The 3 Types of Income and How They’re Taxed

Earned, interest and passive income are three distinct forms of income you may have, and a variety of different tax implications your income might have. With that in mind, here’s a rundown of the three main categories of income and what each one could mean to your tax bill.

Source: The 3 Types of Income and How They’re Taxed

How to Pay Estimated Taxes as a Single-Member LLC 

When I taught a class about bookkeeping for creative entrepreneurs, my first rule was this-> -> Keep Them Separated.  Keep your business income and expenses separate from your personal income/expenses.  If you do this, filing taxes will be less of a headache.

Your business’s income is your income. This is completely counter-intuitive because when you start filing all of your LLC paperwork and setting up your business bank accounts and all of that, everyone will tell you to keep your business income/expenses separate from your personal income/expenses. Don’t let clients deposit paychecks into your personal bank account. Don’t put business expenses on your personal credit card; if you need to fund your business with personal income (and many new businesses do), transfer the money to your business bank account and record it as a capital contribution.

Source: How to Pay Estimated Taxes as a Single-Member LLC – The Billfold

2016 End Of Year Bookkeeping Checklist

Savannah Street Art

The end of the year is upon us, and it is time to get organized with your accounting records. If you have not done so already, I would highly recommend getting on a robust accounting system for your business. Check out  Quickbooks, Xero or whatever works best for you.

To ensure that you are ready for the end the year, I have compiled a list of tips.This not an exhaustive list but a good guide. Some of the tips I got from the National Association of Certified Public Bookkeepers (NACPB).

Enter final transactions for the year
Pay bills, people and other expenses that were incurred in 2016.
Enter ALL cash receipts for business expenses (taxis, business meals, etc)
Review petty cash especially if there is more than one person accessing petty cash.
Reconcile all your accounts and enter any missing transactions.
Work on reducing account receivables by following up with clients/customers to get paid.
Write-off bad debt if necessary, but work on getting paid by customers/clients first.
Make IRA or 401K contributions and donations to charity to reduce taxable income
Make all asset depreciation entries (only applicable for equipment that you had put on a depreciation schedule)

Organize: Make Life Easier on Your CPA and Understand What Happened During The Year
Collect all bank statements and business credit card statements for the year.
Make sure you have check register.
If you have freelancers, get their current address, SSN so you can file 1099s by January 31st.
Inquire from your CPA as to what reports, form and any other documentation are needed.
Ask if year-end reports should be on a cash basis or accrual basis
Back up the accounting file in case of any data loss (cloud or hard drive)
Send a copy of your Income Statement and Balance Sheet to your accountant at the end year to get an idea what your taxes will be for income tax deadline.