Should I list out all expenses on Schedule C or group them by category?

So if I have lots of random small business expenses that don't fit neatly into the main categories, do I just lump them all under "Other Expenses"? And how detailed should the description be for that section?

For small miscellaneous expenses that don't fit the main categories, "Other Expenses" is exactly the right place to put them. You'll want to group similar items together with a brief but clear description - something like "Professional Subscriptions" or "Industry Memberships" rather than listing each one separately. For the description, aim for something specific enough that you'd remember what it includes, but you don't need exhaustive detail. One or two words per grouped item is generally sufficient. The key is being able to connect these totals back to your detailed records if needed later.

Does it help with figuring out depreciation too? I bought a $3000 camera last year and I'm still confused about how to handle that on my taxes.

I'm hesitant to try another tax tool. How's it different from just using TurboTax or HR Block that also claim to handle business expenses?

It absolutely helps with depreciation calculations. You just upload your receipt for the camera, and it will guide you through the options for depreciating it over time or taking a Section 179 deduction if you qualify. It even explains the pros and cons of each approach based on your specific situation. For your question about how it's different from TurboTax or HR Block - those are great general filing tools, but taxr.ai specializes in analyzing actual receipts, invoices and documents. It's more like having an expert look at your specific documentation rather than just inputting numbers into forms. I still use TurboTax to file, but I use taxr.ai first to make sure all my expenses are properly categorized and maximized.

Wait, you actually got through to the IRS? I thought that was impossible these days. How much did this service cost? Seems too good to be true.

I don't buy it. I've tried everything to reach the IRS and always end up waiting for hours or getting disconnected. How could this possibly work when the IRS phone system is so broken?

Yes, I actually spoke with a real IRS agent! The way it works is they use their technology to navigate the IRS phone tree and hold in line for you. When they're about to connect with an agent, they call you so you don't waste time on hold. Took about 15 minutes from when I signed up to when I was talking to someone. I completely understand the skepticism - I felt the same way. The IRS phone system is definitely broken, which is exactly why this service is so valuable. They've figured out how to efficiently work through the system in a way that would take individuals hours to do. They basically handle all the frustrating waiting and navigation for you.

Do you use any specific spreadsheet template? I'm trying to get more organized for next year since my expenses were a complete mess this tax season.

I don't use anything fancy - just created my own in Google Sheets. The key columns I include are: Date, Vendor, Description, Amount, Payment Method (credit card, PayPal, etc.), Receipt Status (yes/no), and Category (matching Schedule C categories where possible). For next year, I recommend starting with a clean sheet in January and entering expenses as they happen rather than trying to catch up later. I spend about 10 minutes each week adding new expenses, and it saves hours of stress at tax time. The most important thing is consistency - find a system that's simple enough that you'll actually maintain it.

The distinction isn't actually about the dollar amount, but rather about the expected useful life of the item. Generally, if something will last more than a year in your business, it's considered equipment (a capital asset) rather than supplies. For your $800 microphone, since it will likely last several years, it would typically be considered equipment. You have options: you could depreciate it over several years, or potentially use Section 179 to deduct the full cost in the current year (subject to limitations). Supplies, on the other hand, are consumable items that you use up within the year.

This is really helpful advice! I'm just starting out as a freelancer and was worried I was doing something wrong by grouping my expenses. One quick follow-up question - when you mention keeping detailed records organized by category, do you recommend physical folders or is a digital system better? I've been taking photos of all my receipts but wasn't sure if that's sufficient backup for the IRS.

Digital systems are absolutely sufficient and often better than physical files! The IRS accepts digital records as long as they're clear and legible. Taking photos of receipts is a great practice - just make sure the images show all the important details (date, vendor, amount, description). I'd recommend organizing them in folders on your computer or cloud storage by tax year, then by category (Office Expenses, Equipment, Travel, etc.). Some people also use apps like Evernote or even simple Google Drive folders. The key is consistency and being able to quickly find specific receipts if needed. One pro tip: I always rename my digital receipt files with the date and a brief description (like "2024-03-15_Amazon_VideoLights_$247.99.jpg") so they're easy to search and sort. This makes tax prep so much smoother each year!

This is exactly the reassurance I needed! I've been second-guessing myself all week about whether my categorization method was correct. It's good to know that the IRS actually prefers this approach rather than seeing every single line item. One thing I'm still a bit unclear on - you mentioned that larger equipment might need to be depreciated over time versus going under "Supplies." Is there a specific dollar threshold where this kicks in, or is it more about the expected useful life of the item? I bought some new camera equipment this year that ranged from $500 to $2,000 per item, so I want to make sure I'm handling those correctly. Thanks for the advice about staying consistent year to year - that's a great point I hadn't really considered before!

Great question about the depreciation threshold! There isn't a specific dollar amount that automatically triggers depreciation requirements. Instead, it's primarily based on the useful life of the item - if something is expected to last more than one year in your business, it's typically considered a depreciable asset rather than a current expense. For your camera equipment in the $500-$2,000 range, since these items will likely serve your business for several years, they would generally be treated as depreciable assets. However, you do have some options: 1. Depreciate them over their useful life (usually 5-7 years for camera equipment) 2. Use Section 179 deduction to expense the full cost in the current year (subject to income limitations and other rules) 3. Take bonus depreciation if applicable Given that you made $65k in gross income, Section 179 could be a great option to consider since it allows you to deduct the full cost immediately rather than spreading it over several years. I'd recommend consulting with a tax professional or using tax software that can help you determine the most beneficial approach for your specific situation. The key is being consistent with how you treat similar items - don't depreciate one camera and expense another similar one without a valid reason for the different treatment.