It’s that time of year when, every time we turn around, we’re being reminded that it’s time to file our income tax returns. I rank those moments right down there with getting a tooth drilled, hearing that a high school friend died, or, these days, watching the news.
So, in hopes of removing some of the sting, and in an effort to pull all the material together, accessible in one place, I’m going to take this occasion to compile into one post what I’ve had to say over the years about taxes on this blog: yours, your clients, and the future of taxes, too. There may be some idea seeds to help you or your clients save money or time.
Your Clients’ Income Tax Filing
Over the years, we’ve taken a very thorough look at what your clients need to know about paying you for their services, and how that affects their income taxes.
Many new advocates are surprised to learn that their services may be deductible for their clients, perhaps as a way to help their clients reach their medical expense filing threshold. This has to do with the IRS’s master list of deductible medical expenses – and guide dogs for the blind. We’ve written clarifications on this for you to study and share with your clients:
- Helping Your Clients Deduct Your Services From Their Income Taxes (IRS and CRA)
- It’s That Time of the Year ? Income Taxes! for You and Your Clients
- Tax Time! Can Your Clients Deduct Your Patient Advocacy Services?
- Patient Advocates, Income Tax Deductions and Guide Dogs
- Is a Patient Advocate or Navigator a Qualified Medical Expense for Patients?
Your Own Income Tax Filing (filing 2017 tax returns in 2018)
Deadlines in the US are different this year:
- Americans’ tax filings aren’t due until April 17 this year. Seriously.
- Canadian income tax filings are due either April 30, or for those who are self-employed, June 15th. (Hey, I like that idea of more time for those who are self-employed, although in some ways that simply prolongs the agony.)
Filing your own income tax return is affected by so many variables that we can’t possibly address them here, nor am I an accountant who can give you advice. But the one thing I can advise you is to keep great records.
That means keeping receipts and logs on everything related to money and your advocacy, and even a few things that you might not realize are related to your practice. The minute you receive one penny in payment for advocacy services (and sometimes even before that!), a whole host of things you might not expect become deductible.
There are obvious deductions like a home office, or a phone line you’ve set up for your business. But there are ways to stretch those deductions, too – like mileage deductions for some volunteer work, or paying for a subscription to your local newspaper (when you track advertising, or are quoted, or….). In fact, these deductions have always been one of the huge benefits of self-employment.
The best advice about deductibility and record keeping will come from your tax preparer or accountant, of course. What I have advised over the years is how to pull your records together to make tax prep efficient and to be sure you’re getting all the credits and deductions you can:
- Save Money and Time with These End of the Year Tasks
- 8 End-of-the-Year Tasks for Smart Care Professionals
A New Topic – Quarterly or Instalment Payments
I realized as I was compiling this post that I’ve not addressed self-employed taxes in the form of regular payments before. In the US they are called “Quarterly Payments.” In Canada, they are called “Instalments” ( for you Americans who think I’ve misspelled the word “instalment” – that’s how it’s spelled in Canada. It’s a British spelling.)
The reason I’ve never written about it is because I’ve never done the math well myself. All I do each quarter is send the amount my tax preparer told me to send when the previous year’s tax return was filed.
But – it’s never right! Getting it right requires paying a tax preparer or account to figure it out for each quarter, and I can’t be bothered with that. My bookkeeping and taxes aren’t so complicated that it’s an expense I’m willing to incur.
Early in my self-employment (2001, 2002, 2003) I never seemed to send enough quarterly, and as my marketing business grew, I was always behind with the amount of quarterly payments. I sent them. I just didn’t send enough money. By April 15, I would not only have to make up the difference in taxes due, but I would have to pay a penalty on the amount in arrears, plus pay the first quarter of the current year’s taxes. I was always in the income tax hole!
After a few years, I was able to bring it around to where it should be. Now I’m well covered each quarter. I always end up paying in more than I owe, and then I usually get a nice refund – which means no penalty. Even better, the refund subsidizes my first quarterly payment for the new tax year.
If you are in that “can’t catch up” space – talk to an accountant about getting set up to slightly overpay. You’ll sleep better at night, and you’ll save yourself penalty money.
Looking to 2018 Taxes
There are changes to the American tax code for 2018. Its first effects for self-employed people won’t be experienced until tax filings in early 2019 for 2018.
We’ll let you know if and when we receive any clarification on the new tax code’s effect on deductibility for your clients, or changes in your own bookkeeping and filing.