Tag Archives: IRS

Looking for an organized way to manage your personal or business finances, and save time preparing various tax returns like Payroll, Sales Tax, and State and Federal Tax Returns?

Anyone, business or individual, can use QuickBooks for this purpose, and get organized with less paper and shoebox clutter.  We will customize the learning to You, whether a beginner or beyond. For the beginner we start with a few items like:

  • Easy Installation (The Wizard)
  • Homepage (The Roadmap)
  • Customize for your individual or business with preferences and settings
  • Create Invoices for Customers & Bills from Vendors
  • Basic Financial Reports

For those beyond, sessions will tailored to your specific questions.

Call  or Email Today for more information, or to get started with Your organized financial future. You work hard and deserve more freedom to choos how You use your time.

Timely Tax Tips for Freelance Workers

There is a cost to the freedom you get being a freelance worker. While you can probably fudge on office-appropriate attire and set your own start time (Sleeping late can be a viable option!), there is one thing you can’t avoid if you hope to be successful.

Taxes.

When able to, a lot of freelancers prefer to hire an accountant. There are a lot of things to keep track of; and while tax law for freelancers really is a lot of common sense if you think about it, the problem is that there is really a lot to keep in mind. As a freelancer, you are your own employer. In addition to the usual responsibilities of a working adult — the electric bill, the water bill, the gas bill, and your rent or mortgage – you are also responsible for your obligations as your own employer. This means paying into Social Security and Medicare, and perhaps setting up a retirement account.

We’ve already talked about the self-employment tax . It’s important to keep in mind that because you are both and employer and an employee, that you are responsible for the Employer and Employee portions of Social Security and Medicare, 15.3% of earnings. It’s true that you can offset earnings with deductions; but you need to be as careful about what you pay as you are about what you don’t pay.

Here are a few things to keep in mind that will help you stay organized.

  1. Don’t trust your 1099.

If you earn $600 or more from a client, that client should send you a 1099-MISC. It’s very important that you compare. Look at Box 7 on your 1099-MISC and compare that number to the number you have in your records. If your client claims they paid you more than your records state, go through the steps to verify and get a new 1099.  Remember: the tax burden is on you, not your clients. The IRS won’t annoy them with phone calls and letters. They will annoy you.

  1. Get a separate bank account.

Yes, you work for yourself. It’s your money and if you’re making less than $600 total, you may not need a separate business account. If freelancing is your primary source of income, however, you really should consider getting a separate account. This will save you headaches when looking up transactions. If you use accounting software like QuickBooks, having a separate account will make it easier to download information to plug into your books. It also makes it easier to track business expenses for deductions.

  1. Pay attention to Estimated Tax.

As a freelancer, you will probably have to pay taxes quarterly instead of just once a year. You’re also an employer, remember?

If you’ve been freelancing for more than a year, you can get a good idea of what you should plan on paying by using one of several easy to use calculators on line such as:

http://www.bankrate.com/calculators/tax-planning/self-employed-business-tax-calculator.aspx

or

http://quickbooks.intuit.com/r/free-self-employment-tax-calculator-quickbooks/

It’s not always easy being your own boss. But it’s not impossible. And if you are the kind of person who enjoys the autonomy, then the additional responsibility is part and parcel. The trick is to be as careful with your books as you are with the work you do, and to be smart about it.

To LLC or not to LLC: that is the question

Being an artist or working in a creative industry as a freelancer isn’t always easy. Unless you’re fortunate enough to find steady clients and gigs, you feel like your professional life is forever going in a circle of feast and famine.  And, if you have worked as an artist of a creative freelancer, you know that being talented at what you do isn’t enough. That myth of the carefree artist with his head in the clouds and no notion of how the business world works is simply that – a myth. Being a great artist goes hand-in-hand with being a savvy businessperson, because as much as you love your art, you need to eat and keep the lights on, too.

One thing every entrepreneur thinks about eventually is whether to operate as a Sole Proprietorship or to form a Limited Liability Corporation (LLC).

