With tax season looming, many self-employed people and small business owners are starting to sweat their tax deductions. One of the greatest areas of concern year after year is business expenses and receipt capture. In a recent study conducted by the Receipts team at QuickBooks Online, 500 self-employed individuals and small business owners were surveyed regarding their current expense tracking and receipt capture habits.
Questions ranged in topic from what types of deductions self-employed individuals take to how expense receipts are stored and organized to what types of challenges these workers face while trying to keep track of it all.
Of the 500 respondents, 60 percent identified as self-employed, while the other 40 percent indicated they were small business owners. Sixty-five percent of these individuals indicated they have between 1 and 5 employees, while almost 20 percent (19.2) have no employees. A majority of all respondents were single (36.6%) or married (38%) with no children (50.4%) and intend to make a real estate purchase in the next 12 months (50%).
Leaving Money on the Table
Two things became apparent as soon as the data was initially analyzed: self-employed individuals are uncertain what exactly they can deduct and this uncertainty leads to not deducting everything they can. This directly translates to leaving money on the table.
According to the study, more than 50 percent (55.4) of respondents do not deduct all of the expenses they can from their taxes every year. In fact, only 15 percent (15.2) of those that responded stated they deduct 100 percent of what they can annually.
When examining why self-employed individuals don’t take all of their deductions, in addition to being uncertain of what can be deducted, people can’t remember all their expenses (21.8%) and don’t deduct everything because they lose their receipts (17.4%).
While it’s unfortunate that these obstacles keep self-employed individuals from taking all the deductions they could, it’s encouraging that these challenges are easily addressed.
QuickBooks Receipt Scanner is designed to keep receipts all in one place and works fast, so it doesn’t disrupt a busy business owner’s day
Physical vs. Digital Tracking
When asked to describe how they organize their receipts, only 16.8 percent of respondents stated that they keep track of their receipts digitally. That means that more than 80 percent of self-employed individuals are still relying on shoeboxes, coffee cans, file folders and their wallets as a filing system.
However, 20 percent (20.5) of respondents expressed a wish for a better way to keep track of their receipts, while another 8 percent (8.2) said that they spend too much time keeping track of and organizing their receipts.
Similar to understanding what receipts are necessary to keep for tax deductions, it would appear that a lack of knowledge regarding other expense tracking and receipt organization methods is what is preventing self-employed individuals from using a more secure tool.
Uncertainty Breeds Stress
Perhaps the most upsetting statistic revolved around the amount of stress that self-employed individuals feel when it comes to expense tracking and receipt management. Two out of 10 respondents stated that they feel stress related to expense tracking at least once every two to three months, while 13 percent of respondents feel stress on a monthly basis. That means that three out of every ten of the survey respondents are feeling some type of stress related to expense tracking on a fairly regular basis. When combined with the over 50 percent (53.8) of respondents who also feel stress organizing these business expenses, tracking these expenses and receipts are obviously providing self-employed individuals with another layer of stress they don’t need.
The Biggest Struggle
When asked what their biggest struggle was relating to tracking their business expenses, self-employed individuals were able to easily articulate these obstacles in their own words. Of all the responses, an overwhelming number was some version of the following: “keeping track of every expense.”
Other themes that were repeated included:
Work Smarter, Not Harder
Fortunately, digital tools have evolved to help self-employed individuals to keep track of their expenses and receipts. With QuickBooks Receipt Scanner, a smartphone camera becomes a scanner. By taking a photo of the receipt, a digital file is uploaded to QuickBooks. Now, losing a receipt isn’t the end of the world; the digital image will remain and can be used when it’s time to review expenses at tax time.
This functionality directly addresses a set of challenges that self-employed individuals repeated throughout the study: keeping track of the receipts, finding the receipts, and putting the receipts all in one place.
Weird But Necessary
Despite confusion regarding what can be deducted, survey respondents were able to recall some of the more … odd items they have deducted for business-related purposes. Some of our favorite responses:
There were a few other more “colorful” items, but we’ll keep this PG for business purposes.
Methodology
QuickBooks surveyed 500 self-employed people about their business expenses and receipts throughout the US in May 2018. The sample was selected by Pollfish. QuickBooks welcomes the re-use of this data under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium.
Source: https://quickbooks.intuit.com
Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
Join BMFMS on Social Media
Organization is Key
Of course, one of the key elements of any tax deduction is keeping and organizing the necessary receipts. Nearly 8 out of 10 respondents (79.6) stated that they could be better or a lot better at organizing their receipt. Only 20 percent (20.4) felt that they had no room for improvement where organization was concerned.
