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Bookkeeping primer
This document provides an overview of managing finances, bookkeeping basics, and tax tips for small business owners. It discusses the responsibilities of business owners, including generating income, funding expenses, tracking income and expenses, and paying taxes. It offers tips for getting paid, paying others, using contractors, keeping simple bookkeeping records, deducting expenses, paying quarterly estimated taxes, and penalties for underpayment. The document aims to help small business owners stay organized with their finances and taxes.
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Bookkeeping primer
- 1. Managing Financial Transactions, Bookkeeping Basics and Small Business Tax Tips Wray Rives, CPA CGMA Certified Public Accountant Chartered Global Management Accountant
- 2. Topics • Whatit means to be in business for yourself • Getting paid and paying others • Dealing with independent contractors • Bookkeeping – the simplified version • Handling the more confusing deductions • Taxes • Tips
- 3. Welcome, business owner… As a “business owner” you must: Generate your own income Fund your expenses Track and report income and expenses Contribute to Social Security and Medicare Pay income taxes on your profit Pay those taxes 4 times a year Track and report payments to contractors
- 4. Money in…money out Goal: Get paid quickly Income • Use free online tools to track time and invoice • Use Paypal to get paid (www.paypal.com) • Create simple contract (www.docstoc.com) Goal: stay organized, Expenses avoid missed deductions • Get a separate checking account •With online bill pay • Get a separate credit card •With annual summary
- 5. Using contractors •Make sure they are contractors, not employees • Independent contractor agreement • Fill out a W9 • Report all payments > $600 in a year – File 1099 at end of year
- 6. Bare-bones bookkeeping Keepit simple • Use “cash” method • How much did you earn? • How much did you spend?
- 7. Key “deductions” Homeoffice deduction (form 8829) Meals & Entertainment 50% deductible Cost of Goods Sold Depreciation Do you spend more than $25,000 on equipment in a year? No Then don’t worry – write it off Mileage $0.56 per mile for 2008 Electronic records are permitted Value of inventory on Jan 1 + $$ spent on new products - Value of inventory on Dec 31 Square footage of office Square footage of residence X Household expenses (rent, insurance, Utilities, etc)
- 8. Taxes Self employmenttaxes • Social security: 15.3% of first $117,000 income • Medicare: 2.9% of all income Income taxes Based on total household income Quarterly payments 1st quarter: April 15 2nd quarter: June 15 3rd quarter: September 15 4th quarter: January 15 Safe harbor provisions 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 3%
- 9. Tips • Track/saveeverything – you can always figure out details later • Be cheap – cash is king, barter • Embrace technology – it is your friend • Value your time
- 10. Wray Rives, CPACGMA www.NeedaCPA.com • wray@NeedaCPA.com • @rivescpa
Editor's Notes
- #7 - No assets, liabilities and owners equity - No debits and credits - No chart of accounts - No cash vs accrual