Bookkeeping primer for self employed individuals

1. Managing Financial Transactions,
Bookkeeping Basics
and Small Business Tax Tips
Wray Rives, CPA CGMA
Certified Public Accountant
Chartered Global Management Accountant

2. Topics
• What it means to be in business for
yourself
• Getting paid and paying others
• Dealing with independent contractors
• Bookkeeping – the simplified version
• Handling the more confusing deductions
• Taxes
• Tips

3. Welcome, business owner…
As a “business owner” you must:
Generate your
own income
Fund your
expenses
Track and
report
income and
expenses
Contribute to
Social Security
and Medicare
Pay income
taxes on
your profit
Pay those
taxes
4 times
a year
Track and
report
payments
to contractors

4. Money in…money out
Goal: Get paid quickly
Income
• Use free online tools to track time and invoice
• Use Paypal to get paid (www.paypal.com)
• Create simple contract (www.docstoc.com)
Goal: stay organized, Expenses avoid missed deductions
• Get a separate checking account
•With online bill pay
• Get a separate credit card
•With annual summary

5. Using contractors
• Make sure they are contractors, not
employees
• Independent contractor agreement
• Fill out a W9
• Report all payments > $600 in a year
– File 1099 at end of year

6. Bare-bones bookkeeping
Keep it simple
• Use “cash” method
• How much did you
earn?
• How much did you
spend?

7. Key “deductions”
Home office deduction (form 8829)
Meals & Entertainment
50% deductible
Cost of Goods Sold
Depreciation
Do you spend more than
$25,000 on equipment
in a year?
No
Then don’t worry – write it off
Mileage
$0.56 per mile for 2008
Electronic records are permitted
Value of inventory on Jan 1
+
$$ spent on new products
-
Value of inventory on Dec 31
Square footage
of office
Square footage
of residence
X
Household
expenses
(rent, insurance,
Utilities, etc)

8. Taxes
Self employment taxes • Social security: 15.3% of first $117,000
income
• Medicare: 2.9% of all income
Income taxes Based on total household income
Quarterly payments 1st quarter: April 15
2nd quarter: June 15
3rd quarter: September 15
4th quarter: January 15
Safe harbor provisions No penalty if you pay either:
• The same amount you paid last year
• 90% of what you should pay this year
Penalty for underpayment Interest on the amount of underpayment,
currently at 3%

9. Tips
• Track/save everything – you can always
figure out details later
• Be cheap – cash is king, barter
• Embrace technology – it is your friend
• Value your time

10. Wray Rives, CPA CGMA
www.NeedaCPA.com
• wray@NeedaCPA.com
• @rivescpa