Archive for taxes
One of the biggest challenges of running any business – especially your own as a freelancer – is staying on top of the financial books. As we go into the final week of the year, our friends at Outright.com have provided this handy end of year bookkeeping checklist to help you get organized.
End of Year Bookkeeping Checklist:
1.Record Transactions: Make sure you’ve recorded all the transactions from your credit cards, bank accounts and receipts. And don’t forget to check your online accounts, like PayPal, eBay and Freshbooks. Record every expense and dollar received for your business, no matter how insignificant or questionable. It’s better to have everything written down and recorded so you’ll be able to make the most from deductions—because if you don’t record it, it doesn’t exist.
2.Double Check: Make sure you aren’t missing any income or expense transactions—it’s worth it to take the time to double check. Make sure you have a digital copy of receipts from any online transactions, whether they’re sales or outsourcing work to contractors or websites, so you have a record of all your transactions.
3.Proper Categorization: Here’s where it gets a bit tricky, but well worth the time in the end. Make sure all of your income and expenses have been properly categorized. Categorizing your income (for the most part all “Sales”) is not nearly as critical as those deductible expenses. The Schedule C categories can be confusing but they make the difference; mileage under “Car and Truck Expenses” is deductible while “Other Expenses” are not. Web services such as Outright.com can do most of the categorization for you; but when in doubt, ask a professional or hire a bookkeeper.
4.Don’t Forget Mileage: Any work-related travel can count towards deductions. Make sure you’ve recorded all the time you’ve spent in the car going to and from work-related sites—you can deduct $0.55 per mile for these trips! Your daily commute doesn’t qualify but regardless, for many, the deduction adds up to thousands.
5.Complete Your W-9’s: To properly file a 1099 for any contract or freelance work you hired, you must have accurate taxpayer identification, in the form of an IRS form W-9. Now is the time to request the W-9 form from your contractors as 1099’s are due January 31.
6. Pay Your Estimated Taxes: To avoid penalties when taxes are due on April 15th, be sure you’ve paid enough in estimated taxes for the year. Final federal tax payments are due by January 15th. The fourth installment of your 2009 estimated taxes should bring you up to at least 90% of what your final total taxes are for the year. If that’s still too confusing, pay the same amount as you actually owed from last year. Here’s how: Work with the IRS.
7. Triple Check Profit and Loss: Finally you should look at your profit and loss statement for the entire year. If you can’t easily get one from your bookkeeping software, find another. Do the numbers seem reasonable compared to how your income and expense totaled in prior years? Yes, we’re effectively triple checking your income and those expenses. Search your pockets for receipts, don’t neglect that credit card that was canceled because creditors are so stingy, and keep in mind that payment from your brother for some consulting.
Outright.com is the free online platform that manages all business finances, tracks income and expenses, and automates tax preparation. The company tracks over $1B in income from self-employed and micro-business transactions. They’re kicking off tax-time with their new W-9 automation to help get businesses organized for the months ahead. Visit them at www.outright.com to make sure you’re ahead of the game and not scrambling with important deadlines, looming as soon as January 31!
For the first few years that I worked for myself, I did my own taxes. Each year we bought Turbo Tax, plugged in our numbers and boom, we were done. Then we added a rental property, my business grew, and we added a few kids to the mix. I was feeling overwhelmed so I hired an accountant to help me do my taxes.
I was amazed. I was paying someone a lot of money to do exactly what I had done myself the previous years. He asked all the same questions the tax software did and I gave him all the same answers. He even complimented me on how organized I was! Right there is the secret! Get organized, know what you can deduct, and you may not really need that accountant.
The next tax season I fired him and went back to doing things my way. After almost 13 years of working for myself, from home as a freelancer, I have learned a few things. Read More→