Bookkeeping & Taxes for Freelancers, Episode 108

with Amy Northard on June 23rd, 2016

One of the biggest hurdles I’ve discovered for freelancers and new business owners is how to handle finances. After all, we’re experts in our craft – not accountants. The nuances of tax law or even basic money management are overwhelming.

This week we’re going to chat with Amy Northard, a certified public accountant who’s target market is freelance creatives.

Watch this episode

Show Notes

A “Quarterlife Crisis” got Amy Northard out of the cubicle and into the niche of working with creatives.
When a third party is taking out payroll taxes and paying them for your small business you can expense it as a payroll expense.
Think of liability as a credit card – you still owe the money.
You should have a separate bank account for your business because it is critical for bookkeeping.
You can work with your bank for a business account where you have your personal checking.
CPA Mobility allows you to practice in a state who’s practices line up with the state where you are doing business.
There are challenges around state taxes as they change from state to state.
International business have their challenges as they have many different rules.
Quarterly taxes are usually estimated on the previous year which can lead to an over or under payment. It is conservative to add 30% of your business profit to cover your taxes.
If you owe more than $1000 on your tax return the IRS will penalize you for an under payment.
Different states charge differently for sales on tax for services. If you are unsure, check with your state.
Shared services (like Internet service for your business or home office space) are deducted on a home office spread sheet.
Having a home office is no longer a red flag for the IRS.
Auto generated notices from the IRS are often sent when payment is missed. Do NOT panic. Review all records before paying what is sent.

Small Business Suggestions

When you are accepting payments from people, you really should consider becoming an LLC to separate you business from personal taxes.
Small Businesses usually schedule a consulting fee with Amy Northard, CPA and can then sign up for a monthly plan.
Liability Insurance can be purchased for most small businesses. This can protect you from an angry and/or dissatisfied client who threatens to sue.
An S Corp is more advantageous than a C Corp which pays taxes on the profits that are made. A C Corp pays taxes twice.
You have to take a reasonable salary when you are registered as an S Corp and making a profit.
Try to find somebody to work with that is a little ahead of you in your genre of work.
Hire a team that can be trusted and continue to grow.

Tools for Accounting

Quickbooks
Wave Apps
Excel
Lynda
MileIQ
TripLog

Important Links from this Episode

US per Diem rates
Amy Northard, CPA
Twitter