If you’re like me, you’ve put off doing your taxes. Today I want to introduce Linda Jones of Taykoff.com a site dedicated to helping new businesses get started with easy to follow step-by-step guidance. She’s sharing tips to help with this year’s tax season, which is right around the corner, and ideas to help make next year’s tax season less daunting.
The time is fast approaching when the taxman will be looking for his share of your money. If you don’t do it right, he may even show up at our door and insist on an audit. This possibility is a scary proposition, especially for new authors. But, learning how to set-up accounting as a writer is not as scary as it sounds. There are only three steps to starting off right.
Before we begin, I need to make clear that I am not a CPA. The following is advice from my personal experience in building several businesses. It is always best to consult a CPA before starting a new business.
Learning how to setup accounting as a writer is not complicated. There are three main areas you need to take care of:
Get a Buisness Checking Account
Step 1 – Open a business checking account
Opening an account is the first step to setting up your business. Even as a sole proprietor, you will want to keep business expenses separate from personal expenses. By doing so, you prevent the IRS from thinking you are not a legitimate business. If there is a question about this, you could lose the ability to take business write-offs.
To learn how to open a business checking account, visit Step 5 in How to Start a Small Business.
Step 2 – Choose an accounting software or process
If you are an accountant, feel free to keep track of your accounts with old fashioned pen & paper or a spreadsheet. But, if you are clueless when it comes to bookkeeping, I recommend using accounting software instead.
I use Quickbooks Self-Employed for all my accounting needs. Here are the main reasons I chose them:
- Quickbooks Software is accessible online and via a mobile app, making it easy to use.
- Syncs with my bank account.
- Notifies me when there are new transactions to categorize.
- Automatically tracks mileage. Do you enjoy writing from a coffee shop? It will track your mileage so you don’t have to.
- Inexpensive. These programs usually have a month free or a sale price for the first half year. Once it moves to full price, it’s only about $10/mo (as of this writing).
- Tracks quarterly estimated tax payments. In the US, all entrepreneurs have to pay an estimated income tax quarterly.
- Tracks my total deductions for tax time so I can maximize my write-offs.
Unless you are an accountant by trade, I recommend a software like this.
Step 3 – Determine if you need to pay sales tax
Some people don’t remember to check for Sales & Use Permit requirements. In the US, this is the sales tax required when selling products. For instance, if you keep a stock of your books to sell at book fairs or conferences, you may need to charge sales tax. You will want to check with your state to learn about their specific requirements.
A simple search online for “your state + sales and use permit” should lead you to the information you need. You’ll want to verify the following:
- What requires sales tax (is it only products or services as well)?
- How often will you need to make your sales tax payments to the state?
- How do you apply for a permit?
- What is the local tax rate you need to charge?
- Is there anything else you need to track (any special forms or documents)?
If you discover you don’t need to charge sales tax, fantastic! No further action is needed.
How to Track
But, if you find you do need to charge, then you’ll also want to set up a system for tracking your sales tax. A program like Quickbooks can do this for you, but it will need to be an upgraded version. The Self-Employed version does not track inventory.
You may also want a separate checking account to hold the tax payments. A separate account keeps the money aside so you don’t spend it. You don’t want to miss a payment to them because you forgot to hold the money aside.
These first accounting steps are important for all writers. These also ensure you are legal so you don’t find yourself on the IRS’ radar.
To learn more about small business accounting, please visit How to Start a Business. A guide to getting your business licensing, set up accounting, build your website and more.
Linda Jones is Founder + CEO of Taykoff.com. Taykoff is passionate about helping people get their new business in the air. From idea to licensing to setting up
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Also published on Medium.