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Separate bank accounts and deductions

Forum|Forum|2 years ago
August 30, 2023
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Hi,

I am just starting my Sole Proprietor crochet business officially this month (registered with NY state and have an EIN). Last year I was able to deduct some of my start up expenses on my regular tax form. I am looking for information about how business expenses and deductions work. NYS recommends a separate bank account to remit sales tax. They also recommend an account for income. Then here on TurboTax it warns against using a business account for expenses because they aren't all deductible? So do I just keep purchasing yarn and similar supplies with my personal credit card and just claim it in the end? My goal had been to get the business self sustainable where the income would cover the costs of the business and anything left over was my profit. But now I don't understand what to do and I don't want to do anything wrong and ruin my financial life.

-Daria

Ask the Experts - Self-Employed - Aug 2023

Best answer by bkaytaxes

Hello @Dar16 !

Big kudos for starting a new business and wanted to stay on track with reporting requirements! The best way for you to keep accurate records is to keep your business and personal activity separate. A separate account and charge cards would be a great way to isolate your business activity and save tons of energy during tax time or generating any reports to analyze your business activity. When you do your taxes its important to know what's deductible and what you may need to exclude from your schedule C, where you would report expenses. Here is a helpful guide that shows come common expenses that are deductible. Keep in mind, no list will be all inclusive so just remember to record the business purpose and check with a professional if you are not sure: Business Deductions . You can connect with a Turbo Tax Expert year round to help with any questions you might have!

bkaytaxesAnswer

Hello @Dar16 !

Big kudos for starting a new business and wanted to stay on track with reporting requirements! The best way for you to keep accurate records is to keep your business and personal activity separate. A separate account and charge cards would be a great way to isolate your business activity and save tons of energy during tax time or generating any reports to analyze your business activity. When you do your taxes its important to know what's deductible and what you may need to exclude from your schedule C, where you would report expenses. Here is a helpful guide that shows come common expenses that are deductible. Keep in mind, no list will be all inclusive so just remember to record the business purpose and check with a professional if you are not sure: Business Deductions . You can connect with a Turbo Tax Expert year round to help with any questions you might have!

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D

Dar16Author

Thank you. So I can use my business card to pay for craft supplies? At the end of the year I can then claim things that are mixed expenses (home office) and previous to opening accounts purchases made on my personal card that I have documented (specifically yarn... I've spent $1000 this year alone so far)? Lastly and maybe most importantly, how do I collect personal profit from the business?

I appreciate your help!

-Daria