In most cases, you’re probably going to start with and stay with a Sole Proprietorship. This is the easiest business to start because there isn’t much set up required. Although you may be required to get a business license, there isn’t any paperwork you need file unless you choose to “Do Business As” (DBA) a name besides your own. You may also want to consider going ahead and applying for an EIN (Employer Identification Number. While it’s not necessary for a Sole Proprietorship, it will help protect your social security number. It also legitimizes that what you are doing is more than a hobby. You report your earnings annually and you are responsible for paying self-employment taxes as well as covering contributions to Social Security and Medicare.

If you’re fine with all of that, and you’re careful with your accounting practices, then you will probably want to form a Sole Proprietorship.

Keep in mind though, that if your business should ever be sued, then you are personally liable for everything. And if you should lose, your house, your property, and other assets will be at risk.

Forming an LLC takes some legwork, preparation, and money. After you chose a name and make sure it’s not already being used, it’s time to file articles of corporation. Depending on the state you live in, expect to pay between $100 and $800. In Kentucky if you forgo the ease of having someone else do the heavy lifting for you, it will only cost you a $49 fee paid to the State Treasurer to file your articles of corporation.

Some states also require an operating agreement that outlines how your business is run; Kentucky, however, does not. You’ll then need to get an EIN (Employer Identification Number), which is free and can be obtained online at the IRS website. Keep in mind though, that you can only register for one EIN at a time. At this point, you can separate your personal and business assets. This is the main advantage for forming an LLC as an artist or freelancer.

Finally, you’ll need to register for state tax and unemployment insurance. Even if you happen to be your only “employee” you will still need to do these things in order to be in compliance of state law.

Depending on the nature of your work, forming an LLC might be overkill. Many artists and members in what is termed the “creative class” keep it simple. And, unless the kind of work you do expands to the point that you need to bring in extra help, you will want to seriously consider keeping your work life as least complicated as possible.

If you’re reading this and your business or business concept doesn’t fall under the umbrella of the “gig economy” or you don’t identify as part of “the creative class,” keep in mind that every entrepreneur has to make the decision at some point whether to operate as a Sole Proprietorship or as an LLC.

Help your accountant, help yourself: a few tips for home-based entrepreneurs

 

A 2013 article from Small Business Trends stated that 69% of entrepreneurs in the United States start their businesses at home. This makes perfect sense. Many new businesses are in part or entirely operated online. As people buy more and more goods and services online, there’s less need to take the expensive risk of investing in a brick and mortar business. Moreover, if you know what you’re doing, you can help yourself – and your accountant – come tax season.

Although it takes additional time and a few extra steps, you can really help yourself by understanding the upside of claiming a deduction.

First if all, you know need to know what you can and can’t deduct. It’s a good idea to check with the IRS regularly to see if these things change, but here are a few things you can deduct.

The cost of a home office

In order for this deduction to pass any potential audit, you need to make sure the space you call your home office is a separate space or separated and dedicated space in your home. It doesn’t have to be its own room, but it can’t be a multipurpose space, either. For example, many people use an empty additional bedroom as a home office. Others have a separate studio or redesigned barn they use for a home office. If you are using a corner of your basement, that’s fine, too. Your home office doesn’t have to have four walls and a door.

But you can’t set up computer desk in the corner of a guest bedroom or nursery and call it your home office. The key here is that it must be a regular and exclusive space you use to run your business.

You must also be able to show that your office is the principle place of your business. Even if you meet clients other places, you need to be able to show that you do the majority of your work in your home office.

Keep in mind that the IRS only allows up to 300 square feet. But they do allow for $5 for every square foot up to 300.

Technology and technology purposes

It’ll be a hard sell to convince anyone that if you have one computer that you are only using it for business purposes. If you do that, though, you can deduct the cost of depreciation.

If you decide to purchase a dedicated business computer, you can write the cost of it off. After that, you can write off the cost of depreciation. You can even deduct based on the percentage of use. TurboTax is very helpful with this.

You can also write off the cost of a dedicated phone, whether it’s a cell or landline.

It’s worth the hassle

When you’re starting a new business, whether you operate it out of your home or not, every penny counts. Staying on top of and taking advantage of tax laws can help turn a slow first year into a much better second year.

The most important thing to keep in mind is that keeping track of all your expenses, and keeping all of your business receipts will make it easier in your end of year accounting and tax preparation. You will save yourself and your accounant time, money, and headache down the road.