Checking; contributions; dining; home storage

Because Ron sent several questions look for my answers after each question.


Hi June,

I initially found you because I was looking for information on business checking online. The fees, beginning at $12 monthly (for the least expensive option) seem unnecessary, and as I have been keeping solid records since beginning my consultancy last year, think I’m going to stick with the personal account for now. Nice to see someone provide a good rationale for what seems a rational choice.
Ron refers to these posts on business checking accounts.

So now I’m writing because I’ve just finished reading your book Self-employed Tax Solutions (terrific – thank you! everyone should follow your New Year’s Eve/Day tip!). I agree. I’ve been tracking all my expenses and incomes meticulously, but you gave me some other good points to think about. Here are some questions I have, based on the book scenarios:

1) My kids’ sports leagues all solicit team sponsorships from local businesses. But in your book, you suggest this might not be a wise write-off for indies. Can you elaborate? Should I not do it? And what about sponsoring the softball team that I play on myself?
A quick overview on charitable contributions made by sole proprietorships -- indies: They are not deductible as business deductions. They are personal deductions. Advertising is deductible. So $100 to your daughter's soccer team -- not deductible. $100 for an advertisement in your son's concert program -- deductible. $500 for hockey uniforms that have the name of your business visible to the public -- deductible.

2) I’m still hung up on the “if you have dinner with your wife …” point, primarily because you’re describing exactly what happens to us: The only real time we get to talk about the business, strategy and planning is when we dine together! Permissible deduction, right?
Dinner with someone with whom you have a personal relationship is deductible only if the reason for the dinner is business. Not that you happen to talk business while at dinner. There must be specific business goals that you work on achieving at dinner: spouse reviews brochure; spouse sketches designs for an ad. Things like that.

3) Currently, I can’t take the home office deduction because we don’t have “exclusive space” to work from. But, we do have some space that is exclusively used for storage of business books, files and materials. Can I claim that area? Yes.

Thank you – RA in L.A.
Ron
Long Beach, Calif.

Self-employed Tax Solutions: Don't judge a book by its cover.

Most authors have disagreements with their publishers. I am no different. One of my disagreements was about the cover of the 2nd edition. A broken puzzle! No way, I said. My book helps indies put things together, etc, etc, etc. Well, also, as with most author-publisher battles, I, the author, lost.

I give you this review from Amazon, yes, because it's a review an author would die for, yet mostly because Will said he read it -- albeit last -- in spite of the cover.

Thank you to Will.

And here's what Will said. [Italics mine.] After you've read his comments you may check out Self-employed Tax Solutions, 2nd here on Amazon.

Stunned by how terrific this book is, March 4, 2010
By Will Kalif "StormTheCastle" - See all my reviews

Amazon Verified Purchase (What's this?)

Preamble: What this book is and isn't. This isn't really a book that you get because you are now doing your taxes. It is a help in that regard because it will help you sort through your receipts and expenses and utilize the ones that count.. but, this book is much more suited toward helping you keep easy and straight forward records throughout your year so you can make the absolute most out of your taxes when it comes time to do them.

Okie here is my review:

Tax season is here and I ordered six of these books. Saved this one for last because it has the least appealing cover and title. Wow, was that a mistake. I should have read this one first. I slowly and laboriously read through all the other ones, after a while I was seeing double because they all repeated the same things over and over again -- until I got to this one - wham, it was like a whack on the side of the head. This book is fresh and unique. (hard to believe when we are talking taxes huh?) Hey, good record keeping is key to getting the most out of tax time. But as a independent small business owner I don't want to spend my time as a record keeper/accountant I want to spend my time doing what I love to do. Hey, voila this book simply and easily tells you how to keep records in a way that makes sense and..

And it gives you all kinds of scenarios for what is tax deductible and what is not. Business travel? Business transportation? Is there a difference? There sure is. Business meals? Have more questions? Using your car for business transportation? Spending money on things and not sure if you can claim them? This book gives you a common sense and honest approach to what is fair and deductible. And how to easily keep track of it.

I highly recommend this book. Now don't just get this book. But get it along with any other(s) you get. Order any other tax books that seem to be right for you then tack this one onto the end. Give this book six stars if I could. Breath of fresh air in the middle of a tax season hurricane.

Buy from Amazon here Self-employed Tax Solutions, 2nd

Self-employed Tax Solutions 1st Edition

Some of you have asked about the second edition of my book, Self-employed Tax Solutions, it is now available on Amazon.

The economic morass that we are all in has indies looking to increase income, cut expenses and lower the tax bite. I’d like to help and here’s the scoop on how.

As those of you who have read Self-employed Tax Solutions already know, my book provides a basic education in being self-employed. It explains things like the difference between hobby and business; when travel is deductible as a business expense; how to determine if you can deduct the costs of a home office; and how to calculate estimated tax payments. It arms you with clear, useful, easy-to-understand tax and recordkeeping basics. And it shows you how to pay the least amount of taxes legally possible. The entire Table of Contents can be seen here.

