Year-end Money & Tax Stuff

Do you have anxiety around taxes?  

Most entrepreneurs – even me, a CPA! – have anxiety of some sort around their tax stuff.

The cost of this anxiety?  Lost sleep.  Lost energy.  Lost money.  Lost time.

The antidote for this anxiety?  Educate yourself.  

Educate yourself before you cut the check to the IRS.  When you plan ahead, and talk with a CPA or other qualified tax adviser, you can make sure that check is as small as possible.

When you have a family and a business, your tax stuff is complex.  Please don’t try to go it alone.  Get a CPA to partner with you throughout the year so that you minimize your tax liability.  Your tax adviser should have your back, all year long.

Hire a pro.  ‘Nuff said?

In my corporate career, I spent 14 of my 15 employed years doing taxes.  Big and small businesses.  Rich and average families.  Full disclosure – I’m a CPA but I do not prepare taxes for individuals or businesses.

I hate seeing people pay more taxes, or lose sleep, because they don’t understand these issues.  

Note, I'm not providing any tax advice here, I just want you to please talk with your CPA or tax adviser about how your business is impacted by these issues.  

Take some time to craft a profit plan for 2014.  

Not just revenue (which of course is super important) but profit.  It’s your profits which will pay for vacations, retirement, college savings for your kids.  Plan out your revenue and how much you can invest in your business in the form of coaching, training, support from team members, and so on.  When crafting your cash flow plan, don’t forget to include paying down credit cards if you have invested in your business.  Your tax adviser can tell you when to plan for large purchases.

Get your 2013 money house in hand.  

Have you touched your books in 2013?  Time to get things organized so you can hit the ground running when Jan 2 rolls around.  If you’re using QuickBooks, it shouldn’t take too long to update your activity for 2013 income and expenses.  If you’re not using QuickBooks, pull together your receipts for expenses, invoices that you sent to clients. Total up everything so that you can give it to your tax advisor as early as possible.   

  • Check out www.shoeboxed.com for getting your receipts scanned in.
  • Total up your mileage – you don’t want to miss out on this valuable deduction – review your calendar for trips out of the house for networking meetings, client work, supply runs, trips to the airport.  Don’t forget tolls (particularly if you have EZ Pass or the equivalent).

Talk with your tax adviser in December.  

  • If your income (for your biz or for your family) changed drastically from 2012 to 2013, there are things you can do to be tax efficient (that’s a fancy word to save your tax dollars).  Your tax advisor is the only one who knows your tax and financial situation and the best way to reflect any upcoming income or expenses planned for your business.  Once the ball falls at 12:00 AM on January 1, you can’t make many changes which will impact your 2013 taxable income (retirement contributions can be the exception to this rule).
  • Think about retirement.  If you’re employed, you probably have a 401(k) to save for retirement.  As an entrepreneur, it’s up to you to fund your retirement.  There are loads of options for self employed folks.  Be sure to talk with your tax advisor and financial planner about the best investment product which will maximize your savings and reduce your current taxes.
  • Tax installments – time to plan for your tax liability if you haven’t been doing it all year.  Find out how much you owe on Jan 15 (as an estimated installment) and the total tax liability due on April 15 (any installments paid will be applied against the total liability).  Have a plan so the cash is handy when these payments are due. 

Did you make payments to another business totaling over $600?  

Then you may need to prepare a Form 1099 to tell that business how much money you paid them.  There are loads of rules around this (so talk with your tax advisor about how it impacts you directly).  This is a confusing topic, so here are the highlights, written for the perspective of a solopreneur who has other businesses provide a service.  Think of if you hire an assistant, a web designer, graphics work, bookkeeping, etc.

  • The purpose of the 1099 is to ensure that businesses are reporting their income on their tax return.  It’s up to the payor (the business that paid for and received the services) to report this info to the IRS and the payee (the business that provided the services)
  • If you pay more than $600 to a business which is a sole-prop (not a corporation) - issue a 1099
  • If you pay more than $600 to a business which is a corporation - no 1099 needed.
  • If you pay for a service using your credit card - no 1099 needed
  • Your bookkeeper or tax adviser can complete the form for you, but it’s your job to make sure the right info gets on the form.
  • Get a W-9 from your service providers – it’s how they declare what type of business they are (from a tax point of view – sole-prop or corporation) and provides the tax ID for 1099 reporting purposes.  
  • The filing deadline is Jan 31,so you need to get your info gathered together now.
  • Here’s an example – Suzie Solopreneur paid $1,000 to have her website done.  
    • If she paid by check - issue a 1099 to the web designer
    • If she paid by credit card - the credit card company will issue the 1099 to the web designer.

Did you receive payments totaling over $600 from a single customer?  

Did they pay you by check, e-check, transfer?  If you haven’t provided one already, this customer will likely ask you for your W-9 so they can determine if they need to prepare a 1099 for you.  Be on the lookout for the 1099 in January.  

1099 rules are complicated – talk with your tax adviser!

What is your favorite money “thing” to get in order before January?  I’d love to hear!  Please comment below!