Ya’ll. It does not matter whether you are employed by someone else or considered “self-employed”, the process is the same. Are you winning or losing at life? and what are those numbers please?
Whether you are employed by someone else or you are considered “self-employed”, the list of expenses are relatively the same. The tax code is the language that requires the data be kept separate per the type of “forms/income” you receive throughout the year.
You are an employee of someone else if you receive a scheduled paycheck and on the paycheck stub the taxes withheld are displayed. You will subsequently receive a form W2 at the end of the year that lists the annual totals. If you receive income, cash, check, deposit via square, you are most likely considered “self-employed” are most like not withholding taxes, and you subsequently receive forms 1099-Misc and 1099-K.
First, try to create and maintain a “budget”. Creating a filing system to save records, receipts, payment methods, statements, etc. I suggest using both an old school filing system with an actual filing cabinet and a digital or e-copy system on a computer.
Your filing system will contain folders for all of the expenditures that are within your BUDGET.
Income folders – Paycheck stubs (employed by someone else, often referred to as personal). Other forms of keeping track of income including personal checks written to you or your “business”, cash received, reports from square, and bank statements.
- Your bookkeeping system and records are what separate things: personal or used for business (we’ll go in depth later)
- the fact the you don’t “report” income to the IRS is what make’s it considered “under the table”. Cash is supposed to be included either by depositing it into a specific bank account or “recording” it manually in the bookkeeping, regardless of if you deposit it or not.
Expenses Folders – Include Automobile expenses (for fun, keep track of personal usage and “business” usage. There is probably an app on your smart phone to help, you can keep a mileage log in your car, or you can create a spreadsheet.
- Any reference to “business” or “business” usage is for folks who receive 1099-Misc forms for their income or 1099-K’s.
T-mobile Telephone expense
Sprint Telephone expense
Lowe’s Supplies, Repairs/Maintenance/ landscaping
allocate expenses to whatever account that makes sense to you, as long as it’s accounted for it’s fine.
Home Depot ” ”
Ace Hardware ” ”
Your budget and list of items should be tailored to you specifically. If the budget is a business one, acceptable “items used for business” can vary based on profession.
Here are some of the tasks you’ll become familiar with.
- Enter every business transaction into either a spreadsheet or software like Quickbooks. Essentially, your taking your monthly bank statements and merging them together to keep running balance of expenses, in their respective accounts. Keep receipts somewhere accessible for 7 – 10 years. If you run a paperless life, BACKUP your data OFTEN. Recreating financial statements can be crippling but if you keep good records and receipts you will be in great shape.
- Invoice clients/customers. Create a filing system for clients / customers, keep records of all correspondence ( I prefer emails), services performed, and billing information including date paid and payment method.
- Make cash deposits, or manually enter into your bookkeeping system.
- Run a weekly cash flow report and check that your data entries and filing are complete.
- Run Accounts payable, and pay.
- Run Accounts receivable, and collect.
- Check for overdo’s: Bills to pay or revenue to collect.
- Monthly bookkeeping – gather additional last minute receipts and bank statements and credit card statements to enter into software or spreadsheets. Save bank statements as pdf’s on your computer.
- Reconcile – Reconciliations are imperative to ensure there are no errors and all data is included.
- Calculate and submit sales tax, employee payroll tax, and income tax.
- Review and print financial reports like profit and loss statements and the balance sheet.
Create a folder on your desktop or somewhere on your computer to file documents and separate things by year. Statements, invoices, TAX DOCS, etc… Create folders within the folder to separate items and label them specifically by type, month, and year.
More detailed info to come and check my website for more information and templates http://www.paulinestaxservices.com