As a freelancer or independent consultant, it can be tricky to navigate your finances for tax preparation.
Luckily, Tiller Money helps you easily and efficiently collect and organize your financial data in a self-employed tax return spreadsheet so you can hand it over to your accountant in a nice neat package.
In this post, we’ll explore how you can prepare for filing your taxes if you’re self-employed. These tips will also help you out with your personal taxes too.
1. Gather the data for your self-employed tax return spreadsheet
If you’ve been using Tiller Money for a while you may have all of your previous year’s data in your Transactions sheet. If you’re just starting out with Tiller you’ll likely only see three months of data for freelance work.
Never fear! You can easily add your historical transactions to the Transactions sheet with these manual steps. We also have steps for getting the data out of Mint, Personal Capital, and YNAB and into your Tiller spreadsheet.
2. Build a custom category list
Now you have your transactions in your Google Sheet. However, those transactions aren’t super useful for tax prep until they’re categorized. If you’ve been using Tiller a while and have kept up with categorizing your transactions, and know about AutoCat, you can skip to the next section on building a pivot table.
If you’re brand new to Tiller you’ll want to set up your Categories to reflect your business-related expenses and income. You can use this sample category set to get you started and customize it to meet your specific self-employed expense tracking needs.
3. Use AutoCat for Quick Categorization
When you’re happy with how your categories are organized, it’s time to start categorizing your financial transactions. Manually categorizing helps build awareness about your spending and can be a catalyst for change.
Even though it may be considered a business expense, if you’re rudely awakened to how much you’re spending at coffee shops because you have to categorize 200 transactions as “wifi access” it might encourage you to stay at home for cup o’ joe a few mornings a week.
But, if you don’t want to take the manual categorization route, and you need to categorize a year’s worth of data quickly, install AutoCat, our Google Sheets Add-on.
AutoCat allows you to build a custom ruleset to automatically categorize your historical data and automate the categorization process as new transactions hit your Transactions sheet.
Read and watch more on getting started with AutoCat here. To prepare for self-employed tax filing the best workflow is to sort your Transactions sheet by the description and pick out the recurring descriptions, add them to the AutoCat sheet, assign the correct category, and then run AutoCat.
Repeat these steps until you’ve covered as many recurring expenses as possible. You can use the amount and account criteria to fine tune your rules and likely cover 95% of your existing transactions.
When you’ve created as many rules as possible to automate your categories, you can filter the Transactions list by the Category column to review which ones are still blank and quickly do those by hand. Boom! Categorization for last year is done and it likely took you less than half an hour.
4. Build A Pivot Table to Organize Your Self Employed Spending and Earnings
Now that you’ve got your data organized and categorized you can start to gather the insights your accountant will need.
Build a pivot table from your Transactions sheet to get a view of your spending for each month in each category. In-depth instructions on building a monthly spending pivot table are here, but the basics are:
- Select all the data in your Transactions sheet.
- Create the pivot table from the Google Sheets Data menu.
- Choose a category for the rows, month for the columns, and the amount for the values.
At this point, you could stop and share this Google Sheet with your Accountant and you’d likely be 90% of the way through the previously grueling process of organizing your self-employed tax return spreadsheet.
Some additional questions your accountant might have may relate to how large your home office is, how many miles you put on your vehicle related to business travel, and what percentage of the time you’re using your home internet for work. Information like this is useful in determining the percentage of expenses that can be considered a business expense, and ultimately deducted on your tax return, so you may want to add some notes below your pivot table.
5. Add Tiller’s Yearly Insights Sheet to Your Freelance Finance Tracker
It may also be useful to include Tiller’s Yearly Insights sheet to this tax preparation spreadsheet. It will quickly give you a summary of your income, spending, and totals for all categories for the entire selected year.
You can also use this as a sheet to help you make some estimates on how much more tax you might owe after seeing your total income, spending, and estimated taxes already paid.
Self Employed Taxes Made Easy
Using these quick tips you can get your finances organized in your self-employed tax return spreadsheet in as little as 45 minutes. Since Tiller automatically pulls in your latest transactions and balances every day next year’s tax season will be even easier!