Running a business has changed dramatically in the last few years. For myself, one of the biggest shifts I’ve seen is the rise of mobile payments.
When I first started as a freelancer, I remember having to prepare and format paper invoices to clients. I would then have to wait a while to get a check in the mail which I would then drive down to the bank and deposit. I don’t even want to think of the time wasted getting all of that done!
The Benefits of Mobile Payments
One of the best decisions I made was to encourage and switch over as many clients to digital payments as soon as it was becoming ‘mainstream.’ Not only is it less paperwork, but it has simplified things so I can focus more on projects. For clients, it’s an easy way to take care of their payments.
However, just because it’s mobile doesn’t mean it’s work-free. If you are self-employed and using mobile payments, you still need to track your business income going into your account and business expenses being paid through mobile payments.
Mobile Payments and Your Taxes
Nowadays there are plenty of mobile payment options like PayPal and Venmo, but how do they affect your taxes?
While you may not see the cold hard cash or check in your hands, any business income you earn through mobile payments is treated just like the former. You must report your income when you file your taxes.
The good news is for many it’s easier to keep track of things when you have mobile payments. No carrying around a receipt book, you can go ahead and download the app.
If you’re using financial software like QuickBooks Self-Employed, you may be able to simply link your accounts to a mobile payment option. You can then sort and categorize payments. QuickBooks Self-Employed makes it easy to track your business income and expenses year-round. You can then easily transfer your information to your TurboTax Self-Employed tax return at tax-time.
Mobile Payments and 1099s
Quite a few of my colleagues began using mobile payments and were trying to figure out how they would be reported as income and whether or not they were going to get a 1099-K form. They had clients who used mobile payment services to pay them.
If they earned less than the income threshold required by the IRS to issue a 1099 -K($20,000 in a year and 200 payments), then the mobile payment company would not be required to send my colleagues a 1099-K for their business income.
Either way, my self-employed colleagues were responsible for claiming the money they earned. Generally, if they expected to owe more than $1,000 in taxes for the year, they needed to pay estimated taxes.
Those who procrastinated on organizing their finances throughout the year had some work to do, while those who tracked their finances throughout the year and paid their estimated taxes had far less to wrap up at tax time.
Review Your Finances Regularly
As always, keeping accurate records is key. If you haven’t already, set aside and schedule a time each week to review your invoices and payments.
It’s much easier to log into and check out QuickBooks Self-Employed every Friday and make sure everything is properly recorded. It takes about 20 minutes or so, but it’s so worth it.
Thoughts on Mobile Pay
I’d love to hear how you’re handling your finances as an entrepreneur! How much of your business do you do online? How big are mobile payments in your business?