Today I'm going to talk about helpful tax tips for small business. It's coming up on tax time here in the States. Right now we're right at the beginning of February so a lot of people are meeting with their accountants and getting things sorted out for 2019 taxes. I'm meeting with my accountant this week, which inspired the idea for this show.
The five different things I'm going to cover today are general guidelines.
They are things to keep in mind, especially if you're new to having a business running a business. I live in Minnesota, so some of what I know from working with my own accountant the last 10 years might not be completely true for you if you're listening to this and another state, or definitely another country. Keep that in mind as I go through these.
I'm not going to get to nitty gritty detail because, again, I want this to be sort of tips to keep in mind for most people tuning in, no matter where you are.
First thing to keep in mind that I found to be hugely helpful when I finally started implementing it is quarterly tax payments. Instead of getting to tax time and again, my business is my sole income. So when I go intoa tax time, I am expecting a bill. And if you're in that same boat, you may want to look into quarterly tax payments. That way, when you get to April 15, and you have to pay up, you have already most likely paid every quarter, the same way that you pay quarterly sales tax stuff.
It just feels really good not to have a massive bill at the end of the year.
Your accountant will take a look at your earnings from the previous year, generally make a an educated guess based on on your numbers and then put together quarterly tax options for you so that you can make payments every quarter instead of once a year.
Next thing to think about, number two tax tip stuff, is your per diem.
If you travel a lot for the work that you do within the state, or within the country, rather, even internationally, you are given per diems for whatever city that you're staying in. This includes lodging, or meals and other expenses, depending on how your accountant is structuring it. What you want to do is keep track of the cities that you are working in. You can go online and just take a look at what the per diems are for both lodging and for other expenses and then keep track of those. My accountant usually has me hand over a list of where I've been when I've been and then puts those together all at once.
It's an easier thing to keep track of as you're doing it, rather than going back through the whole year.
Which brings me to the third thing, which is also something that I highly recommend keeping track of sort of as you go, and that's mileage. So there's a couple different ways at least in the state of Minnesota to expense your vehicle. You can either expense sort of the maintenance and care of the car, or you can do mileage.
That's a really basic way of putting it but my accountant has me keep track of my mileage, my business miles and it's really, really easy. I just pull out my calendar and whenever I'm driving, somewhere that's a gig, I just look at the Google Map and write down the round trip mileage and keep it in my calendar. So it's linked directly to that gig. When I pull it up at the end of the year.
You can also try different apps. I think QuickBooks has one now, or mile IQ.
I actually used that for a couple of years, and I liked it, but I wasn't driving my own car enough for it to be as effective as I wanted it to be. You might want to check something like that out. With Mile IQ essentially your phone stays on and keeps track of where you're driving. And then you can go through and choose if it was a business trip or a personal trip, so makes it kind of easy for you there.
And that segues nicely into number four, which is business expenses. One of the things to keep in mind for tax time is that you have all of your expenses taken care of. I have one business account, a checking, savings and a credit card. Everything that I do related to my business goes through that account. And it's a lot easier to divide things out whether it's dues and subscriptions, or meals, or whatever it is that I'm buying for my business.
You're gonna want to make sure that you know what you've been spending money on for your business and have all of that stuff ready for your accountant.
Finally, contracting labor. Whenever I have an associate shoot for me or a second shooter, or somebody come in for a one time gig, they are contract labor. If you reach a certain amount of money each year, and this is going to be different state by state…there's a certain amount of money that if you have paid your person through a contract labor agreement, that amount, you're going to have to send them a 1099 form at the end of the year. Just keep in mind that if you've been working with people all year and this is your first year paying other people, make sure that you are keeping track of that properly and double check and see if you've paid them enough or if they need a 1099.
Once you figured that out, there are a couple of websites. Again, your accountant will be very helpful with this. But there's a couple of websites where you can just fill everything out, the website will process it for you. It's not very expensive, the website will send out the 1099 for you. In my case, because I've worked with a lot of the same folks, year after year, it auto-populates each year, their address and all of their information, so that I don't have to do it over and over.
It just gets easier the more you do it.
I think that's generally the theme with all of this accounting and tax stuff is the more you do it, the more you spend time kind of setting your business up. I use QuickBooks so I know all of my expenses, all of the things that I'm keeping track of I have a pretty good feel for it at this point. Things change year to year, but don't be discouraged if you're just diving into this and it seems like a lot because you will figure it out and you'll find a system that works for you.
My final piece of advice is just find an accountant. If you're feeling totally overwhelmed, just have a chat with them. I know it can be a little bit overwhelming if you haven't been organized about it, but hopefully this will help you get more organized and feel a little bit better about our favorite time of year in business.