Where to begin vol. 9

When paying bills or entering cash expenses that you charge back to your client (such as postage, telephone calls and photocopies), you can track this in QuickBooks Pro®. Just select the customer in the correct bill or check payment field, and it will automatically apply that expense to the correct client data file. When you arc ready to invoice that client, click on Time/Costs and select your expenses: it will insert the costs onto your invoice when billing your client.

If you have other assets that you are now using for your business such as a desk, computer, or any other general-purpose office supply, you can write it off by depreciating it over its useful life. Say you paid $250 for a fax machine the prior year and now its sole purpose is for your new company. Technically you placed the fax in service on the date the company was opened, its value is listed at $250. and you can depreciate it over five years. You would make a journal entry that would debit your Fixed Asset account, and credit your Capital Contribution account. You would then depreciate the asset at the end of the fiscal year on your tax return unless you are a Corporation. Don't forget about the handy Section 179 Deduction! This deduction allows you to fully depreciate an asset (except real estate or a luxury car *see IRS guidelines*) up to $24,000 per tax year! Right now the IRS is allowing up to $100,000 for the next few years. Trust me; you'll get good at finding the best possible deductions when preparing your taxes along with your clients! Also, don't forget that you can now write off the business use of your home to help lower your business tax liability at the end of the year. If the room you are using has 250 square feet, you can write off the entire room as long as you are using it entirely for your business. If you are storing client files and reports in your garage, you can measure the area you arc storing the documents in. and include that In your business use of the home as well. My advice is. if you're ever audited, and you have extra clothes hanging in the closet in your office, don't calculate that area in your business use. The IRS won't allow you to take the entire office if you have any personal items stored in there. This deduction will be taken on your Schedule С portion of your 1040 tax return, not reflecting on your profit & loss statement.


Now that you are self-employed, you have the liability of paying self-employment tax on your 1040 Schedule С tax return. There is a minimum earnings of $400 profit. If you earn a profit of more than $400. you must pay your FICA and Medicare, which is now called Self-Employment Tax. This is 15.3% of your profitable earnings. If you're earning $52,000 per year now. and your business expenses are roughly $15,000. your Self-Employment Tax liability will be roughly $5,661 for the year. ($52,000 minus $15,000 = $37,000 x 15.3% = $5,661). You are not allowed to take your itemized deductions before this tax is calcubted. That being said. I cannot stress enough the importance of paying your quarterly taxes! I always budget my clients' payments by- taking 18% off the top of each check received, putting it into an interest-bearing money market account, and using it for my quarterly tax payments. You do nfli want to get into a situation where you owe the IRS or State. If you set up a system and budget now. it won't financially hurt you later. Face it. we all have to pay our taxes, and just because you are self-employed now. doesn't mean that you do not have a tax liability any longer.