Bookkeeping for US creators and freelancers: the minimum that keeps you safe

1. Separate business money first

Open one account (and ideally one card) only for the business. It is the single habit that makes everything else cheap: every transaction on it is business, so categorising becomes quick and your Schedule C totals are easy to defend.

If you pay a business cost personally, record it as money you put into the business. If you move money to your personal account, record it as an owner’s draw — a draw is not an expense and does not reduce your profit.

2. Record gross income, then fees

Stripe, Shopify, YouTube, Patreon and marketplaces pay you net amounts after fees, refunds and holds. Your income is what customers paid. Fees are an expense. Refunds reduce sales. The payout is just money moving from the platform to your bank.

Schedule C reflects this: gross receipts on line 1, returns and allowances on line 2, and expenses on their own lines. Booking only the payouts understates both income and expenses and makes your numbers impossible to reconcile with the platform’s year-end forms.

3. Use categories that map to your return

The line is a suggestion; your tax preparer decides the final mapping. Business meals are generally only partly deductible.

4. Set aside tax as you earn

No employer withholds tax from self-employment income. Individuals, including sole proprietors, generally must make estimated tax payments if they expect to owe $1,000 or more when they file. The year has four payment periods; due dates are in IRS Publication 505.

Most taxpayers avoid the underpayment penalty if they owe less than $1,000 after withholding and credits, or if they paid at least 90% of this year’s tax or 100% of last year’s, whichever is smaller.

5. Keep the evidence

• Keep records until the period of limitations for the return runs out — generally 3 years.
• 6 years if you did not report income that is more than 25% of the gross income shown on the return.
• At least 4 years for employment tax records.
• Records about property (equipment, a camera, a car used for business) until the limitation period expires for the year you dispose of it.