 Hello everyone. Can you hear me okay? It sounds really loud up here. Can you hear me way back there though? Is it good? Okay, how's everyone doing today? Well, that's great to hear. Everyone seems super pumped up to learn about accounting and taxes. Yeah, yeah, woo. I love it. So real quick Just so you know who I am and why I might be a little qualified to talk about accounting. I Own a business. I've owned a few different businesses over the years And then I have a few plugins the main one quiz and survey master and then I'm the lead organizer of word camp Jacksonville, Florida And I have a website and a Twitter. So if you ever want to look me up Disclaimer before I get into anything I am not an accountant everything I'm going to talk about is Experience and tips I've learned over the years from running several businesses as well as consulting with my accountant But I am not an accountant. So I just want to throw that out there and Then you should also consider booking time with an accountant as they may be able to clarify some things as well as find Tips and best practices for your particular business Any questions on the disclaimer before I proceed? Okay, so the very first thing I want to talk about is knowing your business structure Now for a lot of people they wait to the end of the year or at tax season and they don't really have any business structure So they didn't know exactly what they should be worrying about or what they should be keeping which they should be holding on to What could be deductible in their current business. So knowing your structure when you get started is probably very important in both and both a legal aspect as well as taxes So the most common for people in this industry or freelancers or small agencies is usually either a sole proprietorship an LLC or an escort Anything above those and beyond that's probably a little bit outside the scope of most of the people here So those are the three I'm going to talk about today The sole proprietorship and LLC there's a really big difference in the eyes of the law But in taxes, they're the same exact thing when you go to file your taxes the LLC sole proprietorship They're pretty much identical and you can file them almost the exact same way they're both Known as something called a pass-through entity and essentially all the money in Your business account or any money any income you come in you get received It's pretty much treated as all your income Whether if you have a separate business account and you keep the money in there and you only take out a small portion It's still technically all your income because they're all passed through entities Now the difference here with the escort is that it's Slightly different in that you were more of an employee and then the income business is slightly different than your personal income So it helps with a tax break, but it's not super big tax break until you get past the $30,000 mark So usually when I'm helping people get started where they're gonna start it I recommend starting with an LOC and then once you pass 30,000. I suggest going to an escort For tax purposes Obviously consults your lawyer as well to see where you would best stand to start with but for tax purposes Usually start with LOC and then you transition to an escort down the road. Does that make sense? Did I lose anybody? No, okay, so the next thing is all these forms and paperwork and stuff that no one wants to deal with 1099, W9, W2 Those are all random forms. Most people have no idea what those are and most of the time you probably won't deal with them I will have the slides available afterwards for those who are trying to catch pictures. Uh-oh Well, Sean is Fixing that the first form is 1099 Essentially, this is what you'll use for your contractors and then advice diversity if you're being contracted to the 1099 is the the 1099 form so If you make more than six hundred dollars from a client Usually they're gonna ask for something called a W9 and that's where you're gonna fill out You know this cool paperwork just saying who you are blah blah and then Drive it back. No, I okay anyways So then the 1099 form is what says hey, this is how much I've paid this person So essentially the same thing on the opposite side if you have a contractor if you have lots of work Lots and lots and you have hire on a designer or you bring on maybe a developer and you have some work to send to them You would do this the opposite way You would collect a W9 from them and then issue them a 1099 if they have over six hundred dollars throughout that year And then at the end of the year when they're doing taxes They're gonna use their 1099s and you'll use your 1099 1099s to show how much income you've made through that avenue Now there's a few different ways you can keep up with your W9's either as You have contractors you can ask for W9 as soon as you bring them on or once you get to this is $600 mark Personally, I'd rather just get the W9 when I first bring them on so I don't have to worry about tracking them down afterwards Some contractors will disappear on you eventually So if you were to contract out some design work and velper work and then at the end of the year Remember you didn't collect the W9 yet and then try to hunt them down. It might be difficult So usually I collect the W9's right up front. That's that's just personal preference and The W2 it for employees You would issue out W2's and then contractors would be 1099s But essentially those two forms are the same thing there is pretty much saying how much you've paid them or How much someone's paid you if you're an employee or a contractor? Quarterly estimated taxes a lot of people don't do this I know I didn't to start with but you really should Essentially the IRS expects any profitable business to make quarterly taxes So an unprofitable is defined as making over a thousand dollars during the year Most people that'll be a client or two So most people in this industry once you start freelancing or doing agency work You're gonna be profitable enough that you're supposed to do this However Now while they can you can be penalized if you're a small business the penalty is usually very small So that's why I didn't do it the first little bit, but you're supposed to so and you there's a variety of ways You can do that, but usually it's essentially say last year you made 30,000 hypothetically, so then this year you would make four equal payments of 7,500 so just as throughout the year. That's how you would estimate it until you get enough Experience and your belt to kind of estimate how much you're gonna be making this year But most accountants recommend just