Managing Financial Transactions, Bookkeeping Basics and Small Business Tax Tips Kevin Reeth CEO and Co-Founder, Outright.com July 15, 2009

Topics 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 Taxes: what and when you have to pay

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

Taxes: what and when you have to pay

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

Money In…Money Out Create simple contract/statement of work Use free/low cost online tools to invoice and track time Use Paypal to get paid Use a separate checking account for bills Preferably one with free online bill pay Get a separate credit card for purchases Goal: Get paid quickly Goal: Stay organized, avoid missed deductions Expenses Income

Create simple contract/statement of work

Use free/low cost online tools to invoice and track time

Use Paypal to get paid

Use a separate checking account for bills

Preferably one with free online bill pay

Get a separate credit card for purchases

Using Contractors Get organized, then get started Independent contractor agreement Fill out a W9 Report all payments > $600 in a year Don’t forget to file 1099 at end of year to contractor by Jan 31 to IRS by Feb 28 (paper) or Mar 31 (e-file) http://blog.outright.com Search: 1099

Get organized, then get started

Independent contractor agreement

Fill out a W9

Report all payments > $600 in a year

Don’t forget to file 1099 at end of year

to contractor by Jan 31

to IRS by Feb 28 (paper) or Mar 31 (e-file)

Bare-bones Bookkeeping Keep it simple Use “cash” method How much did you earn? How much did you spend?

Keep it simple

Use “cash” method

How much did you earn?

How much did you spend?

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

What Taxes to Pay and When Self employment taxes Social security: 12.4% of first $106,800 income Medicare: 2.9% of all income 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 No penalty if you pay either: The same amount you paid last year 90% of what you should pay this year Penalty for underpayment Interest on the amount of underpayment, currently at 4%

Social security: 12.4% of first $106,800 income

Medicare: 2.9% of all income

No penalty if you pay either:

The same amount you paid last year

90% of what you should pay this year

Tips Track/save everything – you can always figure out details later Cashflow is king - negotiate everything, buy used, and barter Value your time - embrace technology

Track/save everything – you can always figure out details later

Cashflow is king - negotiate everything, buy used, and barter

Value your time - embrace technology

Resources http://bit.ly/Vn50B Nolo’s Small Business Taxes Online services http://www.irs.gov/pub/irs-pdf/f8829.pdf Home office (Form 8829) www.irs.gov/pub/irs-pdf/f1040sc.pdf Profit & Loss (Schedule C) Tax forms http://www.irs.gov/pub/irs-pdf/f1099msc.pdf 1099MISC www.outright.com http:// oe.quickbooks.com Online bookkeeping www.paypal.com Paypal www.freshbooks.com www.harvest.com www.blinksale.com Online invoicing and time tracking www.docstoc.com Sample independent contractor agreements