Tracking expenses for work-at-home parentsNovember 2015 / Share
The traditional model of corporate America, where employees go into an office every day from 9 a.m. to 5 p.m., is changing. These days, as communication methods and technology have advanced, it is no longer necessary to commute to an office when the same work can be done from home. According to the U.S. Census Bureau, 9.2 million Americans worked from home in 1997. By 2010, that had jumped up to 13.4 million people who worked at home at least once a week, a rise of 35 percent in just over a decade.
The majority of people who work from home are self-employed, and many do so while taking care of their kids. For parents who are also managing a home office, managing both their kids and their work takes a lot of coordination and planning, not to mention the resources necessary to accomplish the work.
One important task for work-at-home parents is tracking business expenses. For those with a home office, keeping a log of purchases made for work is necessary. Certain work expenses can be tax write-offs, so it is vital to know at the end of the year what income was spent in order to do a job. Additionally, being aware of expenses helps at-home workers budget for the future.
There are several ways to log what is being spent while working from home. Parents should explore these different methods and find the model that fits best for them:
One of the best ways to keep track of business purchases is on a smartphone application. There are several apps available that can help a parent working from home keep track all of his or her expenses.
iXpenseit is one of the most popular apps on the market for expenses, and it is designed perfectly for those working from their home office. According to PCWorld, the application is easily sortable, so various types of purchases can be categorized by things like payment method and vendor. It is also specifically designed for small businesses, helping workers manage their budgets so work and household expenses are kept separate.
The value of a mobile app is it allows workers to update expenses immediately, even when they are away from the home office. As soon as a purchase is made, the application can track how much it cost and where it fits into a business's budget.
Keeping a spreadsheet
The IRS stated that in order to deduct a purchase on a tax return, the purchase must be ordinary and necessary . That means the item must be a common item that anyone can buy and it must be needed in order to do a job. For example, buying a new television for an at-home office only counts as a business expense if watching TV is part of the job's requirements.
Many workers opt to create and manage a spreadsheet of all the expenses they make, both for their home office and for personal use. From there, they can then determine if items fit the IRS' requirements for a business expense. The Small Business Brief recommended paying for business items separately . That way when it comes time to enter information into a spreadsheet, it is easier to sort what purchases were for work. It involves extra effort up-front for a parent, but the clarity of a work expense account will be worth it in the long run when it is time to file taxes.
Vectra Bank can help parents who work from home open a second bank account for company purchases. Talk to a financial professional today to determine the best strategy for tracking business expenses from a home office.
The information provided is presented for general informational purposes only and does not constitute tax, legal, business or investment advice.