expenses are not deductible on Schedule C,
Business Equipment/goods Gas for Client Visits Home Office Office Furniture Parking Costs for Client Visits Online Tax Prep Fees but rather are an itemized deduction on Schedule A. Use Form 8829 to calculate the cost of using a portion of your home to store business equipment and goods. When calculating vehicle expenses you must choose between tracking actual costs or taking the mileage deductions. You are free to choose the option which gives you the largest deduction. Expenses for a home office are included on Schedule C, but must be calculated separately on Form 8829. Office furniture should usually be capitalized and deducted as a 4562. When calculating vehicle expenses you must choose between tracking actual costs or taking the mileage deductions. Parking costs are then in addition to whichever method you choose to calculate operating expenses. Tax preparation costs are deductible on Schedule A, still it is appropriate to allocate a portion, but not the total cost of tax preparation to Schedule C under the legal and professional services category. Accountant Legal and professional services Not deductible Not tracked on Schedule C Office Expense Lawyer Business Counseling/Coaching Aspirin, etc. Physical therapy for carpal tunnel syndrome "Post-It's, Staples, Pens and other Office Supplies Notebooks Printer Paper Printer Over the counter medicines are generally not deductible. "Physical therapy costs would be deducted as part of your medical expenses on Schedule A." "Many printers today are such low cost, that they can be considered office expense. If you spend significant amounts on a high price printer, you should write it off as a
Business Cards Programs to help business (GoDaddy Bookkeeping, Freshbooks, Shoeboxed, etc.) Necessary Software (Photoshop, InDesign, etc.) Costs Associated with Camera Film Books to help with business Magazines to help with business Subscriptions to Job Boards Zip Drives External Harddrive Data backup Anti-virus for work computer Computer upgrades Computer peripherals" Section 179 deduction like computers above. 4562' 4562' Subscriptions to job boards are only deductible on Schedule C if it is a necessary expense to operate the business. Job board subscriptions that are primarily for finding a new job, should be expensed on Schedule A as job hunting expenses. Other "Cellphone Skype Conferences & Networking Events Professional Group Memberships Public Transport Costs for Client Visits Phone Cards 4562. If a computer upgrade is expected to significantly increase the life of the computer, the cost should be capitalized and depreciated using Form 4562" "The cost of Skype is only deductible if it is a ordinary and necessary expenditure needed to operate your business and is not for personal reasons. Only $5,000 of organization expenses are deductible in the year
Security Monitoring Subscription Publications (NY Times) or Databases (ERIC) required for research Public Internet Access Incorporation/DBA, etc. Postage Post Office Box Storage Fees Groceries for rented office Groceries for home office" you start up a business. Only the cost of groceries that are directly used by clients and employees is deductible. You may not deduct the cost of groceries to provide meals for yourself while working at home." Rent-Other Business Property Returns and Allowances Supplies Travel, Meals and Entertainment Utilities Rented Office Unpaid Invoices Protective Clothing/Goggles "Cleaning and Laundering Service When Traveling for Business" "Internet from home/office Cable or Satellite TV" "Only deduct unpaid invoices if you have included the invoices in gross receipts. If you never reported the revenue from an unpaid invoice, you do not get to deduct the value that was never received." "Only the cost of internet that is used exclusively for the business is deductible. If the internet connection is also use for your home, you can deduct a portion of the cost using form 8829. The cost of cable or satellite TV is only deductible if it is an ordinary and necessary expense needed to operate your business. Even if the TV cost is used for your business you may be required to allocate a portion of the cost if it is every used for personal reasons."
There are some expenses to put in "Other" for tax purposes, but would actually assign to a category in your bookkeeping during the year (i.e. categories not listed on the Schedule C). Then at tax time, the whole category can go in to "Other." For example, Internet from home/office for taxes is recommended as categorizing as "Other" on the Schedule C. But for general business purposes you can use an "Internet" category. Bookkeeping is not just for tax purposes. It's also important for internal business decisions throughout the year.