MeKenna and Kat are each on the Assist group for YNAB. Along with working for YNAB, they’re each facet hustlers: freelance lighting designer (MeKenna) and freelance actor/performer (Kat). Put their options for managing facet hustle bills and revenue in YNAB into motion in your personal funds to remove a few of that tax-time stress!
No matter what sort of work your facet hustle entails, discovering the proper processes, instruments, or techniques to assist could make life an entire lot simpler. Whereas we each handle our facet hustles a bit in a different way in our budgets, we agree that we couldn’t think about managing the bills and revenue with out YNAB.
One factor we do have in frequent is that each one our facet hustle revenue and bills go into and are available out of our private accounts. This works finest for our private setup, however if in case you have a separate checking account for your small business, a separate enterprise funds is the way in which to go! Take a look at this hyperlink to our Small Enterprise touchdown web page with plenty of sources on establishing a separate enterprise funds.
Handle Tax-Deductible Bills
Possibility One: Tagging
Kat’s strategy:
I took the checklist of deductible expense classes I obtained from my accountant and made observe of those that apply to me. After I spend cash for the enterprise, I add my enterprise tag for the yr (#katwork22) and the spending sort to the memo area. For me, that’s subscriptions, coaching, transportation, meals, provides, costumes, and journey.
I add the tag and the spending sort to the memo area of any deductible spending. If I purchased a number of issues in that buy and solely a few of them are deductible, I’ll cut up the transaction and add the data solely to the memo area of the corresponding cut up. For recurring deductible bills (subscriptions, cellular phone payments, and many others.), I be sure that the tag is within the memo area of the scheduled repeating transaction for extra automation. When the brand new yr comes round and the January transaction drops in with the previous yr’s date, I simply have to recollect to replace each the January model of the transaction and the repeating future transaction with the brand new date tag!
The attractive half about this for me is that the tax class doesn’t should correspond with the spending class in my funds. I’d categorize a workshop underneath a enterprise class like Performing Bills, however I’d categorize a dressing up piece I purchased to my common Clothes class. I’d need to fund that parking cost in my standard Transportation class, however I need to make certain to put in writing it off on my taxes.
Possibility Two: Flagging
Now which you could add customized names to flags, they’re additionally an awesome various to the facet hustle tag. You need to use one shade for all tax-deductible bills or you should use one for every sort of spending: crimson could possibly be facet hustle meals, yellow could possibly be facet hustle journey, and many others. The one draw back of utilizing flags is which you could’t flag a cut up portion of a transaction, solely the complete transaction. In the event you use cut up transactions in your tax-deductible spending, the tags within the memo area are a greater technique to go.
Tax Preparation
When tax time comes round, I seek for every sort of spending and the tag – “#katwork22 coaching.” For the only strategy, I can choose all of the transactions and the Chosen Whole on the high is what I spent in that class. I can add that to the spreadsheet I share with my accountant.
Alternatively, I can seek for simply the enterprise tag (in my case, #katwork22), choose all of the transactions in all these spending varieties, and Export Chosen Transactions to a spreadsheet app. From there, I can kind by the totally different tax deductible classes and ship that alongside to my accountant.
In the event you select to make use of flags, you possibly can seek for flags and comply with the identical directions as above!
What to do if one yr’s spending is distributed over a couple of funds
Perhaps you determined to do a recent begin mid-year. Or perhaps you’re like Kat — you filed for divorce in the course of the yr and needed to create a brand new funds with new accounts in July! Regardless of the rationale, typically having a couple of funds that holds transactions in a single yr is unavoidable. Right here’s how you can merge the information into one place!
First, you’ll go to All Accounts and seek for your small business tag. Choose all of the transactions for that tax yr and use Export Chosen Transactions to create a CSV file of simply these transactions. Do the identical factor within the different funds(s). While you’re completed, you’ll have two or extra CSV information with the related spending transactions in them.
You may decide one file to be the primary file. Subsequent, open the opposite one, copy all of the transactions (with out the header) from that funds after which paste all of the transactions into the primary file. Repeat till all transactions for that yr are in a single file. From there, you possibly can delete columns you don’t want, kind and filter as desired.
Possibility Three: 1099 Class Group
MeKenna’s strategy:
I’ve a class group known as “1099” and inside it are all 1099-related classes. Taxes, Tithing, Dropbox, Adobe Suite Subscriptions, Tech & Gear, Journey for Work, Tax Accountant, Reimbursements, and Miscellaneous. You may customise this to be your work-related classes, or hold all of them contained inside your present funds setup like Kat does. Or some mixture of each!
Right here’s my setup:
Categorizing and Monitoring Facet Hustle Revenue
1099 revenue isn’t taxed till you file on the finish of the yr, which might trigger two challenges: not having sufficient put aside when it comes time to pay taxes and inflated revenue information in YNAB. In case you are each an worker and an unbiased contractor, the paychecks out of your employer are the post-tax quantity however your facet hustle funds are the pre-taxed quantity. Kat and MeKenna have two totally different approaches to those challenges!
MeKenna’s strategy:
In my funds, I need to separate my 1099 revenue and the taxes that I take out of it, so I exploit a cut up transaction. The payee is the identify of the revenue supply and I click on Break up within the class area. I personally prefer to put aside 20% for taxes, so if the bill is for $2,000, I categorize $1,600 as “Influx: Prepared To Assign” and $400 to my Tax class.
That approach, my Revenue v. Expense report reveals my approximate web revenue as an alternative of gross revenue for simply my 1099 pay. And it additionally helps me keep in mind to put aside cash for self-employment taxes!
Kat’s strategy:
Nearly all of my facet hustle revenue is available in just a few annual checks. I’m not too frightened concerning the accuracy of my revenue information, so I categorize the complete influx quantity to Influx: Able to Assign. Then I assign a piece of it to the tax class to ensure I’ve some set-aside. I set a Goal on my tax class so I put aside about the identical quantity I needed to pay final yr. As soon as I’ve absolutely funded that concentrate on for the yr, the remainder of the 1099 revenue is free to be assigned anyplace else.
When deciding how you can categorize your facet hustle revenue, understand that any cash inflowed right into a class gained’t present as revenue in stories. In case your aim is in your revenue in YNAB to point out as web revenue, splitting a number of the inflows to the taxes class will extra precisely replicate that web revenue.
In the event you prefer to see your revenue by revenue supply/consumer, you should use distinct payees for every and verify the Revenue v. Expense report back to see how a lot you had been paid by every consumer.
Take a look at extra Quick Tax Time Prep Ideas with YNAB
If You Have Separate Enterprise Financial institution Accounts
As talked about above, if in case you have separate accounts for your small business, you’ll need to add them to a separate enterprise funds, fairly than to your private funds. That approach, you’ll be capable of separate private and enterprise revenue. You’ll additionally be capable of distinguish between enterprise and private bills extra simply.
We hope we’ve given you some methods to use to this yr’s funds (or should you’re like a few of us, you could return and tag all of final yr’s bills to make tax time simpler!)
Don’t hesitate to attain out to the Assist group if in case you have any questions on setting this up in your funds!
Are you a freelancer who stumbled upon this submit whereas trying to find a greater technique to handle your funds? With 4 Guidelines, a sturdy library of free sources, and an award-winning cash administration app, YNAB has the whole lot you must take management of your monetary life and revel in much less cash stress. Strive it without cost in the present day, no bank card required!