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When you first start earning money on your own, one thing that you may find overwhelming or confusing is doing your accounts. Nowadays we can earn money in a huge variety of different ways. We work jobs, we earn money online, or we start our own businesses. Many of us have more than one source of income. But, one thing all of these things have in common is that they have to be recorded and declared on your tax return.
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Before you rush out and waste a fortune on an accountant, so you don’t have to worry, let’s think about doing it yourself. Accounting is nowhere near as difficult as it may seem. Many people manage to do it just fine, and there is plenty of guidance out there if you do get stuck. Let’s take a look at some of the basics to help you get started.
Whenever you make money, even smaller amounts, you need to record it. It’s a great idea to set up some simple spreadsheets. One for your income, recording invoice numbers, dates, amounts earned and who made the payment. And one of your expenses, recording receipt number, amount, who you’ve paid the money too, what kind of expense it is and the date the expense was paid.
Setting up sheets is simple, but you could use a downloadable template if you need help. Separate your sheets into months for greater control. At the end of the year, all you need to do is look at the totals on your spreadsheets before you declare your final income for the period.
To file your tax return, all you’ll need is the total amounts on your sheets. But, if anything goes wrong or the tax office has any questions, they will want to see receipts and records. So, as well as keeping your spreadsheets up to date, keep your paperwork in order. You don’t necessarily need to print them all out if you get paid online. Just make sure you have them with the correct date and corresponding invoice number so that they are easy to find. You also need to record any income that you receive from employment. Using a 1099 form can make this a lot easier.
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Start Straight Away
One mistake people make is not starting straight away. They put off accounting because it’s overwhelming, they don’t know what they need to do, or they don’t think they have to because they don’t earn that much. Then, later in the year when it comes to filing returns they have to track back and try to work it all out. Start straight away and make sure you put aside a little time each week to sit down and record and file what you need to.
Don’t Forget Your Expenses
If you are earning money for yourself, as a self-employed person, you will be able to claim back the tax on any business expenses. Don’t forget to record these as it can end up being a significant saving at the end of the year.
While many people try to avoid using an accountant due to the expense, if you’re not comfortable, hiring an accountant will be much cheaper than paying a fine for doing it wrong so don’t hesitate to do so.
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