Tax time cometh albeit a month later this year due to a work overload within the Internal Revenue Service. One last opportunity to make certain you’re claiming everything within your business that can legally be written off. Not knowing which expenses you need to track can lose you some money at tax time.

• Watch that mileage add up! One of the largest deductions any pet sitter or dog walker will see is for mileage. Remember though mileage can only be deducted for those filing a Schedule C of From 1040. For 2020 the federal mileage rate is $0.575 per mile.

• Your boots are made for walking. Well at least your footwear and uniforms could be? Determining if work tools and uniforms as well as work clothes are tax deductible depends on a couple of factors. According to H&R Block,
  
  
  • In regard to uniforms, you can deduct the cost of the uniforms and their upkeep (dry cleaning) if both of the following apply:
    • Your job requires that you wear special clothing such as a uniform.
    • The clothes are not suitable for everyday wear. For example, a uniform with a company logo isn’t suitable for everyday wear, so it would qualify as a deduction.

Work clothes are tax deductible if your employer requires you to wear them every day, but they cannot be worn as everyday wear, such as a uniform. However, if your employer requires you to wear suits – which can be worn as everyday wear – you cannot deduct their cost even if you never wear the suits outside of work.

You can fully deduct small tools with a useful life of less than one year. Deduct them the year you buy them. This could include items such as leashes, poop bags, dog toys and treats.

However, if the tools have a useful life of more than one year, you must depreciate them. You can usually depreciate tools over a seven-year recovery period or use the Section 179 expense deduction. Under Section 179, you can expense the full cost of a tool the year you place it in service. The deduction is limited to the amount of your self-employment income.

You can deduct the cost of the tools as an unreimbursed employee expense on Schedule A if both of these apply:

• You work for an employer, rather than being self-employed.
• You are required to have the tools for your trade.

You are also subject to the recovery-period rules and Section 179 rules.

• Lessons learned. Money or fees spent on books, classes or any type of additional work-related learning could be deducted. Furthering your education through a NAPPS online course or attending a NAPPS Conference may qualify you for a nice deduction as well as making you a more professional sitter with all that knowledge you’re acquiring.

• Can you hear me now? Don’t forget to deduct that cellphone bill or office phones as well as a portion of your internet service. These tools help your business function at a professional level.

• These four walls. The only people who can take the home office deduction are those who are self-employed, according to Michael Corrente, managing director of the tax group at CBIZ MHM, an accounting and professional advisory firm. In a recent Huffington Post article, he says that includes sole proprietors and independent contractors. there is a chance that you can write off your home office. However, the IRS has some pretty strict rules around how to claim the deduction.

Primary and exclusive use

The first qualification is that you have a space in your home that’s regularly and exclusively used to run your business. “For example, if you have an extra room and that room is used 100% to run your business, then you can qualify for the home office deduction,” Corrente said.

On the other hand, working at the dining room table or a desk in your bedroom doesn’t count. The space has to be used for business purposes only. And if you have an office building or other location that you visit regularly to get work done, you can’t write off your home office since it’s not your principal place of business.

Simplified vs. regular method

The next step is to determine how much your home office costs. There are two options for doing that.

The first is the simplified method. This allows you to deduct $5 per square foot of your office, up to 300 square feet (a maximum $1,500 deduction). “The simplified option is just really easy,” explained Angela Anderson, a certified public accountant and tax specialist for JustAnswer. “You don’t have to worry about calculating your expenses and breaking them down.”

Keep in mind, though, that taking the easy option could leave money on the table.

There’s more work involved in the regular method, but there is also no cap. Say your home office is 300 square feet and your total home size is 1,500 square feet. That means your home office is 20% of the house, and you could then write off 20% of the costs of maintaining that office, such as 20% of your rent or mortgage, 20% of your property taxes and insurance, 20% of your internet, electricity and phone bill, etc. That could very well add up to more than $1,500.

The downside of that method for homeowners, Corrente said, is that you will have to recapture any depreciation you wrote-off if you sell your home and pay taxes on a gain from the sale. Regardless of which method you ultimately choose, you should crunch the numbers on both options before deciding.

For many last year there may not have been many expenses, in fact you may have had to claim PUA, One thing that can sometimes take unemployment recipients by surprise is finding out that unemployment benefits are considered taxable income. That means you will have to pay state and federal taxes on the amount of money you receive, though you won’t have to pay Medicare or social security taxes on it. You will get a 1099-G form in the mail that lists your income from PUA, PUC, and the Lost Wage Assistance program from the end of the summer (the previous extra $300 per week).  Now, under the American Rescue Plan, the federal government will forgive income taxes on up to $10,200 in benefits per person, as long as your gross income was less than $150,000.  That means if you and a spouse both collected unemployment benefits, the government will forgive taxes on up to $20,400.

Whew, did you catch all that? It makes my head hurt just thinking about this, which is why it’s best to leave all the tax stuff up to your CPA but at least be knowledgeable about what you could be taking as an expense all while staying within the letter of the law.

All questions should always be directed toward a tax professional.