So, you started a new business this year, are your financials and/or record keeping ready to file taxes? I hope the answer is yes, if it is I applaud you, congratulations. I have found that many entrepreneurs who start a small business have a difficult time managing the financial operations in the first couple of years. As a start up the entrepreneur is often too busy growing the business and struggle with reporting their self-employment taxes on time or keeping accurate records for their accountant or tax professional.
Check out these four bookkeeping tips every self-employed person should know.
- Pay Quarterly Estimated Taxes – Yes that is correct as a business owner or self-employed individual you will have to make estimated tax payments to IRS if you expect to owe $1,000 or more in tax when you file your income taxes. Estimated tax payments will consist of your Social Security and Medicare obligation and other taxes. If you do not make quarterly payments you will need to pay back all of those taxes plus penalty charges. Your tax professional will be able to provide you with the amount that you will be required to budget to pay your quarterly taxes to IRS.
- Keep all your receipts – Whether its office supplies or coffee while discussing business. All of small expenses can add up, so write them all off. Some expenses, like meals under $75, the IRS doesn’t require you keep the receipt but it is recommended that you keep them anyway. If you’re audited, IRS will want to see all your records, so might as well have them available.
- Open a separate bank account – Make sure you have a separate bank account for your business. Try to use a debit card or check for all of your payments and purchases, this will allow you to have record for all your transactions in one account. Don’t put money earned from your business into your personal bank account. You must keep the two separate. If not, you won’t be able to distinguish between the two and that could have an effect on your taxes.
- Get help – It is not necessary to have a bookkeeper record every transaction for you; however, it is smart to have a tax professional or bookkeeper look over your books monthly or quarterly to make sure you are ready at the end of the year. Plus, be able to stay organized, ensuring your billing is current and expenses are properly recorded.
Having an organized bookkeeping system is important must be established to manage your income and expenses. Even if your business simple or a hobby that is creating an income, bookkeeping is still a must for tax purposes and for knowing how your business is doing. Therefore, get organized, having a box of full of receipts and check stubs is not accounting. Instead decided on an accounting method that works for you and enjoy your business