Tax season upon us. Around this time of year the winds change, the sky darkens, and working adults await ominous slips of paper reporting their earnings in the mail.
Before you read further, understand that neither I nor Barkly are qualified to give tax advice. We recommend using these tips which I’ve found researching online in your conversations with tax professionals. For more in-depth information on tax write-offs for small businesses, consult the IRS Tax Guide for Small Businesses.
While absolutely no one enjoys doing taxes (save maybe for professional accountants who get paid to do them), the reward of a tax return makes the onerous task much more bearable. Individuals that receive tax refunds paid more tax throughout the year than they owed to the government, which was deducted from their paychecks automatically. This is essentially an interest-free loan to the government. A person’s tax burden is calculated by adding all of their income sources, and taking deductions or credits for certain ‘write-offs,’ anything from dependents to charitable donations.
This is not the case however for many of us in the pet care industry. Dog walking and pet sitting usually fall under the category of contract or self-employment. Whether you walk for a service like Barkly (contract work) or own your very own pet sitting business (self-employment), the IRS sees you the same. Because you are acting as your own employer, taxes are not withheld automatically from your income and you are responsible for keeping track and reporting it to the government.
Wow. My dog walker pays more in taxes than Trump. For that matter, so does my dog. https://t.co/4ycLjzdHZr
The Mystique of the Write-Off
If you’re new to contract employment, you’re probably not completely familiar with the concept of work-related tax write-offs. You may have claimed deductions on your taxes before for things such as charitable donations, but when you’re a self-employed individual, write-offs become the centerpiece of your tax form. This is because contract and self-employed individuals almost always incur more unreimbursed expenses than regular employees. Employers generally pay or reimburse their employees for things such as work clothes and extra travel time to a temporary work place. As a contractor, you run your own business, thus you get to write-off things you pay out of pocket for that contribute directly to your business. These deductions reduce your overall taxable income, resulting in less money owed by you to the IRS. Write-offs are the key to reducing the wad of cash you end up owing the government after all your hard work.
It can be a little confusing to discern what is available to write-off and what is not. Travel expenses are some of the more illusive tax deductions out there. In this case, it can be helpful to think about what you would expect an employer to pay for if they were in control of your job. At a “normal” job, you are generally expected to arrive from your home to work with no reimbursement. This makes sense considering you entered the agreement of employment with awareness of your commute, thus these “personal commuting expenses” are not covered.
However, beyond arriving to work in the morning and home again in the evening, travel expenses should be paid for. If you have to drive 50 miles to a different branch of your company to pick up some files, the company should be supplying a vehicle or reimbursing you for mileage on your own. This translates well to dog walking. The commute from your home to your first walk cannot be written off, but travel between your walks can be deducted.
Even if you don’t drive a car, you can still deduct travel costs. Public transit fares are deductible, as well as costs for maintaining your bicycle. In this case, save as many receipts as you can. In the event of an audit, the IRS will want proof of your SmartTrip purchases or $200 bike tune-up. Just be careful that the expenses you deduct are only in relation to your contract work. If you have another job, try to keep your commuting expenses as separate as possible from those of your dog walking, pet sitting, etc.
Travel costs are not the only tax write-offs for a self-employed individual. As previously mentioned, anything that is used specifically to maintain or grow your business is a potential write-off. The easiest example for dog walkers is the omnipresent poop bag. It’s likely you have an arsenal of them in your backpack, purse, car, closet, etc. Add up the cost of those little lovelies and deduct that from your taxes. If you have a dog, keep his poop bags separate from your dog walking ones (or at least the receipts). Unfortunately for us pet parents, the IRS does not see dogs as dependent children, so expenses for their care are not deductible from your taxes.
Other equipment expenses relating to your dog walking or pet sitting business may include, but are not limited to: Walking shoes, rain gear, tennis balls, treats, leashes and business cards. As long as these items are used exclusively for your business, they are considered write-offs. So don’t play tennis with your dog park balls!
If you really want to dig deep and get the most out of your tax exemptions, there are additional things you can claim. For example, if you run a serious pet sitting business out of your apartment, and you use a specific part of it for that business, you can actually deduct a portion of your rent. You can even deduct a device such as a laptop or smart phone if it is an essential part of running your business (and solely used for that business). However, understand that as you make these claims, the chance of an audit from the IRS increases. If you intend to claim many deductions on your taxes, impeccable research and record keeping is a must.
Good luck filing!