taking how much you made last year and it's playing up into quarters And then making that every quarter does that make sense? Yeah, I'm at yeah taxes on this 75. Yes, you're not gonna be paying your entire income in the taxes You know sorry just to clarify Track your income. I've helped a lot of freelancers over the years and one thing I've found is that a lot of them Don't really keep track of how much money they're owed or how much money is out there? What kind of income they're expecting and That's not probably a good idea. You probably should know how much money is out there I was helping a freelancer about a month ago who didn't wasn't even sure which invoices they've sent out so you can't make money if you don't send out invoices first of all but Tracking your income is vital so you can one see how much money you're expecting to come in how much money You're making where you're making that money from say you have a variety of different services You offer by keeping track of this income into and you can categorize it you can see which services are profitable Things along those lines, so it's pretty important to track your income and then if you're tracking that you want to keep all You the records accurate So in this case you want to stay on top of your books and It can be time-consuming depending on what you exactly do what services you offer what kind of payments you take But for most people who are just taking maybe a client or two at a time this won't really take that much time So essentially when a log all your expenses and payments as they happen Some people love to wait maybe once a month once a week once a quarter to go in and try to reconcile all the receipts and all They're paid invoices and then once you get to that point you'll be like oh, okay I've just said I've just set aside six hours this coming Sunday, and then you're not going to want to do it So no one wants to do accounting stuff for six hours So if you do it as you go you're more inclined to actually do it Now expenses the log there's a lot and this is not even an inclusive list, but this is most of the big ones for our industry Purchases such as like computer printer accessories office applies your contractors Obviously you want to keep track of how much you're paying your contractors Office your co-working space Advertising business cards Facebook ads Twitter ads All of your legal your lawyer stuff all those things legal fees mileage gas work camps meals Meals for most meals if it's business related and it's under seventy five dollars You don't have to keep the receipt, but you should Because if you were to be audited by the IRS and you don't have your receipts It's kind of hard to prove that it was actually it actually happened and all this fun stuff So I keep all of my receipts that are business related, but technically under seventy five you don't have to It has to be business related with somebody. Yes now From there over seventy five then you have to have a receipt no matter what but for most cases I always keep the receipt just to have it Clothing a lot of people love to write off their suits or they're really dressed dress nice shirts and their dresses Because they're gonna go meet clients in these clothing technically you can't The clothing if you can wear it in another setting. It's not technically Required for your business so this outfit. I cannot write off of my taxes now If it had my company logo, and I could only wear it at word camps or that scenario Then I could possibly write it off as taxes because I could I could say that it's for business And I could usually only wear it when I'm trying to work some sort of business deal Same thing so similar avenues would be like a painter's outfit could only be done Normally most painters don't walk around their painters outfit at the grocery store So those type of clothing could be written off for the majority of everyday clothes. You don't usually get to write off Use software I've met a lot of people that try to manage this in Excel spreadsheets, and I get a headache just looking at how they do it I don't know These services make it super simple So it's usually and some of them like wave accounting has a free plan So I always suggest using a software because it'll help you categorize it'll help you with Invoicing it'll help you with all these fun things instead of trying to deal with it all within Excel and yourself I've used pretty much all of these I like wave accounting because it's free But I really like fresh books because it works really well with our industry I think and then bench isn't a software per se It starts at a hundred and twenty five dollars a month But you get like a dedicated bookkeeper to keep track of everything for you that you consult with So if you really don't like taxes or accounting or anything like that I would suggest maybe looking into bench or similar services Use an online one especially for our industry and just in general you can get one That's maybe on your computer like the quick books computer edition But in today's world that's so much easier with the online you can just give your accountant access Or send them over the details to reports rather than having to either print it out or email it over It's just a lot easier and the online ones in my experience So you want to maintain your records if you keep your receipts all year and then you throw them out at the end of the year And then IRS audits you the following year you're not going to have those receipts anymore So you want to keep those receipts and all of your documentation usually seven years If they decide to audit you you'll need to show documentation So keep copies of invoices receipts statements tax payments Etc anything that goes into your taxes at the end of the year that you would might need to show proof on Sean so So I usually keep a filing cabinet I have one at my desk at that at my home office I pretty much just keep all of my documentation for the business in that filing cabinet at this point now I have two filing cabinets, but it's usually best practice just to keep all your documentation in one place and that way you have it Yeah, as long as you have the documentation a lot of receipts a Lot of receipts will fade over time. So you should make a scan copy especially Some of the grocery store ones that paper that will fade within like three weeks So always make a scan copy regardless. I try to keep the originals, but if they fade over time It's not going to really what he's saying is he believes that you should either do all scanned or none scanned in my experience I've never encountered that you have to go one way or the