Cleanup and Planning: Year-End Checklist for The Self Employed

By Karyn Greenstreet

copyright © 2003, by Karyn Greenstreet. All rights reserved.

As the end of the year approaches, it’s important to both close-out the old year properly as well as plan for the new year. I recommend you do this process throughout the year so that there isn’t a last-minute rush to complete your year-end closing tasks. Here are some idea that you might want to add to your checklist:

Cleanup and Closing Tasks

*Enter all revenue and expenses into your recordkeeping system.

*Send final invoices for current year.

*Reconcile your bank account records with bank statements.

*Estimate your last tax payment for the current year (many self-employed people make quarterly estimated tax payments…the final payment is usually due on January 15)

*Mail holiday cards and gifts to clients/customers

*Make holiday offers to clients/customers

*Clean out old files/emails

*Create year-end accounting reports and compare to goals for year

*Tally business-related mileage for year

*Tally expenses by vendor and prepare 1099’s if needed

*Contact your accountant and discuss year-end tax planning

Planning Tasks for the New Year

*Write a list of goals

*Write a list of tasks that need to be accomplished in order to make those goals

*Write a list of projects you’d like to start or complete

*Create an updated marketing plan

*Create an updated budget

*List the topics you’d like to study, the classes you’d like to take, or the books you’d like to read, to keep you up-to-date with your industry and business skills

*Schedule upcoming classes you’ll teach and distribute that Calendar of Events to clients and staff

Cleanup and planning tasks don’t just happen in December and January. If you review these tasks quarterly, they won’t sneak up on you at the end of the year.

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Karyn Greenstreet is a Self-Employment expert and small business coach. She shares tips, techniques and strategies with self-employed people to boost clarity and focus, create sustainable motivation, and increase sales and profits. Visit her website at www.PassionForBusiness.com

It's Official...I've missed the Mom Masterminds Bus!

I knew it was coming, I just hoped it wouldn't be this soon. I received an email today that this coming Sunday they are closing the doors to Mom Masterminds. Talk about making for a bad day! I just want to cry!

For those of you who don't know what Mom Masterminds is..it is only the best resource for work at home mom's like myself who have, or want to have, their own business. To quote the website: "Mom Masterminds™ is a hands-on mentoring community for mothers who are ready to work past the fluff and re-focus on making real money from their online businesses." However, I have not been able to afford the monthly fee so I haven't joined yet. Looks like I won't be joining now hu? :(

It's not that I don't want to pay the fee, because from all of my great online friends who are already members I definitely know it is well worth the cost, I have just had some 'out of my control' events in my life that have made it impossible for me to do so.

I want to congratulate Alice and Kelly on a job well done! And to those ladies that have joined I wish you the best of luck with your businesses! I know a lot of you who are doing very, very well and you say you owe it to this wonderful group and I for one believe you!

Here's to keeping my fingers crossed and my positive vibes flowing that one day the doors will reopen and I will have the funds to join!

IRS Consumer Alert: Tax Refund Email Scam

The IRS has issued a consumer alert regarding a tax refund email scam.

The email claims to be from the IRS (tax refunds @irs.gov) and informs people of a supposed tax refund. There is a link in the email that if clicked requests personal information from the recipient. However, it does NOT go to the IRS website. Once the spammers get ahold of your bank/credit card, social security number, etc. information they use it to make illegal purchases. Another form of "phishing" and identity theft.

The Internal Revenue Service will not ask for personally identifiable information via email. They also do not request that you fill out a special form to receive a refund.

If you receive this email there are a few things that you need to do:

1. Do not open any attachments contained in it.
2. Call the IRS at 1-800-829-1040 to determine if you do have a refund due to you or if the IRS is trying to reach you concerning a refund.
3. Never give out any personal information via email if you are not sure who it is from, even if it looks real. Call the IRS and conduct your business with them either over the telephone or via snail mail.

For more information concerning this and other attempts to defraud the public check out the Criminal Enforcement Page at the IRS website: IRS.GOV.

Standard Mileage Rates to Increase in 2006

On December 2, 2005, the Internal Revenue Service announced that the optional standard mileage rates would increase for next year.

Effective January 1, 2006 the mileage rates for the use of an automobile will be deductible as follows:

Business Miles: 44.5 cents per mile
Medical or Moving Miles: 18 cents per mileMiles driven in service of a charitable organization (not including miles related to Hurricane Katrina Relief): 14 cents per mile
Hurricane Katrina Related Miles: 32 cents per mile for deduction purposes & 44.5 cents per mile for reimbursement purposes.

CLICK HERE for more information on the use of the mileage rates!

Stayed tuned for the rates that you should use when filing your 2005 income taxes!

Self Employment Tax

U.S. Federal Income Tax

Self Employment & Paying Self Employment Tax

As a regular employee of a company you are required by the Internal Revenue Service to have withheld from you earnings FICA (Federal Insurance Contributions Act) and Medicare taxes. FICA is also known as the Social Security tax. You pay these taxes into the government and they are used for retired, unemployed, and disabled Americans and their dependants in the form of Social Security payments and Medicare benefits.

The Self Employment (SE) Tax is similar to these aforementioned taxes except that they are for self employed individuals and are imposed on self employed earnings. It allows those who are self employed to be eligible for these benefits later in life, just as an employee is.

The current rate for self employment tax is 15.3%. That percentage is broken down into two (2) parts: 12.4% is for Social Security and 2.9% is for Medicare. Even if you are receiving Social Security or Medicare benefits and no matter your age you are still responsible for the self employment tax.

In order to determine if you are responsible for this tax you must first know if you are considered self employed by the IRS. What exactly qualifies a person as self employed to the IRS you may ask?

According to the IRS you are self-employed if any of these apply to you:
- You carry on a trade or business as a sole proprietor;
- You are a member of a partnership or limited liability company that files a Form 1065, U.S. Return of Partnership, that carries on a trade or business; or
- You are otherwise in business for yourself. i.e. Independent Contractor, Direct Sales, etc.
- You have a part-time business, in addition to your regular job.

For more information on whether or not you are considered self employed, click here.

Ok, you have determined that you are in fact considered self employed by the IRS. Now, how do you know if you are required to pay the Self Employment Tax?

If you had net earnings of $400 or more in the year, or if you had church employee income of $108.28 or more, you are required to pay the self employment tax on those earnings.

How to pay the tax is the next thing you should know. In order to pay self employment taxes you must have one (1) of the following:
- A social security number or
- An Individual Taxpayer Identification Number (ITIN)

Since income tax is a pay as you go tax you have to pay the tax as you earn your income during the year. If your expected tax liability is more than $1,000, including the self employment tax, and you have no taxes withheld, you must make estimated tax payments. Click here for more information on estimated taxes.

The following forms are a few that may be needed when dealing with the self employment tax: (Please note this is not an all inclusive list and other forms may be required by the IRS.)

- Form 1040 US Individual Tax Return

- Schedule SE Self Employment Tax: Figure your self employment net earnings. Be sure you figure your total earnings that are included in the self employment tax.

- Short Schedule SE: Some can file the shortened version of Schedule SE. Follow the guide to determine if this is possible in your situation.

- Schedule C Profit or Loss from Business: Enter your business income and expenses, cost of goods sold, and/or vehicle and mileage information.

- Form 8829 Expenses for Business Use of Your Home: Figure the area used for your business and any allowable expenses that may pertain to your home.

A listing of available forms and instructions can be found here.