Ques for those self employed/DH self employed

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amother

Brown

Thu, Jul 30 2015, 6:58 pm

My DH is self employed.
He juggles different types of work and little businesses, etc.
We have all money earned in various bank accounts, and also spend all our life expenses from there.

Problem is, we aren't sure how to calculate and report income?
How does everyone do it, when every day there's a different amount coming in/ being withdrawed from the accounts?

Our expenses are convered BH, that's not my question, we're just very confused as to how to figure out our annual income.

Anyone relate or have advice?

chatz

Thu, Jul 30 2015, 7:02 pm

The best thing is to have separate accounts (checking, credit card) for all business income and expenses.

Withdraw from there to a personal account and spend personal expenses from the personal account.

Don't mix

tigerwife

Thu, Jul 30 2015, 7:05 pm

Spreadsheets.
One file per client with dates and times of each project, bills and notes about payment.
For some I use PayPal invoices but they will cost a percentage.

I'm far from organized about it but it's better than sifting through a year of bank transactions.

amother

Brown

Thu, Jul 30 2015, 7:19 pm

Problem is that we spend the money as it comes in, so we can't keep a total of what came into each account for the week, month, etc.

It feels impossible to keep tabs on exact income when you have a few different smaller incomes and so many different expenses.

We don't even begin to know how we're going to file for taxes.

SRS

Thu, Jul 30 2015, 7:25 pm

You need to set up a business accounts and do not mix personal with business expenses except to make a transfer to your own bank account. I think you need an accountant to advise and set you up because it is clear that you need some expertise.

MagentaYenta

Thu, Jul 30 2015, 7:25 pm

amother wrote:

Your bank statements would show deposits, if you can access accounts online you can know day to day.

Consider seeing a qualified CPA.

amother

Brown

Thu, Jul 30 2015, 7:36 pm

Thanks you very much to everyone who replied.
How much would it cost to hire a CPA to manage all our monies business and personal?

Fuchsia

Thu, Jul 30 2015, 7:40 pm

amother wrote:

Thanks you very much to everyone who replied.
How much would it cost to hire a CPA to manage all our monies business and personal?

Hire a competent accountant.
I don't know exact numbers, but it shouldn't be unaffordable. Contact two or three to get price comparisons.

Thu, Jul 30 2015, 7:42 pm

I don't think you need a cpa to manage your money. You might need an accountant or bookkeeper to teach you a system of HOW to manage your money.

I have a billing program that I use such keeps track of how much I am paid (and owed)

Does your dh not invoice his clients? Give receipts? It's old fashioned, but maybe just buy him a yellow receipt pad and he can make it a habit of writing each client a receipt as he does each job. Then he'll have the copy for your records.

amother

Lavender

Thu, Jul 30 2015, 7:56 pm

I am an accountant and my dh is self employed. Here's how we do it:
We have a separate business account and personal account (as others already recommended- this is vital in not only keeping things organized, but avoiding problems if you're ever audited). Every week, we pay ourselves a salary from the business account. This also means that we have to file payroll taxes every quarter for the business, (which, incidentally will prevent us from owing huge amounts of money in taxes at the end of the year). At the end of every month, if we still need more money for bills, we take a distribution from the business account.

The business is an s-corp, which means it's not taxed separately, rather it passes through into our income, and is taxed on our return. This is what works for us, however you should definitely speak to an accountant.

chatz

Thu, Jul 30 2015, 8:37 pm

At the minimum, have a spreadsheet that both you and your husband can access easily (shared on phone or computer) and record each business income and expense as it happens.

Date, payor/payee, income, expense, notes

Include anything that you are uncertain about but mark it with a ?

You should be able to get a rough idea of total business income less total business expenses per month to see where you're holding. Personal expenses don't count in this.

Amarante

Thu, Jul 30 2015, 8:47 pm

In Los Angeles, a basic bookkeeper starts at about $25 per hour but that is guaranteeing certain number of hours.

However, you need to keep records for the bookkeeper to be able to do your accounts.

The accounts can be pretty basic - your business/clients/project on a sheet - for each month or project (or whatever makes sense) you enter all money received. You then enter all costs relating to the client/project or business.

