©2009 Natalie Fobes
The goal of any accounting system is to track your money. You need to know where your money comes from and where it goes. This knowledge helps you plan for the future, figure out your taxes and see trends in your business.
The easiest way to do this is to use a program like Money or Quicken that works with your bank. You want to be able to download your bank transactions directly into the program. You will need to enter the payee and a category for each transaction. For deposits you’ll need to enter who paid you and the category.
While this may seem like a lot of work it will save you lots of time in the future. It will allow you to track your business success and plan for future.
For example, every month or so I check to see how much money I’ve made. I compare it to previous years and can then estimate how much I will owe in taxes at the end of the year. I adjust my Estimated Quarterly tax payments accordingly.
In November I look at my tax-deductible expenses to see if I am comparable with previous years. If the deductions are less than the previous year’s I might make some purchases before the end of the year, or pay my professional associations’ dues a little early, or pay off the advertising invoice that will come across my desk in January to boost my deductions.
I can track how my marketing and promotion expenditures are doing by comparing income year over year.
Below are some of the categories that I’ve set up on my business software
Sales tax collected
Employee Wages 1099
Employee Wages W2
Storage Unit for slides/equipment
Promotion and advertising
Processing and printing
Travel other than hotel, plane, auto
Meals, in and out of town
Shipping fed-ex, stamps
Cost of materials (albums)
Sales tax is collected on retail sales only and is entered as a line item in my accounting program. I do not include it in my total income as it is only money I collect for the state. I charge sales tax on my fine art print sales, my weddings and portraits. The tax is on both services and products for my weddings and portraits.
I do not charge tax on my assignment, stock, lecture or royalty income.
Next quarter you will be required to get your local and state business licenses. After that you will be required to file forms for the state and city B&O tax (Business and Occupation) on either a quarterly or yearly basis. The state and city will let you know which schedule you are on.
If you have employees you must pay Labor and Industry and Unemployment taxes. You will be required to with hold money from their paychecks and contribute half of their medicare and social security taxes. If your employees are contractors, and you paid them more than $800 during the year, you are required to send them a 1099 at the end of the year.
Other taxes may include personal property tax on your equipment, an employee commute tax and a usage tax on equipment bought out of state that you didn’t pay the state’s sales tax on.
Taxes are complicated.
Check with a tax preparer to make sure you are doing your taxes correctly. Better yet, hire a cpa to prepare your taxes. It is tax deductible.