In this OWN IT Live Chat we were joined by Robert Steward and Ryan Walsh, accountants who work with the self-employed and small business owners. They covered questions about getting finances prepped for year end, and what that means for self-employed professionals.
These slides summarize some of the main ideas presented. You can read the full Live Chat Recap at this link.
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Live Chat Transcript: Managing Expenses and Year End Prep
1. Live Chat Recap:
Managing Expenses and
Prepping for Year’s End
OWN IT
The Network Dedicated to
Small Business Success
2. Live Chat Recap: Managing Expenses and
Prepping for Year’s End
In this OWN IT Live Chat we were joined
by Robert Steward and Ryan Walsh,
accountants who work with the self-
employed and small business owners. They
covered questions about getting finances
prepped for year end, and what that
means for self-employed professionals.
3. Live Chat Recap: Managing Expenses and
Prepping for Year’s End
These slides summarize some of the
main ideas presented. You can read
the full Live Chat Recap at this link.
https://www.ownit.com/communities/
ownit/posts/673776
4. Get your books 100% up to date (meaning
all account activity has been entered and
monthly statements reconciled). This way
you can give your accountant an accurate
Profit and Loss or Balance Sheet.
What's the most important thing a self-
employed professional can do to get set for the
end of the year?
5. Another thing that you want to do before
the end of the year is to make sure to
collect all of your W-9s. Normally this
should be done on an ongoing basis
throughout the year, but it is easy to forget
or to be unfamiliar with the 1099 rules.
W-9s and W-4s
6. You should collect W-9s for all the vendors
that are eligible for 1099s. 1099s are
required when payments of $10 or more in
gross royalties or $600 or more in rents,
lawyer fees or compensation are made are
made to unincorporated business.
W-9s and W-4s
7. In addition to W9s for contractors, all
W4s for employees should be
collected and verified. W9s should be
on file for all of your subcontractors/
v e n d o r s t h a t d o n o t h a v e
corporations formed.
W-9s and W-4s
8. Also, it is important that small
business owners start to think about
expenses they have coming up and,
cash flow willing, make as many of
those necessary purchases before
December 31st.
Year End Purchases
9. If you have control over in-year timing of a
purchase it is best to push it near the tax year end.
You preserve cash balance for most of the year and
can still claim an expense.
Perhaps think about purchases that you are
planning to make in the new year and think about
making them now.
Year End Purchases
10. Never make unnecessary purchases to save taxes,
only make the necessary purchases early to deduct
in the current tax year.
Don't buy things that you may need IF you get a
new contract or client. Sign on the back of a check
before signing on the front of one.
Year End Purchases
11. 1.Payroll Transactions
2.Taxation Treatment of Different Entities
3.Distinguishing Between the Tax
Treatment of Expenses and Income
Versus Actual Cash Flows
What is the biggest point of confusion when
preparing end of year finances?
12. Payroll transactions require a lot of logistics in the
accounting entries. Without the education almost no one
puts these transactions into their bookkeeping records
properly.
The employee vs subcontractor issue is one of the most
common mistakes made by small business owners and can
also be the most costly in tax penalties and interest.
What is the biggest point of confusion when
preparing end of year finances?
13. A competent accountant is
your best solution to sorting
these questions out.
What is the biggest point of confusion when
preparing end of year finances?
14. If you're serious about your business our
panel thinks that you should form a business
right away. Forming a company offers you
personal asset protection, perpetual
existence, and tax flexibility to name just a
few advantages.
Should you form an LLC or Corporation?
15. You can form businesses in most states for less than $1,000.
With an entity formed you can elect for Small Business Corporation
(S-Corp) tax treatment which may save you more than the entity
formation cost by ten fold in the first year.
The average S-Corp owner saves $1,000 to $1,200 on every $10,000
of profit as opposed to the same business filed as a sole proprietor
or partnership.
Should you form an LLC or Corporation?
16. What are the top three self-employed tax
issues that must be in place for year end?
1. Understand your expenses.
2. Keep a record of everything.
3. Understand your revenue. Get W-9s
from each of your customers or clients
and be sure you have supporting
documentation for all of your sources
of income.
17. Plan Ahead
When it comes to taxes there is nothing you can do
once the transaction has occurred. You should
always understand your options and the tax
consequences attached to each option when
making any business purchase. Ask your
accountant ahead of time so that you have all the
information available to you to make the best
decision.
18. Plan Ahead
That being said, the best tax planning action you
can take as a self employed small business owner is
the formation of an LLC or INC and furthermore
the election of that entity to be treated as an S-
Corp (requires filing of a 3 page form with the IRS,
with no filing fee). The cost associated with the
formation and maintenance are by far outweighed
by the tax savings.
19. FIND MORE INFORMATION on OWN IT
• Visit OWNIT.com for the full Live Chat recap
including additional information and links.
• Check out the rest of our helpful series.
• Join the Network Dedicated to Small
Business Success.
• Connect with thousands of small business
owners like you with our free app.
21. OWN IT is a trusted network of small business owners and
the self-employed supporting each other in growing our
businesses. Join us to make better, more informed decisions
via the experiences of experts and professionals like you.
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