The 20 categories that make tax time painless
Tax season. If you're a freelancer or small business owner, there's a good chance you're about to lose a weekend digging through bank statements trying to figure out what counts as a deduction. I've spent 30 years in business analytics and I've watched this cycle play out more times than I can count.
So here's what most people get wrong. They track expenses but they don't categorize them. That one missing step is the difference between a 45-minute filing session and a weekend you'll never get back.
The Schedule C shortcut nobody talks about
The IRS has about 20 expense categories on Schedule C. That's it. Advertising, car and truck, insurance, office supplies, utilities. The full list is right there on the form. Set up your tracking to match those categories from day one and filing your taxes becomes transferring totals. No guessing, no Googling "is this a business expense," no shoebox of receipts.
The categories that trip up most people:
Cost of Goods Sold vs. Expenses. If you sell physical products, your materials and production costs go in COGS, not general expenses. Getting this wrong throws off your profit number and can flag your return.
Home Office. You can absolutely deduct it, but track it separately. The simplified method gives you $5 per square foot up to 300 sq ft. The regular method means tracking actual costs. Either way, you need the numbers ready before you sit down to file.
Car and Truck. Track actual expenses (gas, insurance, repairs) or use the standard mileage rate. Pick one and stick with it for the year. Mixing them mid-year is a mess nobody wants to untangle. If you drive for business, grab a simple mileage log and keep it in your car. A $6 notebook beats trying to reconstruct a year of trips from memory. Click here to see the one I like.
Other Expenses. This is the catch-all and it's where most people dump everything they're unsure about. The problem? A big number in "Other" is exactly what gets the IRS curious. Take 10 minutes and break those out into the right categories. Future you will be grateful.
The 15-minute Friday habit
Every Friday, spend 15 minutes reviewing your week's transactions and dropping them into the right Schedule C category. That's it. Keep a receipt folder on your desk for the paper receipts that come in during the week. Friday is when they get logged and filed. This organizer at Amazon is the one I use.
Do this consistently and by April you've got 12 months of clean, organized data ready to file. No panic, no all-nighters, no overpaying a preparer to sort through your chaos.
The good news: people who hate tax season aren't bad at taxes. They're just doing 12 months of work in one painful burst. Spread it out and the whole thing gets boring. Boring is what we want here.
One more thing
I built two tools for exactly this workflow. The Small Business Revenue & Expense Tracker Pro ($29) if you just need the spreadsheet. Or the Freelancer Business Starter Kit ($39) if you want the full package: tracker, invoice template, proposal template, and a setup guide that walks you through everything.
Until next Tuesday,
Eban
