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Andrew Carroll
Owner at CFO Andrew
I am CPA and Financial Planning focused on freelancers.
17 action items
Pay owed S-Corp taxes
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Check your books
Make sure your books are up to date. I suggest taking 20 minutes every Friday morning. If you do that, you'll be able to easily run an income statement that shows you what your profit for the year is.
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Figure your tax
For most solo freelancers figure about 20% of the profit (NOT the gross or top line profit is what you billed minus expenses) for your taxes. Ass in your state rate (e.g. CA needs to pay about 7%, NY the same, TX 0%, etc).
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Submit Payments
You can make an estimated whenever you want. But the IRS likes them four times a year: April, June, September and January. You can make most payments online. I try to keep updated links for the most current place to make payments on my website: https://andrewcarroll.co/tax-payment-information... See more
Once you have your entity set-up, the money flowing into the correct place and your expenses on point, you'll be ready to start paying (lower) taxes!
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Decide between an LLC and S-Corp
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Figure out what your freelance income will be for next year.
S-Corps help save on payroll taxes, and tend to work best in the $80k and above range. If you are between $80k and $110k, it makes sense if you are trending upwards or plan to stay freelance for a long time. Above $110k in income it will almost always make sense to be an S-Corp.... See more
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Commit to setting up the infrastructure
If you go S-Corp, you have to have a separate bank account, books, and payroll. There are lots of new tools out there that can make this much easier, but it is more work than just being a sole proprietor. Don't shoot yourself in the foot - if you are going to do it, commit to doing it right.... See more
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Make sure that you don't have any "pitfalls" to trip up your S-Corp
If you plan to raise outside money, then an S-Corp might not be the best plan. If you work in a "specified trade or business" (accounting, medical, legal, or endorsements type advertising) you'll want to make sure that you get professional help to not run afoul of the new tax laws and state licensing rules.... See more
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Create your entity!
You can use a lawyer or a service like incfile.com or legalzoom.com. If you want more service, I suggest checking out hyke.me. All of these will help you get an LLC formed which you can turn into an S-Corp!
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Set up a bank account and bookkeeping
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Open a business bank account
The absolute first thing a business needs is it's own bank account. Even if you aren't doing to do the S-Corp set-up or even if you aren't getting an LLC - having one account that you can segregate business activity from personal activity is key. It helps make sure that you have good data for tax time, it makes bookkeeping a breeze, and will help you at audit time.... See more
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Pick a credit card for the business
It doesn't need to be a business credit card per se - most often I tell business owners to just pick one of their personal credit cards (since most people have two now a days) and designate it as business. The important thing is to make sure you segregate the expenses - so if the IRS shows up you can say confidently "All the expenses are there and nowhere else".... See more
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Create your books
You can use lots of different systems (there are lots of good ones out there - Xero, Freshbooks, QBO) but you need to use something. The good news is that the robots make it very easy - you can plug in your online credentials for your bank and credit card account and they'll download the activity and do most of the bookkeeping for you!... See more
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Report your S-Corp income
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Fill out a new W-9
You can get the form here: https://www.irs.gov/pub/irs-pdf/fw9.pdf Remember, on Line 1 this is the business name - NOT your name. Since an S-Corp files its own return, the name ON the return will be the company name. Your name doesn't go on this version of the form.... See more
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Provide the new W-9 to Clients
The W-9 form is how they know who to pay and how to report income. Once you have an S-Corp you want to give them a new one that provides them the name of the business and its EIN.
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Redirect deposits and automatic payments to business account
Make sure your vendors know where to send checks and that you deposit all income in the business bank account. Check your online payment tools (like online payments in Freshbooks, or your merchant account) and update the bank accounts to your new business bank account.... See more
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Update your books weekly!
With all the money headed into your business bank account, it will be super easy at tax time to figure out your income!
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Write off S-Corp expenses
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Figure out what to deduct
What you can deduct is a SUPER common question. The trouble is, it varies by person and business. The IRS standard is whatever is "ordinary and necessary". So what is ordinary and necessary for a freelancer, might vary based on your business, where you are, and how you operate. But generally, you can deduct Any direct client expenses Phone, internet, and other tech items Online software and subscriptions (adobe, Dropbox, Github, etc) Travel to and from clients Meals where you are meeting clients or potential clients Any activity where you are getting your name out there (Advertising) Home Office expenses Hardware (computers, tablets, phones, etc) Office supplies and expenses... See more
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Pick a business credit card
The BEST way to write of expenses is to run as much as you can through a business credit card. GET THOSE POINTS! You don't truly need a "business" credit card - any credit card will work, as long as it is used exclusively for business. This is key - as I mentioned before, separating personal and business is CRITICAL. But since most people have multiple cards, I usually just tell people to pick one of them and say "this is my business card". Link it up to your books and ONLY use it for business expenses and you'll be all set!... See more
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Move over subscriptions
You also need to go through your personal bank and credit card statements to look for things that are auto billing. Moving them over is a pain, but will save you cash come tax time. The upfront investment WILL pay off!
Making sure you get the most out of your deductions is key to being a successful entrepreneur.
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