The web is brimming with finance tools for the self-employed, but few are as laser-focused on minimizing tax-time angst as Deductr. It’s available as either a paid service (Deductr Pro) or an ad-supported free version that provides the same basic functionality for those willing to forgo transaction downloads and other automated help.
As the name might suggest, Deductr’s main mission is to help you track deductible business expenses as you incur them (as opposed to waiting until April 14th to go through piles of bank statements, receipts, and car logs). But it also provides tools for keeping records to help convince the IRS you are running a business (in case you are audited).
Deductr lets you track your expenses as you incur them.
It’s not a full-blown accounting service: There’s no help with invoicing, inventory or payroll, for example, although the company says it plans to add these features as for-fee add-ons to Deductr Pro down the line. But Deductr does let you enter income and charitable deductions in order to get a complete picture of what your tax liability might look like.
For the same reason, Deductr when you first sign up asks you to fill out a questionnaire about your business that covers everything from use of a car or home to whether you have employees or pay for medical insurance. It’s the only business accounting service I’ve used that ever asked whether I was on my spouse’s health insurance plan (I am), or was paying for my own.
However, you don’t have to provide complete details to start entering expenses in Deductr. Its register looks a lot like the ones you see in any finance app, with fields for date, payees, amount paid, category and notes. Clicking the category field produces a drop-down menu of Schedule C (sole proprietor) deduction categories, which you can edit if need be (for example, I added web hosting as a subcategory under utilities). Deductr recommends using the notes field to explain the business reason for the expense.
Deductr also offers Activity and Calendar features, meant to create a sort of diary showing what you were doing for your business (default categories include administrative and sales). The idea here is that you might someday need proof that you were engaging in a business, as opposed to a hobby, and written records help.
Deductr’s app uses your phone’s GPS receiver to record your mileage.
Deductr also helps you track business use of your car. You can manually enter travel data, but if you download a free companion mobile app (iPhone or Android), it can record mileage using the built-in GPS receiver. It can also photograph receipts to attach to transactions (in Deductr Pro only), and you can use it to record activities and expenses. Deductr automatically syncs data from the mobile app with the web service.
Deductr’s reporting features are minimal, but may suffice for many people. They include projections for profit and loss and tax rates, and year-to-date deductions (neatly organized by Schedule C category), activity logs, mileage, and medical expenses.
If you spring for Deductr Pro ($19.95/month or $199/year), you can link your account to your financial institutions and download bank and credit/debit card transactions, which saves time on manual entry. Pro also offers phone support (versus chat or email only for the free version), and—as mentioned earlier—the ability to link receipts to transactions, and the promise of support for eventual add-ons.
Like any financial management service, Deductr is only as good as the data you put into it. At the end of the day, you still have to categorize your transactions, and there’s no automation to help (like you get with QuickBooks): Deductr doesn’t automatically categorize recurring transactions.
You can do some of what Deductr does with free expense reporting tools such as Expensify or Concur, and there are less expensive small-business bookkeeping tools such as Outright. But Deductr does a good job of covering all the deduction bases, and its simplicity and ease of use might well make tracking expenses, activities and mileage less daunting than it is with more sophisticated and feature-rich competitors.