Tech Taxes

(Originally posted May 6, 2015)

Well, its May and I hope you're doing your taxes! I know, taxes were due April 15th but if you want to make tax time easier just keep up with your finances throughout the year.

Taxes are so much easier when you just get to play "fill in the blank" on tax forms instead of trying to remember where that $500 came from or where it went! Here are a few things that help me get my taxes done pretty quickly. I have a part time business so those who work full time in their business this doesn't nearly cover everything!

Separate Business Checking Account:

All sole-proprietors and small business owners should have a separate account for their business and not use their personal accounts. It's much cleaner to keep things separate and makes tracking income and expenses for the business a lot easier. You may work from home and be the only person in your business but it's still a business. Run your business like a business not a hobby, especially if you want it to grow. That would apply to bands too! If you make an income from your band, then you aren't just a musician, you're a business owner. You also don't need to form a business entity to open a checking account either, some banks require it but not all of them.

Side note: not all sole proprietors (freelancers) need to form an LLC at all. I've heard people say this a few times but basically if you aren't making much money from your side business or if you are a freelance employee that works for another business, then don't waste time creating an LLC. Just ask yourself "

Will I get sued?" If the answer is "No", don't form an LLC. How's that for business advice :) I'm serious though. Some people I've met confuse forming an LLC with the need for insurance to protect their equipment; forming an LLC doesn't magically protect you from a flood - you need insurance for that. Unless you work in a highly litigious industry and/or have a high net worth, you have a very low chance of being sued by someone. If you want to work under a different name like "John the Audio Guy" you still don't need to form an LLC, just get a DBA which is all you need to open a checking account under the name "John the Audio Guy". For those that do form an LLC, it's not that hard to do. If you are willing to put in a few hours to research so you totally understand it, there's no need to hire someone to do it for you.

Keep Up With The Monies:

Bookkeeping may drive you crazy, but just by putting some procedures in place bookkeeping can be an automatic process. You can create a simple spreadsheet or purchase accounting software. Either way, you just need to track what comes in and what goes out. One thing that really helped me is creating job numbers which is a great way for organizing everything. Every show or project gets a number, with that I create the invoice and keep up with expenses for that particular job number. It's a good way to see if a particular client is worth your time, maybe you put out more in expenses than the job is worth...time to let that client go!

Mileage:

Its really important to keep up with the miles you put on your vehicle in a year for business purposes, especially if you use your personal car for business. Leave a notebook in your car or use your phone to take down the miles traveled so you can properly write it off on your taxes. So much easier to track the miles rather than try to guess. 

Don't Spend It All:

If you make an income from your business you will have to pay taxes on that income. So, don't spend all the profit from the business and don't buy equipment you don't need to keep from paying taxes. We are in business to serve our customers and do fulfilling work but don't forget, if you are in business you need to MAKE MONEY. I don't just buy frivolously to keep from paying Uncle Sam, the bigger the tax bill the more I made this year - Hello! I do take every single deduction possible to keep from paying Uncle Sam too much, but make no mistake "Show me the MONEY!" Uncle Sam gets his and but I get mine!

(that last sentence sounds like a line from a rap song, is it?)

That's it! Now go do your taxes :) some resources below

- Cheers! 

Should I form an LLC?: www.nolo.com/legal-encyclopedia...

Bookkeeping Mistakes: www.score.org/resources...

How to run a business: www.entreleadership.com