Post on 25-Feb-2016
description
INTRODUCTION TO SELF-EMPLOYMENT
Presented by:
Cullen G. Williams, CPA
Brian M. Carle, CPA
Jeff P. Russell, Esq.
What is Self-Employment? EMPLOYEE VS INDEPENDENT
CONTRACTOR Receive wages reported on a
W-2
Responsible for ½ FICA taxes (7.65%)
Taxes withheld from paycheck
Responsible to employer
Uses employer’s tools & resources
Receive payments reported on a 1099-MISC
Responsible for 100% of FICA taxes (15.3%)
No taxes withheld
Responsible to self
Uses own tools & resources
Business Vs. Hobby 1099-MISC received does not always mean you have a
business
Profit motive
Level of personal enjoyment
Examples
Mary Kay
Making furniture
Drag racing
Choice Of Entity Sole Proprietorship
Limited Liability Company (LLC)
S Corporation
C Corporation
Partnership
Business Deductions
ORDINARY & NECESSARY ALLOCATION OF PERSONAL USE Examples could include, but are
not limited to:
Cost of product sold
Insurances specific to the business
Legal fees for establishing business
Accounting fees for bookkeeping, planning, and tax preparation
Certain office supplies
Certain travel
Examples of personal use items typically include, but are not limited to:
Automobiles
Cell phones
Computer & internet
Meals
Documentation, Documentation, Documentation!!!
Business purpose
Amount spent
Receipt, credit card/bank statement, etc
Cell phone logs
Mileage logs
Repair receipts
Vehicle registrations
Sample Mileage Log
Separate Business & Personal Items
Separate bank accounts
Business revenues and expenditures in business account
Personal revenues and expenditures in personal account
Tax Implications for Poor Record Keeping
No Expense Records W/Expense Records Difference
Gross Revenue $ 30,000 $ 30,000 $ -
Expenses - 15,000 15,000
Net Taxable Income $ 30,000 $ 15,000 $ (15,000)
Federal Income Tax $ 7,500 $ 3,750 $ (3,750)
State Income Tax 2,385 1,193 (1,193)
Social Security & Medicare 4,590 2,295 (2,295)
Total Tax Liability $ 14,475 $ 7,238 $ (7,238)
Using Technology To Track Business Finances
Spreadsheets ( Microsoft Excel) – Sample income statement posted on the “Resources” tab of our website
QuickBooks
Apps
Sample Income Statement
Steps To Help You Succeed Quarterly tax planning
Making estimated tax payments
Set aside money to pay quarterly estimates
Retirement accounts
Health insurance
Questions?
Contact UsCullen G. Williams, CPA
Williams & Associates, P.A.11 Debeck Drive
Holden, ME 04429ph 207-941-9810 EXT 17
f 207-941-9432CWilliams@waacpas.com
www.waacpas.com
Brian M. Carle, CPA
Williams & Associates, P.A.11 Debeck Drive
Holden, ME 04429ph 207-941-9810 EXT 16
f 207-941-9432BCarle@waacpas.com
www.waacpas.com
Jeff P. Russell, EsqRussell Law, PLLC16 Sunset Avenue
Hampden, ME 04444ph 207-735-6361
Jeff@Jeffrusselljd.com