This margin for improvement leads to a high margin of error as well. Seven out of 10 self-employed individuals (69.8) stated that they lose a receipt at least once per month; while the other 30 percent (30.2) said they never lose receipts.
Plus, many self-employed individuals don’t keep their receipts for the express purpose of using them as a tax deduction. When asked to rank the most important reasons that they hold on to receipts, respondents stated it was in case they wanted to make a return. Tied for the second most important reason were the following: to keep product warranties; to keep track of how much is spent on business and expenses; and finally, to deduct expenses at tax time.
Of course, one of the key elements of any tax deduction is keeping and organizing the necessary receipts. Nearly 8 out of 10 respondents (79.6) stated that they could be better or a lot better at organizing their receipt. Only 20 percent (20.4) felt that they had no room for improvement where organization was concerned.
This margin for improvement leads to a high margin of error as well. Seven out of 10 self-employed individuals (69.8) stated that they lose a receipt at least once per month; while the other 30 percent (30.2) said they never lose receipts.
Plus, many self-employed individuals don’t keep their receipts for the express purpose of using them as a tax deduction. When asked to rank the most important reasons that they hold on to receipts, respondents stated it was in case they wanted to make a return. Tied for the second most important reason were the following: to keep product warranties; to keep track of how much is spent on business and expenses; and finally, to deduct expenses at tax time.
Physical vs. Digital Tracking
When asked to describe how they organize their receipts, only 16.8 percent of respondents stated that they keep track of their receipts digitally. That means that more than 80 percent of self-employed individuals are still relying on shoeboxes, coffee cans, file folders and their wallets as a filing system.
However, 20 percent (20.5) of respondents expressed a wish for a better way to keep track of their receipts, while another 8 percent (8.2) said that they spend too much time keeping track of and organizing their receipts.
Similar to understanding what receipts are necessary to keep for tax deductions, it would appear that a lack of knowledge regarding other expense tracking and receipt organization methods is what is preventing self-employed individuals from using a more secure tool.
Uncertainty Breeds Stress
Perhaps the most upsetting statistic revolved around the amount of stress that self-employed individuals feel when it comes to expense tracking and receipt management. Two out of 10 respondents stated that they feel stress related to expense tracking at least once every two to three months, while 13 percent of respondents feel stress on a monthly basis. That means that three out of every ten of the survey respondents are feeling some type of stress related to expense tracking on a fairly regular basis. When combined with the over 50 percent (53.8) of respondents who also feel stress organizing these business expenses, tracking these expenses and receipts are obviously providing self-employed individuals with another layer of stress they don’t need.
The Biggest Struggle
When asked what their biggest struggle was relating to tracking their business expenses, self-employed individuals were able to easily articulate these obstacles in their own words. Of all the responses, an overwhelming number was some version of the following: “keeping track of every expense.”
Other themes that were repeated included:
- Misplacing or forgetting to separate personal and business expenses
- Knowing what can and cannot be deducted
- Keeping everything organized
Fortunately, digital tools have evolved to help self-employed individuals to keep track of their expenses and receipts. With QuickBooks Receipt Scanner, a smartphone camera becomes a scanner. By taking a photo of the receipt, a digital file is uploaded to QuickBooks. Now, losing a receipt isn’t the end of the world; the digital image will remain and can be used when it’s time to review expenses at tax time.
This functionality directly addresses a set of challenges that self-employed individuals repeated throughout the study: keeping track of the receipts, finding the receipts, and putting the receipts all in one place.
Weird But Necessary
Despite confusion regarding what can be deducted, survey respondents were able to recall some of the more … odd items they have deducted for business-related purposes. Some of our favorite responses:
- Trip to the Zoo
- Banana
- Cow
- Shrunken Head
- Mustard
- Dog Walking
- Inflatable Snowman
- Feather Duster
Methodology
QuickBooks surveyed 500 self-employed people about their business expenses and receipts throughout the US in May 2018. The sample was selected by Pollfish. QuickBooks welcomes the re-use of this data under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium.
Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
Join BMFMS on Social Media
1 comment:
I will recommend anyone looking for Business loan to Le_Meridian they helped me with Four Million USD loan to startup my Quilting business and it's was fast When obtaining a loan from them it was surprising at how easy they were to work with. They can finance up to the amount of $500,000,000.000 (Five Hundred Million Dollars) in any region of the world as long as there 1.9% ROI can be guaranteed on the projects.The process was fast and secure. It was definitely a positive experience.Avoid scammers on here and contact Le_Meridian Funding Service On. lfdsloans@lemeridianfds.com / lfdsloans@outlook.com. WhatsApp...+ 19893943740. if you looking for business loan.
Post a Comment