Considering Self-Employment?

Last week's post about becoming incorporated got a lot of discussion going with other bloggers and business owners. We got to talking about some very important parts of being self-employed and I thought I'd discuss those today.

While quitting your full-time job and working for yourself sounds awesome (which it really is!), there are some things to consider when leaving your full-time job. Your employer may offer you a lot of benefits that being self-employed will not.

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Medical Insurance

Medical insurance can be very costly. Chances are, your employer is able to offer you medical insurance at a fairly low rate. Insurance for self-employed individuals can cost about $300 per month.

Life Insurance

I don't know if this is a common benefit for employers, but my old employer offered free life insurance up to the amount of my base pay. I could also double or triple this amount for a nominal fee every month. Individual life insurance plans will depend on the amount of coverage you want, your age and your past health.

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Disability Insurance

Most full-time employees are offered disability insurance in the situation where you are unable to work for a period of time (surgery, car accident, etc). This may be full pay or partial pay depending on your employer and how long you have worked there. As a self-employed individual, have you thought about what you would do if you couldn't work. For a month? For six months? Definitely something to think about. Again, rates will depend on your age, the amount you want to collect each month, etc.

Retirement

My old employer offered a retirement plan where they matched a portion of my contribution. And they made it easy to participate as the money came (pre-taxed) out of my check each week. Now that I'm self-employed, that entire amount is dependent on me.

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Taxes

When you work for a company, your taxes are paid each pay period before you receive your paycheck. This makes it easy to pay your taxes because you don't have to think about it and it's all taken care of for you. When you are self-employed you will need to pay estimated taxes each quarter. It really isn't hard to do, but you must budget for them. Not all crafty business owners are good at the business side of things. (left-brain vs right-brained). So this may be something you need to pay a profession to help you with. If so, you will want to budget for it.

While I don't want to discourage anyone from quitting their job and living their dream, I just wanted to point out some things that aren't always thought about when running numbers. I know I hadn't considered disability insurance until the other day. Just a little food for thought :)

Tax Prep Tips

It's that time of year again...Tax Time! Are you one who waits til the last minute to get your tax papers in order? Do you stress about finding all your receipts? Do you vow to do better next year?

I'm here to offer a few tips on how I keep everything organized throughout the year so taxes are a breeze come the first of the year.

I can't help you much with your 2011 taxes, but but I can help you can get your 2012 taxes organized NOW!

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I find it best to break taxes into manageable time lines. There are things I enter immediately, things I enter monthly and things I enter quarterly. I use Excel to organize everything, but there are several other ways you can do this. Do what works for you.

Immediate Entries

I have started to enter my local sales on the day I get paid for them. I tend to forget about them if I don't enter them right away.

Monthly Entries

*Each month I print out my Paypal statement and enter the data in the correct column of my Cost Log. You could also copy and paste the data from the CSV download as well. I'm a visual person and like to write notes on my statement, so I print mine out.

*I also keep all of my receipts from the month in a baggie and enter those monthly as well.

*Just this year, I've started keeping a monthly Profit Log. It details what items sold, how much the materials cost, Paypal fees and Etsy fees. It doesn't take into consideration when I buy things in bulk or any other overhead. I just wanted an item by item profit log to see how I'm doing.

Quarterly Entries

I pay my state sales tax quarterly, so I update my Sales Log quarterly as well. My locals sales are already entered, but I transfer my data from Etsy and enter my consignment sales as well. I break my Sales Log into sections so I know which sales I collected taxes on and which ones I didn't. Then I make sure to note why taxes were not collected on these sales (wholesale, out of state, etc.)

Keep in mind that you can do things differently and still stay organized. You can enter your sales monthly if you like and enter your Paypal data weekly, etc. Do what works for YOU. But make sure you do it!

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Have any good tax tips? Share them with us in the comments!

Let's Get Personal

Every year I talk about my Etsy Shop and Blog goals, but I don't ever really talk about my personal goals. I guess many years I really don't have personal goals...my business is my personal time :) But this year I have a few more goals that I'd like to accomplish. And as I've said before, I feel that telling people your goals makes them set in stone and helps me to accomplish them! So here they are...

