Managing Financial Transactions, *Bookkeeping Basics* and Small Business Tax Tips


Published on founder covers the critical fundamentals of starting your own business including: What it means to be in business for yourself, Getting paid and paying others, Working with independent contractors, Bookkeeping – the simplified version,
Handling the more confusing deductions, and Taxes: what and when you have to pay.

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Managing Financial Transactions, *Bookkeeping Basics* and Small Business Tax Tips

  1. 1. Managing Financial Transactions, Bookkeeping Basics and Small Business Tax Tips Kevin Reeth CEO and Co-Founder, July 15, 2009
  2. 2. Topics <ul><li>What it means to be in business for yourself </li></ul><ul><li>Getting paid and paying others </li></ul><ul><li>Working with independent contractors </li></ul><ul><li>Bookkeeping – the simplified version </li></ul><ul><li>Handling the more confusing deductions </li></ul><ul><li>Taxes: what and when you have to pay </li></ul>
  3. 3. As a “Business Owner” you Must… Generate your own income Fund your expenses Contribute to Social Security and Medicare Track and report income and expenses Pay income taxes on your profit Pay taxes at least 4 times per year Track and report any payments to contractors
  4. 4. Money In…Money Out <ul><li>Create simple contract/statement of work </li></ul><ul><li>Use free/low cost online tools to invoice and track time </li></ul><ul><li>Use Paypal to get paid </li></ul><ul><li>Use a separate checking account for bills </li></ul><ul><ul><li>Preferably one with free online bill pay </li></ul></ul><ul><li>Get a separate credit card for purchases </li></ul>Goal: Get paid quickly Goal: Stay organized, avoid missed deductions Expenses Income
  5. 5. Using Contractors <ul><li>Get organized, then get started </li></ul><ul><ul><li>Independent contractor agreement </li></ul></ul><ul><ul><li>Fill out a W9 </li></ul></ul><ul><li>Report all payments > $600 in a year </li></ul><ul><li>Don’t forget to file 1099 at end of year </li></ul><ul><ul><li>to contractor by Jan 31 </li></ul></ul><ul><ul><li>to IRS by Feb 28 (paper) or Mar 31 (e-file) </li></ul></ul> Search: 1099
  6. 6. Bare-bones Bookkeeping <ul><li>Keep it simple </li></ul><ul><li>Use “cash” method </li></ul><ul><li>How much did you earn? </li></ul><ul><li>How much did you spend? </li></ul>
  7. 7. Key “Deductions” < $250,000 on equipment? Write it off Depreciation X Home office deduction (form 8829) % of square footage for office Household expenses (rent, insurance, Utilities, etc) Only 50% deductible Meals & Entertainment $.55 per mile Mileage Value of inventory on Jan 1 + $$ spent on new products - Value of inventory on Dec 31 Cost of Goods Sold
  8. 8. What Taxes to Pay and When Self employment taxes <ul><li>Social security: 12.4% of first $106,800 income </li></ul><ul><li>Medicare: 2.9% of all income </li></ul>Income taxes Based on total household income Quarterly payments 1 st quarter: April 15 2 nd quarter: June 15 3 rd quarter: September 15 4 th quarter: January 15 Avoiding penalties <ul><li>No penalty if you pay either: </li></ul><ul><li>The same amount you paid last year </li></ul><ul><li>90% of what you should pay this year </li></ul>Penalty for underpayment Interest on the amount of underpayment, currently at 4%
  9. 9. Tips <ul><li>Track/save everything – you can always figure out details later </li></ul><ul><li>Cashflow is king - negotiate everything, buy used, and barter </li></ul><ul><li>Value your time - embrace technology </li></ul>
  10. 10. Resources Nolo’s Small Business Taxes Online services Home office (Form 8829) Profit & Loss (Schedule C) Tax forms 1099MISC http:// Online bookkeeping Paypal Online invoicing and time tracking Sample independent contractor agreements