other But again, that's how I've worked with my accountant. So it might I'm not the most expert to know the exact situation there. I know I don't have everything scanned I only have some of it and my accountant doesn't get on to me I'm no expert, but that's I just know what my accountant. I've worked through That's one off now. The next thing is you want to report every penny. I Know a lot of people that they get a lot of 1099s in there like well the IRS won't notice if I don't report this 1099 of a thousand dollars They might not notice this. I don't want to pay in that much taxes Don't try to get around the IRS the IRS will always find out and it won't end well ever so always report report every penny report all sources of income and Then because IRS will actually compare Your clients tax information so those that collected your W9 and and they're sending out 1099s the IRS gonna check all that and be like wait You know company a paid Joe $100 or $1,000 or $10,000 and it's not lining up over here So the IRS can actually send you something called a notice CP 22,000 which is a notice of under of under reported income and they will send you that if they catch you They will send you that document and it can lead to penalty lawsuit or jail So it's not fun. Don't don't go down that route. Don't try to go around the IRS That's fine any questions on anything. I've gone over so far before I Don't have the answer for that. I I know we I've my accountant helps me with some of this Those forms I'm not that I don't know I have enough knowledge about to be confident to tell you one way or the other I could tell you how mine is I have some my accountant kind of works through and has some dollar amounts that she looks at But I'm not an expert enough that I would want to tell you one way or there that'd be a question for your accountant Any other questions on anything we've gone over so far? Was it that boring that you're all asleep? I Know I know taxes are pretty boring. I So these are two great questions for your lawyer and your accountant because there's a lot of variables in this question But I I would start as an LLC because you want to keep your personal and your business separate and have all those great advantages of having it separate and then you switch to escort once you get around 30,000 is what my accountant said when we were reviewing this mainly because the tax breaks aren't usually Really much before that so she said you once you hit 30,000 and over that's when she suggests the most of her clients That's when I switched to an escort and that's when she suggests most people do well. Does that answer your question? You want to repeat your question? So from like a sole proprietorship and why you would want to switch that's more of a legal question but essentially if you get sued and You're separated. You're just you they can go after your personal assets like your house your car all that stuff That you don't want to lose so by working with your lawyer and establishing an identity like an LLC or escort C Corp You'll keep it separate and especially in this industry You would let you probably want to keep those things separated. Is that an answer your question? The the tax advantages it would be the main reason that most of between LLC and escort Most of the legal aspects are the same I'm no legal expert. There are some distinctions, but in my experience from the things I've switched over it hasn't really done anything to the tax advantages were the main reason I switched Yeah, in my experience with my businesses and then what my accountant suggested is usually the 30 40,000 range is when we start looking into those There's a special form that my accountant fills out I don't know the exact number all the time ahead, but it's it's a fairly simple process You have to go through a certain process to do it, but it's there's no set date that you'd have to do it This is more of an accounting talk So I don't I'm not nearly an expert in legal. I'm definitely not an expert in accounting, but I'm much farther away from lawyer But there's a variety of ways you could turn go into an LLC You can go like an online route like legal zoom you can go meet a lawyer in person. There's a lot of varieties I always suggest that this is your first business to go talk to a lawyer That way you're making sure you have all your eyes dotting your T's crossed But that's come that's completely personal preference there. Does that answer your question? I guess that was my last slide so any other questions. I have not found any dissit disadvantage I'm not it. I'm not an expert here, but in my experience. There's not a venus I just didn't know about them when I started to cut my companies. So that's why I started with LLC Not at my level at least not according to my lawyer. Hopefully he's right, but There's some more legal aspects to it. We have some other entities I'm more like an employee and I like these tax-free dividends all those fun complications But it's it's not quite the C Corp level But and every state's different every like how these differences that you wanted to consult with your lawyer And I'm not an expert, but it's not in mind Well, if it's under 600 you don't have to you can still report it. It's it's not Required but it's very strongly suggested and if you can't hunt it down Then mention it to your accountant and then they have these special forms that they can issue and send to your clients But it's as long as you're reporting the income and that would fall back more on them if they're not doing their side Yes, if are you talking about quarterly estimated payments? If this is your very first year and you're just starting you have no clients from last year Then you don't usually have to worry about it this first year because you're not technically a profitable as of last year So this is a new cycle. So you're not you don't have a defined profitable entity Until the end of the year and that's when you would start making estimated court Now if you estimate a lot if you start having a lot of clients right out of the gate Then you can go ahead and start making estimated based on your traction now But if not then you can wait to the end of the year because like I said at our small levels at the penalties Not usually huge, but they usually give you some leeway Especially like if it's your first year then you don't have to worry about it right out of the gate Does that answer your question? any other questions on the exciting topic of accounting and taxes and I will tweet out on my Twitter a slide a link to the slides if anyone's interested in that and Then everyone else have a great day. Thank you