Self-employed Tax Solutions is a book of basics and none of the basics has changed since the original publication in 2005. So let me assure you that the second edition of Self-employed Tax Solutions has everything contained in the earlier 2005 edition. Nothing has been left out. Nothing has been added. Year references in examples, of course, have been updated as has the method for deducting start-up costs. Those of you with the original edition don’t need to spend your money on the new edition. Of course, you may want to alert an indie colleague who doesn't have a copy of my book that both the 1st edition --- on sale at a discount on my site -- and the 2nd edition are available.

Best,
June
[revised 1/15/10]

Indies: Do it right.

June –

I am a nuclear engineer from Knoxville, Tennessee. I just started December 3, 2007. I would like to start off without calling attention to the IRS.

I assume I need to pay quarterly estimated taxes but am not sure how to estimate them.

When was the last update of your book, Self-employed Tax Solutions?

If I use Schedule C must I also fill out the SE Form?

Your help would be appreciated.

Thanks,
Max


Hi Max,

I am not sure what you mean by “without calling attention to the IRS.” And if you mean you don’t want to call attention to yourself in the eyes of the IRS, I am still unsure.

Every new indie -- such as you – needs to get as much information about self-employment income, expenses and taxes as possible. Your goal should be to pay the least tax legitimately possible and to avoid missed deadlines and payments so that you don’t get stuck paying penalties and interest.

As in nuclear energy, the aim is economy, simplicity and doing it right. Rather than thinking of your task as an indie in terms of keeping the government off your back or out of your business affairs, think in terms of avoiding mistakes and delays that would cause problems and overpayment of taxes – in other words, learn how to do it right.

Here is my post on how to calculate and pay Estimated Taxes .

Yes, a Schedule C: Profit or Loss from Business, and a Form SE: Self-employment Tax, are part of your tax return.

My book, Self-employed Tax Solutions, just went into its 6th printing. My purpose in writing it is to give indies an understanding of how the IRS looks at self-employment and also to give them a basic foundation in income, taxes, expenses, and recordkeeping. The book does that and will always do that.

Other than an adjustment to the treatment of start-up costs the tax laws have not changed since the book was published in 2005. As you may know from reading my material or attending one of my seminars I advise indies to have a professional prepare their returns. So, when I say that the tax laws haven’t changed I mean, for example, that the method of recording and calculating business miles remains the same. Yes, the per mile amount allowed by the IRS changes every year. That is something your tax pro knows or you can look up on the IRS site. But, what your tax pro probably has not told you, nor has it changed, is that you should write down your odometer reading in your calendar on New Year’s Eve before you go out to party.

Get the idea? Hope that helps.

Best,
June

Self-employed Tax Solutions -- 6th Printing!

A little horn tooting this morning. Self-employed Tax Solutions' publisher, The Globe Pequot Press just contacted me to say that the 6th printing of my book is happening as I write this!

I'm not sure if it's because there are so many indies out there, or because there are so few accurate, easy-to-understand, books to help on indie taxes, but for all of you who bought the book, and to everyone who writes with questions, comments, and kudos, my thanks go out to you!

Southwest Takes a Shine to Self-employed Tax Solutions

I love getting feedback from readers of my blog, but it's nice, every once in a while, to get kudos from big organizations.

Self-employed Tax Solutions is a finalist for the 2007 New Mexico Book Award . The Award, which includes authors throughout the Southwest, is sponsored by several organizations including Borders Books.

Self-employed Tax Solutions is one of four finalists in the business category. Competition includes: Mastery at Work: 18 Keys for Achieving Success; The Japanese Money Tree; and Web Marketing for Dummies.

For Solutions complete Table of Contents, please visit here.

Thanks for your interest in my blog and my website. Please wish me luck and I'll keep you posted ... June

Help! I am self-employed. NOW what do I do?

June,


I recently began working for the US Dept of Commerce on a contract basis, so I have no taxes withheld and receive no benefits. I've never been a contractor before, and thus never had to pay my own taxes, so I'm wondering if there are any self-help resources out there for me, preferably any software that will do it for me??

Please help me!!
Andrew from Utah


Hello Andrew,

A word processing program cannot make you a writer. A calculator can't make you a mathematician. A software program cannot be your bookkeeper or accountant.

Switching from employee to self-employed status is daunting because nobody tells you where to start to get information -- and you need a lot of information.
As a new indie, the areas you need to learn about break down into:
*** Recordkeeping for income
*** What are dedcutible business expenses
*** Recordkeeping for expenses
*** What taxes do you pay
*** How do you pay taxes

I recommend you start by reading a short column on my website, such as: Is it a deductible business expense? and Estimated Taxes, a post on this blog.

If you like what you read there, I encourage you to buy a copy of my book, Self-employed Tax Solutions, featured in BusinessWeek. The book answers many of the most common self-employed questions in the same easy-to-understand style you'll find in my columns.

