The Forms-Pay unto Caesar what is Caesar's

This is part 2 of my Tax posts, See 2 posts down for part 1 and remember, I'm not an expert so consult a tax professional with any questions.

I'm writing these posts to help those of us who JUNK as a business.

The T*a*x form you fill out for your business is the S*ch*ed*ule C as seen above.
It will be a separate page of your 1040 long form. As long as you are not incorporated this is the form you use to pay the taxes on your business.

Don't let the form scare you, there is a line to put your income, A line to put your product purchases, a line for car usage, supplies and other things you might have spent money on that are business related. Note that not all your meals and not all your travel is deductible (this is why a CPA is important) they can help with the nuances of this form.

Line 31 is your Profit or Loss and this number is then transferred to your 1040 page 1 form on line 12. You want this amount to be as low as possible, so be sure you figure in your automotive mileage and every other possible legitimate expense you can find. You will pay taxes based on this number.

Now here is an important detail. For your business income you will not only pay income t*ax*es but you have to pay the so*ci*al sec*urity/Med*ica*re as well.
Normally these are taken from your paycheck... but because you don't have a paycheck you are responsible for paying this amount directly. Here's the kicker, it's almost twice what you pay as an employee. Yep that's right as a self employed person you pay twice the SS/Med that an employee pays. This is Sc*hed*ule SE and it is a separate page. It's also called the Self Empl*oyment T*a*x.

Here's the other thing. You really should pay your taxes throughout the year. This is called an es*tim*ated t*a*x payment and there is a form (1040es coupon) that your CPA will prepare for you that needs to be sent in 4x each year. This will save you from unnecessary penalties at the end of the year and also relieve the burden of paying the whole amount at one time.
Note the *** are there to keep my blog post from being flagged and also note, that I am not a CPA or an expert and none of my advise should be taken without consulting a CPA first. As they say with medication, "consult your doctor before starting any treatment plan :)"

It's a new year, time to think about t*x*s

As a small business owner for almost 30 years I've learned a thing or two about
T* a*x *e* s and record keeping. I hear lots of questions about this subject while I'm out and about, and so I thought I'd take a moment to share what I know (which is only a little bit of what there is to know, about the subject).



It is so important to have good records for any business, and one of the only ways to know how you are doing throughout the year. As a bookkeeper by day, with a wonderful Mom, who is a CPA, I have some unique advise on this subject. So please bear with me, I'll make it all as simple as possible.

Having been A*u*dit*ed twice, I can tell you that good records are a must and being truthful is absolutely necessary.
(BTW I came out great both times due to excellent records.)

My motto is "be truthful, keep records, and when you get the a*u**di*t letter, you'll have nothing to worry about".

You need to keep track of your sales, and your expenses, That's it in a nutshell.
Your profit is your Sales minus your expenses. That is what you pay tax on.
I could go on here about Cash accounting versus Accrual account but I don't want to bore you. Most small businesses like ours, use the Cash accounting method, and that is what I'm explaining here. Note: unsold inventory is not an expense until it is sold.

How best to do this? There are several ways depending on how computer savvy you are.




The simplest way is a paper journal. Every time you sell... write it down, every time you spend money... write it down.
Have separate columns for product purchases, supplies, advertising etc.
Keep a continuous total of each column so you know how you are doing throughout the year.

(Note: Not all your product purchases are deductible as an expense. They are only deductible after you sell them or write them off. This is where a professional can be of great help.)

Having this information will help you to make business decisions as well. When to buy, when to sell, when to have a sale and even when to re-arrange your booth space to generate sales.

If you want to get a little more sophisticated you could use an XL spreadsheet (learning XL changed my life) or even a computer program like QuickBooks to keep your records (they have an online program available that is very affordable.)




At the end of the year you will provide these numbers to your accountant for your t*a*x return. I strongly encourage you to hire a CPA to do your t*a*x*es. Get a good one, they are worth their weight in gold. If you decide to fill out your own return you'll need to use a Sc*he**du**le C for you business income.

We'll talk about the Sc*he**du**le C next .
Now see that wasn't so painful.

Note the *** are there to keep my blog post from being flagged and also note, that I am not a CPA or an expert and none of my advise should be taken without consulting a CPA first. As they say with medication, "consult your doctor before starting any treatment plan :)"