1. Keep this easy tip in mind:
Business expenses are always deductible. Personal expenses are never deductible (as business expenses).
So, everything related to the business you should clearly track. One easy way is to get a separate business checking account and debit/credit card. Use it only for business. This keeps all the business transactions in one location, which makes record keeping straightforward.
Then you have the "mixed" type expenses: cell phone, internet, etc. Generally speaking, if you cannot run the business without that expense, then I will deduct it as a business expense. My cell phone is primarily used for my business, and I could not run my business without it, so that goes in the business bucket. Same with internet for me. For some other businesses, though, this may not be applicable, especially a part-time business. In this case, I will ask the client to estimate how much of the phone use is business vs personal, then apply that ratio to the phone cost. It's "reasonable."
Mileage is a special case. Use a mileage log, either written on a phone app and only deduct business miles.
2. If you have a W-2 job, and have enough taxes withheld, you don't have to worry about making quarterly estimated tax payments. If you are self employed, then you need to estimate your quarterly income and make a tax payment.
3. Business income and expenses are reported on Sch C for a sole proprietor. This income/loss flows into your 1040. Depending on where you live, you may or may not have a state tax obligation (franchise tax, sales tax, etc).
4. QB profit and loss statement.
Good luck,
Mark Wagner CPA