Solutions will give you a basic understanding of what it means to be self-employed. This understanding will give you the confidence to know which step to take next.

I wish you much success.

Best regards,
June Walker

A Photographer's Tax Return

I normally don't go into this much detail answering a question that comes in from my blog, but the complexity of this photographer's situation and her plea for help pushed me to do so.

Here's the question from Gwyneth in North Carolina:


Oh man. I lived in 2 states last year, and I think I have about 4 or 5 W-2s. Additionally, I did independent contractor photography work for another photographer. I was paid in both check and once in equipment. She has not given me a 1099 form. I have definitely spent far more on equipment and start-up costs than I made.

*** Do I file two different forms to the IRS?
*** My camera was purchased before I ever used it to earn money with...can I still deduct that?
*** Can I spread out my start-up costs? (website, cameras, computer equipment, etc, etc.) Or would they all be deducted for the year the money was actually spent?
*** What about cell phones? My cell phone is my only phone, so of course I use it for business AND personal calls. (this goes for my computer, clothing I bought expressly to wear while working, but that I also wear other times, etc.)

In the end, I definitely didn't make any money w/ my freelance work. I know I still need to file, and I want to do it right, but I certainly cannot pay a well-qualified tax preparer...I don't even have any of the money I made anymore. I poured it all back into equipment...and then some.

I apologize for asking so many questions. I'm sure you've answered a lot of them in various articles. I've read tons of your posts, and I find them so helpful.

Thank you!
Gwyn



Hello Gwyn,

Good Golly! You cannot file your own return. Because of the complexity of your situation I can tell by your questions that you don't know enough to do it on your own and do it correctly.

This is what I think you need to do. There are two major parts to the whole tax preparation event. The first part is the task of putting everything together properly, aka, recordkeeping. The other part is the tax preparation itself. Your part will be to get it the information together in an orderly fashion. That will take a bunch of your time and effort and patience.

Then take your records to a tax preparation franchise. Someone there will do a much better job than you can, and although they are not cheap the fee won't be in the thousands of dollars.

Here's two reasons to relax and just look at this as a chore that must be done:
Since you have more expenses than income you'll likely owe no tax.
And, you have a lot of time to do this. You need to file an extension. Read Extensions: Relax ... there's no need to file by April 15th on my website at http://www.junewalkeronline.com/index.asp?sPG=43 . An extension will give you until October 15, 2007 to file your return

To answer your specific questions:
1. You file one IRS 1040 tax return but there are many forms that are part of it.
2. You must separate both income and expenses into two areas: W-2 and self-employed.
[The equipment you were paid with is both income and expense.]
3. Your camera can be business expense. Its cost is its value on your first day of business.
4, Depending on the cost and kind of start-up costs they may be deducted all at once or over a period of time.
[The tax preparer will know how to handle that.]
5. You may deduct a business portion of cell phone and computer.
6. Street clothes are not deductible.
7. All the above will need to be divided by the number of days you lived in each state.

I cannot explain a recordkeeping system in an email or post. In the Most Simple System section of my book, Self-employed Tax Solutions, you can learn how to put your records together, simply and easily. The book costs about $13 on Amazon. If you choose, you could certainly read it and put your records together in time for the October deadline. You'd learn a lot and save yourself a lot of stress and time and money!

All this should put you on the right track.

Best regards,
June Walker

Recordkeeping: "I got it."

Dear June,

I had to write and tell you that I just finished reading your book, Self-employed Tax Solutions, cover to cover. I am an intelligent person, having graduated with degrees in microbiology and nursing and done quite a bit of graduate level work as well. However, business accounting has always been very intimidating to me, stressful, and overwhelming. this year I decided to give up on Quick Books, which I paid someone dearly to set up for me, and go back to paper, but to really learn about what I was doing. (Because my son is off to college soon and I need to double my income...at least!) Yours is the first book I read (except those warm fuzzy business books you refer to.) I got it! I set up my bookkeeping a bit more complicated than the simple system you outline (b/c I'm obsessive compulsive!) and I'm thrilled that someone has given me permission, in writing, to set it up my way.

Thank you!
Dawn Jardine, Dressmaker and Sewing Instructor in NY
Member, Professional Association of Custom Clothiers


Hello Dawn,

What a wonderful story. I fly out tomorrow morning heading to Massachusetts and then upstate New York. Despite the time crunch I had to take a moment to read your email to my daughter-in-law, an artist-writer. Yours is a such moving -- but not unusual tale. Others have told me that my book has, for the first time, given them confidence to deal with the business side of their indie venture.

When I was first writing my book and in the middle of explaining it to someone, he said, oh yeah, I get it, it's a Taxes for Dummies. I went bananas! Absolutely not, said I. It is taxes for very bright and talented people who never had the right teacher.

You are the perfect student. Thank you so much for letting me know the book's impact.

Best regards,
June Walker