Never 1) pay more tax than you legally have to 2) fall behind in your taxes because I'll tell you from experience that it's a bitch playing catch up.

Any self employed person needs a good accountant - and by that I don't mean a bean counter that only adds and subtracts columns and tells you that you need to pay the governement xxx this year.

My accountant is wonderful. He will always try to find me innovative ways to save money and he doesn't charge me an arm and leg for his services. The guy I had before that was just an expensive bean counter and he cost me money in taxes that I didn't have to pay.

Shop around. Good accountants are out there. You just got to look for them.

My first peice of advice is to have your CPA do your taxes. For a couple/few hundred dollars you don't have to worry about it.

What kind of business do you have? So long as it's not a C-Corporation, your gains/losses carry over directly to your personal income, which makes doing taxes a bit easier. What information in particular are you looking for?

If you don't understand what your CPA is telling, then make them explain it again. Don't be intimidated by it. You need to understand this stuff in order to run your business properly. I don't mean every tax law and itemization, but you at least have to understand what money is taxable, why are you paying $x per year and what can you do to minimize your taxes.

I also agree that it's worth paying the CPA to do the taxes and filings for you. Make them keep you up to date on what's going on, but leave the hassles for them.

D.

As others have said, get a good accountant that you can trust and understand and who specializes in small business. For the few hundred dollars that you will paye them every year, they will save you much more in real tax money and give you huge piece of mind.

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Steve Fleck @stevefleck | Blog

Hi kitty.

Do you have any specific questions? I'm a tax guy and would be happy to help if I can. Feel free to PM me on here if you want.

Most of the literature I come across is geared towards tax professionals and probably wouldn't be much help, but I will run into a Barnes & Noble the next time I am in the city and check out what kind of books they have available and see if something catches my eye.

Mike

thank you everyone. I appreciate the advice and encouragement. how funny that the state called me today and told me that I labeled something wrong. I nearly cried on the phone. this is ridiculous. if i had an outline of what things are going to be due when and how to fill out the stupid forms taht would be a start. i hate this part of the business.

my cpa (180.00 an hour) is good at counting, and giving some advice, but I don't think he finds creative ways for me to do things with money (other than pay taxes with it). If I come up with an idea, he says, great, do it this way. For example, my company has a team which participates in triathlons and running events--the team is sponsored through my company. i catagorize this under marketing as the equipment and clothing has the company logo, etc. again, my idea.

also my company is sponsoring a local cycling team and is the premier sponsor...so that too is marketing because they race, practice, and do everything with my company logo, etc.

overall though, I need more creative ways to not get socked. I need to evaluate if my cpa is really helping me to the fullest extent.

thanks again everyone, kittycat

I'm also a CPA and please feel free to ask away as well. I do mostly corporate finanance and accounting engagements but do know a little about taxes. I would start with a very basic book like the "dummies" series and see if any of it sinks in. A lot of CPAs are terrible at communicating, so a basic understanding is a good thing that may help you make better decisions in the future. I know there are also a ton of books for self-employed folks (have not actually read any though).

A couple of quick things that come to mind - there are many others:

You have to pay the employee AND employer portion of social security taxes. A lot of self-employeed people forget about that and get surprised.

You can set up your own 401K and bank away a lot of $ where the taxes are deferred.

Keep good records of your ALL of your expenditures.

Good luck!

Interesting topic and wondering if I can get a little advise....

I'm currently employed by a large corporation as a consultant. Friday is my last day at said large corporation and I'm about to go independent for the next 6 weeks. I'll earn approximately 45% of my current YTD earnings in the next 6 weeks before becoming a full time employee by the company who I'll be working for as an independent.

So...

Since I'm already maxed out on SS, I'm assuming that I don't need to file SS on either the employee or the employer side.

I'll have to pay the 1.45% Medicare for both the employee and employer, but don't know what form I'll need to use.

Federal taxes will be caputured on my year end return. I don't think I'll need to worry about paying in advance for I'll be paying my 2004 taxes by January 30, 2005.

NJ State taxes will be caputured on my 2004 tax return.

Anything I need to worry about....

Sounds like you will need to file a Schedule C (Business income/expenses) with your 2004 federal return. You'll want to track your expenses over the next six weeks. Things that normally would be paid for by your employer, but that you'll be paying now that you are an independent consultant. Mileage is one thing that springs to mind. Health insurance is another.

You will pay your Medicare tax with your 2004 federal return. Form SE calculates the tax and you just file it with the rest of your return. Assuming you are not preparing your tax return by hand (either hiring it done or using TaxCut or TurboTax) this will automatically get done.

There may be some opportunity to shelter some of your consulting income by using a retirement plan. Just depends on how complicated you want to get with this. You may be able to do a SIMPLE or a SEP IRA pretty easily. Lots of questions come with this....and may not be worth the hassle since you're only doing this for six weeks.