• Start Jogging Again! I know this sounds like an idle new year's resolution, but I am serious about getting healthier. For about 3 or 4 years, I jogged on a regular basis (3-5 days per week). When I went back to work after my layoff (2 years ago!) I had a hard time exercising again. I've tried a couple of times, but never could be myself back into a routine. I'm starting to see the effects of this and I'm not liking the results! It's time to make a change in my life! I started last week and I jogged 3 times on my treadmill. My goal is to get myself ready for Spring when I can jog 3-4 miles outside and enjoy the beautiful outdoors :)
• Enroll in Online Bill Pay. I've had a couple incidents will bills not getting mailed correctly. Once the mailman delivered my outgoing mail (bills!) to the neighbor. And the other day I was in a hurry paying bills and ripped off the top part of our mortgage statement instead of the bottom. I didn't pay attention to the address in the envelope window and mailed the payment...back to myself! *headdesk* After telling my mom about my "blonde moment" she asked why I don't pay bills online. I can accept credit card payments with my smart phone, but I still write checks, she asked. Okay...good point :) So my goal is to get all of our bills online and get a good system down for getting them paid and in the checkbook balance!
• Keep Track of ALL Sales in 2012! Okay, this is sort of a business goal, but it is for a personal reason :) In the past, I haven't been good about keeping records of all of my local sales. If I delivered an item to work and they handed me cash, often times I didn't have change, so I didn't worry about sales tax. (shhhh...don't tell the IRS!) Those sales can add up, and I don't have record of them. After finishing my taxes for 2011, I realized that I may be able to really make this business work as my full-time job! So in 2012, I want to know exactly what my business is capable of. I want every cent recorded and I want to know that if I'm going to quit my job, that I can really do this. So as I said, a business and a personal goal here.

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It feels good to get these down in writing and out in the world!

5 Easy Tips to Get Your Tax Preparer to Love You :)

I have been filing my business taxes for 3-4 years now and along the way...I have learned a few things :) Today I thought I'd share with you the things I have learned that make your tax preparer love you!

Tip 1: Keep all your receipts...but not in a shoebox!

I have a file cabinet just for my business documents. I keep all of my receipts and invoices in files separated by year. (ie. Costs 2008)

Tip 2: Do not bring this file to your tax preparer!

What do tax preparers hate the most...a year's worth of receipts! I keep all of my costs and sales in Excel Spreadsheets in chronological order. This is very easy to do and just takes a little updating throughout the year. I print them and bring them along with me to my appointment.

Tip 3: Make your Excel documents work for you.

I organize my Cost Log into 7 categories: Date, Company (purchased from), Inventory, Supplies, Utilities, Internet, Fees. I use these specific categories for different reasons. Your categories should work for your specific business. I have a separate room in my house for my business, so I am able to write off part of my home's expenses...therefore I have the Utilities section. Also, I use the Internet specifically for my business, so I am able to write off the entire bill for this. If I had a separate phone line, I would be able to write this off as well. Figure out what sections you need and make them work for you. Add categories as needed...this is the first year I have added Fees to my Cost Log. I put my Etsy fees and shipping fees in this category.

Tip 4: File your sales tax quarterly.

This tip is more for your benefit than for your tax preparers, but it will help everyone out in the end :) By filing your taxes 4 times per year, this forces you to organize your income at least that often. It will leave you less to do at the end of the year :) And if you have to open your Excel document and organize your income...why not do your costs as well! This is my first year selling on Etsy, so I added these sales to the bottom of my Sales Log to show their income. I didn't want them added into my quarterly sections because I did not charge sales tax on them. (out of state)

Tip 5: Have everything with you when you meet with your preparer.

This will save you the time of meeting multiple times and making more work for your preparer. I always schedule my appointment for early to mid-February. This way I am sure that I have received all of my needed paper work. (W-2s, tax forms, credit card statements with last year's costs, etc.)

Follow these tips and you will be in and out in about 20-30 minutes and you will leave your tax preparer with a smile on his/her face :)

Do you have a good tax prep tip? Leave me a comment...I'd love to know :)