Tax planning advice for the self employed.

March 26, 2007 1:57 PM

Tax planning advice for the self employed. The web is full of articles, the bookstores are full of guides. But there is so much "get rich quick" and "pay zero taxes" crap out there that I am not sure where to go for good, solid tax planning advice.

Is it better to operate as an LLC? An s-corp? What expenses are deductible? What is a good system of recordkeeping? What records should be kept? If I have two related business pursuits, should I keep track of them separately or together? And so on. I know I need to see an accountant, but I'd like to be as educated as possible. Right now I am paying a rather high percentage of a rather small income in taxes. I'm not anti-tax, but I am very pro-eating.

So, what books do you recommend? What websites have accurate, useful articles? What has helped you better understand managing finances as a self employed person?

posted by Nothing to work & money (5 comments total)

The LLC vs S Corp is more of an accountant question. Same with the expenses -- it'll depend on what type of business(es) you have.

As for day to day stuff, I think the biggest thing is a disciplined approach. Whether you religiously enter expenses in Quickbooks every day/week/month or record them some other way, get in the habit of doing it. It saves loads of time at the end of the year.

I never used Quickbooks -- we were a small mom and pop and I couldn't justify the expense and hassle. Instead, I got a box and that's where the receipts went every month. At the end of the month, I emptied out the box and sorted the receipts accordingly -- meals/meetings, repairs, equipment, etc. Makes it very easy to total everything up at the end of the year for your accountant. Pretty low tech, but it worked for me.

As far as expenses go, I'd say keep everything and let the accountant throw it out later. But the more organized you are, the easier, faster and cheaper it'll be come tax time. It amazes me that people show up to the accountant's office with a couple huge boxes crammed full of receipts in no particular order and expect the accountant to sort through all that crap.
posted by Atom12 at 2:07 PM on March 26, 2007

I have a book called "Working for Yourself: Law & Taxes for Independent Contractors, Freelancers & Consultants" by Nolo Press. It was extremely useful and I highly recommend it... Nolo is well known for taking high-jargon stuff and making it human-readable. You might be able to find additional information on their site, too.
posted by crackingdes at 2:07 PM on March 26, 2007 [2 favorites]

Find an accountant. I wish I had years ago. They have saved me so much money they pay for themselves many many many times over. And I worry a lot less.
posted by Ookseer at 2:46 PM on March 26, 2007

Seconding the accountant. My father is a CPA, and so I'm lucky enough to have my taxes done free of charge - but I know what I'd be paying him if this wasn't the case, and even making less than $5000 a year, the results brought back by an accountant experienced in income tax preparation are by -far- worth the fee. Not to mention, as Ookseer said, the peace of mind that comes with knowing someone else has these things handled should the I.R.S. come knocking. ;)
posted by po at 3:50 PM on March 26, 2007

Find an accountant with specific expertise in taxes for your field. Also, accountants are not immune from the "I can get your taxes down to zero" bs. You might talk to someone at your bank about recommending a financial planner, who combines accounting with solid business planning. But again, someone who is familiar with your particular field.
posted by nax at 7:01 PM on March 26, 2007