This is going to be a short post today, mainly because I can't think of much to write about. But, since tax season is fast approaching, I thought I'd tell you a little bit about what I do along those lines. Here's a hint - not much.
When you are starting a law firm there are two things that you can be pretty sure of. First, you aren't going to be making a ton of money your first year. Second, especially if it's just you, there are going to be basically two line items, income and expenses. Amortization, depreciation, and capital expenditures probably aren't going to be entering the mix much.
So why make it more complicated than it needs to be? For me,up until this year (2011) I didn't even use quickbooks. I just had a spreadsheet. When money came in I noted it. When I paid a bill or incurred an expense I noted it. Then at the end of the year I added it all up and figured out what my tax liabilities were (if any). And there weren't many.
I haven't done my taxes for 2010 yet, but I must admit I'm a little bit nervous. I made a little bit of money ($45,000 or so - net) so I know I need to be paying some tax on that. But I don't know exactly how much. That's what's making me nervous. I could end up owing some decent money, which is going to be painful to part with.
This year, in hopes of lessening that burden, I'm putting money away every month into a money market account. I'll make a little bit of cash on it and then have it available when it's time to pay Uncle Sam. Better that than to reach the end of the line and realize I don't have enough to foot the bill.
What are your tax strategies? When do you think it's time to hire on a CPA to help you out? For me, that's probably coming up soon. But the thought of it's a little scary.
Have a great weekend.
Friday, February 25, 2011
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6 comments:
Now I don't feel so bad! I'm in the same boat- I use Excel because, I agree, in the first year or so it's really not that complicated. I might hire an accountant next year . . .
What about paying "estimated taxes" on a quarterly basis - assuming that you have a year where you made a descent amount of money?
During the first five years of your practice (forgive me, but I do not know how long you have actually had your practice. So, I'm assuming that it's been at least five years), did you pay any estimated taxes?
Do you have an accountant, and if you do, at what did you decide that a regular account was needed? Since I did not make much my first year, I was able to calculate my asset and liabilities quite easily. But once my practice starts growing, I feel like I will need to have a regular, dependable accountant.
Thank you again for all of your advice.
As a Self-Employed, you are required by the IRS to make "estimated" tax payments throughout the year. check the IRS website for the schedule of payment dates, and the form for calculating the amounts. Failure to make these payments (or paying too little) will result in stiff penalties. Sorry to bring bad news. Live and learn.
A big tip is when starting a law firm you've got to get yourself out there so people know where and how to find you. Get a CMS website going and let social media help you out too.
As a business owner, aren't you supposed to make estimated quarterly payments to the IRS?
I wasn't planning on getting a CPA unless I take on extra help. At the beginning, there are so many expenses, that I do not expect to make much money. And, like you said, they will pretty simple at the beginning. But, once employees or partners become involved, I suspect that it will be over my head and will be worth the money that a CPA charges.
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