Since you are not incorporated, it's not critical that you strictly segregate income streams because you are not going to be filing a separate tax return for a corporation. However, you still should keep track of withdrawals for personal expenses.

It really isn't difficult - it just takes someone making the time every day or every few days to enter income and expenses. If you don't do it now, how can you hope to figure it out when you need to file taxes.

You could pay someone to do this but, IMO, it really would be a waste of money to throw your checks, receipts and whatever to a person and have pay them for what is simple organizational tools. You want to pay people for expertise you can't do yourself - or if you are so busy with paying work, then you hire people because you figure your time is worth more than what you are paying the person.

You pay someone to do your taxes of course because that requires skills although some people do their own - but even then they expect you to provide them with the data or else they will charge you to go through your shoebox of receipts and cancelled checks. LOL

If you really don't understand the basics of what is income and what is a business expense, get a very basic book or make an appointment with a bookkeeper who will help you set up a system that works for you.

Miri7

Thu, Jul 30 2015, 10:50 pm

There are online software programs like fresh books where you can track payments and business expenses and run reports. Will also track time and generate invoices. When I want to know my income I just run a report for the year.

The main thing is to pick one system and stick with it.

TwinsMommy

Thu, Jul 30 2015, 11:02 pm

one neat way to do it (I have multiple sch C's) is 12 manila envelopes per year for income and 12 manila envelopes per year for expenses with the months of the year on them--- Jan 2015, Feb 2015, etc etc. In each income envelope you can keep track of each month's income (for one of my businesses I even used to break it down by type of income when I wanted to track which leg of my business was doing well and which needed boosting)---- photocopies of checks paid to your biz acct or credit card deposit receipts, etc. In each expense envelope you can put receipts for things you spend for the business--- on each envelope it can then be tallied by category so you know your advertising expenses for January, your employee $ for January, etc etc. And you can clearly see how much you paid your personal account FROM the business account.

Once your business PROFIT or income is in your personal account, THEN you can break down all of your bills and family expenses and see if you're paying yourself the right amount or if you need to increase business or let some business expenses go etc. I have a minimum amount I KNOW I can count on each month from my business. In a hard month for the family (my husband doesn't work all summer for example and he doesn't bring in an income during the summer-- hooray for education) I can put more money in the personal account from the business.

I don't have an accountant or anything-- I just try to stay organized and have one day a week (notated in my datebook with a $) where I do bank deposits, pay myself from the biz account, pay bills from the personal account that are due, and keep track of all expenses. When you have all receipts in one place tallied by category and month, schedule C works itself out while you take a nap (not QUITE, but..... lol)

Thu, Jul 30 2015, 11:17 pm

Oh, by the way, op, if you're being supported entirely through your husband's self employment, (and apparently this is the first year with this arrangement) you are going to be SHOCKED at the amount of tax you're going to owe come April.

For that, you SHOULD see an accountant now. Self employment tax is not pretty.

amother

Oak

Thu, Jul 30 2015, 11:33 pm

amother wrote:

Thanks you very much to everyone who replied.
How much would it cost to hire a CPA to manage all our monies business and personal?

We've recently opened our own business and we are having same problem. People told us quickbooks should help with this but it's not. We just contacted an accountant, it should come out to about $1000 a year. Can't really help you out more because we haven't set up everything yet, but this is our next step.

agreer

Fri, Jul 31 2015, 12:26 am

We save for taxes. We take off 25% of every check that comes in and out into a separate bank account. After we pay our taxes for the year, the remainder goes to our savings account.

Show got the idea to save as we go from Dave Ramsey.

Amarante

Fri, Jul 31 2015, 7:26 am

Most definitely you will need a CPA/accountant for end of year taxes but the CPA/accountant won't be able to effectively calculate if you don't have your basic accounts in order for them to calculate taxes.

And yes - self employment taxes are a beeyitch since you are paying both employee and employer share of payroll taxes. When I did it last, that was about 15%. However, that's on AG and so a self employed person with a good accountant has LEGITIMATE ways to decrease through business deductions. But in order to support deductions, you need to have the records backing you up.

GetReal

Fri, Jul 31 2015, 2:53 pm

I also put aside money each month for taxes. Even if you are spending the money as it comes in why can't you record each time you put money in it take it out? When you file taxes how will you know what you can claim as a business expense?

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