Tag: business

Notice: Trying to access array offset on value of type bool in /home/dawnkkennedy/public_html/wp-content/themes/crio/inc/boldgrid-theme-framework/includes/partials/template-tags.php on line 516
style="background: url(); background-size: cover; background-position: center center;">

If you are new to business, or don’t already have your self-employment tax system set up, this post is for you.  Many entrepreneurs treat taxes as an afterthought, often because cash flow is tight, and they don’t set back personal taxes when they take a paycheck.  In the US Self-employment taxes are Social Security and Medicare taxes, like those that are withheld from when you are employed. When the IRS speaks to self-employment taxes, it is referring to this type of tax. There may be additional taxes that business owners and self-employed people have to file.

 

The rates for self-employment taxes may seem high when you first start paying your own. For the 2019 tax year the self-employment tax rate is 15.3% of net earnings, meaning after your expenses.  The truth is that the employer must pay about ½ of  the tax expenses for their employees. So, generally the same percentage is paid by everyone, but if you are employed you pay half (7.65%) and your employer must pay the other half (7.65%).

 

You must withhold your taxes and deposit them at least quarterly, and this is where many small business owners run into problems. The rules don’t allow for self-employed people to just pay annually, you must deposit quarterly, or you can face late-payment penalties. Here is a simple process for setting up your tax system for a successful 2020.

 

  1. Pay Regularly Online. You can easily set up to deposit your taxes online through www.EFTPS.gov by enrolling in the program and receiving a PIN from the IRS, and can deposit your taxes online whenever you take a paycheck. You don’t have to pay them quarterly, just make sure what you paid in each check totals what you owe by the end of the quarter. If you always deposit 20%, this shouldn’t be a problem. This is what I do, I don’t hold back and deposit quarterly anymore. I deposit online every payday.

 

  1. Write Yourself a Paycheck. The easiest and best way to track your income, and the amount you must pay taxes on, is to write yourself a paycheck. When you just take money out of the till and spend it, it becomes a tracking and accounting nightmare. If you get into the habit of writing yourself a regular paycheck, and immediately withholding your self-employment taxes, you will simplify your accounting and reporting for the end of the year and keep yourself protected from tax issues. You can join the movement of entrepreneurs who have committed to pay themselves a paycheck in 2020 by visiting www.entremoneycoach.com/payday.

 

  1. Stay organized with your expenses. Your self-employment taxes are calculated on your NET income, meaning after expenses. Keep your receipts organized, perhaps in an envelope by month, and put the total on the outside of the envelope for each month. You can very easily keep a running total of your expenses on a sheet by totaling the expense envelopes. This doesn’t need to be complicated!

 

The rules for reporting self-employment income are straightforward. If you are a sole proprietor or a single member LLC, you must report your self-employment income and pay taxes using a schedule C when you file your 1040. If you have a corporation or an LLC with more than one member you must file a different form. Staying organized and regularly handling tax deposits will make your 2020 tax year simpler and less stressful.

Notice: Trying to access array offset on value of type bool in /home/dawnkkennedy/public_html/wp-content/themes/crio/inc/boldgrid-theme-framework/includes/partials/template-tags.php on line 516
style="background: url(); background-size: cover; background-position: center center;">

This question coming from a financial coach probably seems a little odd. But the fact is, you may be losing business by being too cheap with your company. Perhaps you have been holding off finding a VA or new software or marketing support. As entrepreneurs we sometimes tend to count pennies and ignore the bigger benefits that we would receive by investing a little money.

I don’t think that you should throw your money around willy nilly, however. I want to give you a quick and easy process you can use to help you make the decision to either invest in new products and services, or to find the places to trim products and services you no longer need or use. The Cost-Benefit analysis for this is simply a tool to examine whether the benefit of something in your business will outweigh the actual cost of having it.

The easiest way top do this is to sit down and write, yes hand write all of the benefits of adding the new product or service. Be specific. For example, a Virtual Assistant will save you time that can be better available for money making activities. Email Automation can make sure nobody who opts in for your newsletter falls through the cracks. And continue to list the benefits that you will personally receive in your business. Then look at the cost, financially, to your business. Many times, when you write it all out, the investment is a “no brainer” and your business will benefit so much you need to add whatever it is, now.

On the flip side, if you are wondering whether to keep something in your business, you can use the same approach. If the benefits (be honest) are not enough to justify the cost, you can likely remove or replace the product or service. I do this periodically because software and platform products evolve and add services, and it is possible that I no longer need a particular product because the function is available in something else, I am already using. I find this process especially helpful when I am trying to decide, “what goes next?” in my business.

I use a cost-benefit analysis almost every time I make a decision to spend money. I keep a list of products and services I would like to have that would make my life easier or would make my client’s experience better. When I have to choose between two services, because I want to make every change financially sustainable, I write the benefits of each service, relative to the cost, and decide which one gets me closer to my goals faster, or the one that makes back my investment quicker.

It’s critical to spend the “right” amount of money in your business every month to allow you to sustain your current level and facilitate growth. If you haven’t used this process before and need to make a next investment decision (or to remove a service) set aside some time before the start of 2020 to try it.

I’ve developed the concept of the business 4 walls from the Dave Ramsey 4 Walls approach, which makes sense, since I started my practice as a Ramsey Financial Coach. Imagine the 4 walls are the sides of a box, and you will consider the things on the inside of the box more important and needing protection than things on the outside of the box. That is how you need to view your business. You need to protect the things that keep the doors open and keep you able to continue to make money. The inside of the box.

We protect those walls by prioritizing what gets paid when. You control the money. You also decide who gets paid, “how much” because the reality is that many times businesses have to juggle when invoices are paid late, or cash flow is tight. More than once I paid the electric bill in two halves instead in one payment when we first started UNEQ consulting. And it saved our cash flow.

Here are three simple steps you can take now to secure your business 4 walls.

1. Take the bills off auto pay. I am a huge proponent of intentional business money management. I want you to pay your bills intentionally. And limit electronic access to your operating account so you can control all of your money, and pay halvsies if necessary.

2. Prioritize your expenses. Organized into the four walls, you pay the bills in this order:

Wall 1. Rent or internet, and utilities, your access to your buyers
Wall 2. Critical Operating Expenses that are required to keep doors open
Wall 3. Inventory or products to sell or provide services with
Wall 4. Payroll and payroll expenses

This includes paying yourself. And not out of the till, writing a paycheck and withholding taxes. For more on this approach, and calculating your B-Number, grab the free e-book at www.entremoneycoach.com

3. Start an emergency fund. You need to protect your four walls and pay these expenses every month, even if the sales are slow or money is late to the table. This is the quarter where many businesses make a bulk of their earnings. Hold some back for the slower months of January and February. Try to hold back the amount you need to cover your four walls, so you continue to be able to get a personal paycheck in 1st Quarter 2020.

If you take these few steps you will be protecting your business, your ability to make money, and your personal income.