Resources to help freelancers and sole proprietors stay in compliance and out of trouble.Like what you hear? Help us out by writing a review at iTunes. Questions go to money@qdnow.com. Thank you!
Money Girl
129 MG From Employee to Self-Employed
Building a portfolio with Fidelity Basket Portfolios is kind of like making a sandwich. It's as simple as picking your stocks and ETFs, sort of like your meats and other topics, and managing it as one big, juicy investment. That's pretty good. Learn more at Fidelity.com/baskets. Investing involves risks including risk of loss, Fidelity Brokers Services LLC, Member NYSC SIPC. With the Wells Fargo Active Cash Credit Card, you can earn unlimited 2% cash rewards on purchases you want and purchases you need. That means you earn 2% cash rewards on what you want, like season tickets to watch your favorite team, and 2% cash rewards on what you need, like paying for parking. That's the beauty of the Active Cash Credit Card. It's ready when you are, with unlimited 2% cash rewards. The Wells Fargo Active Cash Credit Card, that's real life-ready. Terms apply. Learn more at Wells Fargo.com/activecash. Hello, and welcome to Money Girl's Quick and Dirty Tips for a richer life. I'm Laura Adams. Have you ever thought about starting your own business? It could be work you do on the side while you keep your full-time job, or you could become a full-time freelancer, like Michael, who wrote, "Hi, Laura, I'm just getting into freelancing. I have no regular job and all my clients pay by check. I have no idea where to start on the whole self-employment tax and what is allowed to write off. Do you have any resources or applications that will help?" Michael, thanks for the question, and congratulations on making the leap into freelancing. Becoming self-employed can be very exciting and financially rewarding. Whether you call yourself a freelancer, independent contractor, or sole proprietor, you're actually becoming a small business owner. And yes, there are plenty of issues that can overwhelm you. But I'll give you some resources and information to cut through the confusion. When you become self-employed, you start wearing many different hats. All of a sudden, you're the sales, operations, legal and financial departments all wrapped up in one person. I can tell you from personal experience that when you go into business, one of your new best friends should be an accountant. I recommend that you find someone who's local so you can actually have a face-to-face meeting. Make it a point to speak with a couple different people to briefly discuss your business. Then choose someone who listens well and seems to understand the kind of work you're doing. A good accountant can save you money by making sure you plan accordingly for taxes and write off as many business expenses as possible. When you start working for yourself, one of the most important tips I can give is to be prepared for what you'll owe in taxes. Michael mentioned the self-employment tax. The self-employment, or SE tax, is how you pay into the social security system when you're a sole proprietor, and it can take many new entrepreneurs by surprise. Here's why. When you work as an employee, you only pay for half of your social security and Medicare taxes. Your employer pays the other 50%. Many people work their whole lives and don't realize that their company actually had to foot half the bill for these benefits. When you become your own boss, you have to pay 100% of these taxes and it can be a lot more than you think it will. The self-employment tax for 2009 is 15.3% of net earnings. That amount is a total of 12.4% for Social Security, plus 2.9% for Medicare. You only have to pay the Social Security portion on the first $106,800 that you earn. Once you've earned that amount, you don't have to pay any more Social Security tax for the year. However, you must pay the Medicare portion of 2.9% no matter how much you make. You file self-employment tax on Schedule SE with your Form 1040. Remember that if you don't report all of your self-employment income, your future Social Security benefits will be reduced. In addition to self-employment tax, you'll also have to pay federal and state income taxes yourself since an employer isn't withholding and paying them for you. You generally must pay estimated taxes four times a year based on how much you think you'll earn, even if you're just working part-time at your business. That helps you stay on track with tax payments so you don't spend money that really isn't yours. Otherwise, you could find yourself unprepared to pay a huge tax bill at the end of the year. An accountant can help you calculate the amount you should pay in estimated quarterly taxes. Even though you have to pay more in taxes when you're self-employed, you'll have the benefit of being able to deduct qualified business expenses. Those are all the common and necessary costs of running your business, such as office supplies, computer software, liability insurance, entertaining or travel, for instance. You can deduct all or a portion of them from your taxable business income, which reduces the amount of tax you owe. I'll put a link to IRS Publication 535 as well as lots of other resources in the show notes for full details about business expenses that are deductible. And if you work from home, be sure to listen to Money Girl Show Number 107, which is about taking home office deductions. September is a great month for planning. We start thinking about the rest of the year, whether it's back to school, big year-end work projects, holiday plans or travel. Planning ahead is crucial in life, especially when it comes to what happens when you're gone. Getting life insurance may sound daunting, but Policy Genius makes the process a breeze. With Policy Genius, you can find insurance policies that start at just $292 a year for a million dollars of coverage. Some options offer same-day approval and avoid unnecessary medical exams. Policy Genius' technology lets you compare quotes from America's top insurers in just a few clicks to find your lowest price. It's the country's leading online insurance marketplace. And if you ever need help or guidance, they have an expert license support team to answer your questions, handle all the paperwork, and advocate for you throughout the process. It's never too late to plan ahead. Go to PolicyGenius.com or click the link in the description to get your free life insurance quotes and see how much you can save. That's PolicyGenius.com H5N1 bird flu is spreading in poultry and cows. It's rare in people, but bird flu can make you sick. If you work with poultry, dairy cows, wild animals, or with raw unpasteurized milk, wear protective gear like coveralls, NIOSH approved respirators, and eye protection, and wash your hands often. If you start feeling sick, seek medical care and tell them you work with animals. Learn how to reduce your risk at cdc.gov/birdflu, a message from CDC. We wear our work day-by-day, stitch-by-stitch. At Dickies, we believe work is what we're made of. So whether you're gearing up for a new project or looking to add some tried-and-true workware to your collection, remember that Dickies has been standing the test of time for a reason. Their workware isn't just about looking good. It's about performing under pressure and lasting through the toughest jobs. Head over to Dickies.com and use the promo code Workware20 at checkout to save 20% on your purchase. It's the perfect time to experience the quality and reliability that has made Dickies a trusted name for over a century. There are many programs as well as online services designed to help you keep up with expenses and tax deadlines so your business runs smoothly. QuickBooks is a fantastic desktop accounting software that can be used for small or large businesses. If you prefer to work in the cloud, there are some innovative online bookkeeping services. QuickBooks Online and FreshBooks both offer a basic version that you can try out for free. Then you can move up to more comprehensive plans for a monthly fee when you need advanced functions, like time tracking, budgeting, and integration with online banking, for instance. Outright is a free online bookkeeping service that shows you when taxes are due and which expenses you may be able to deduct. Successful entrepreneurs know how to leverage their unique skills and abilities. If one of your strengths isn't keeping up with detailed financial matters, leave it to a professional accountant or bookkeeper. Don't try to do everything yourself. Spend time exploring and mastering your talents so you can grow your business. Now you can share the podcast by putting up the MoneyGirl widget on your blog or website. That's exactly what you needed at factorfictionnutritionblog.com. Thanks, Janine. You can get the code too, as well as all my contact information at moneygirl.quickanddirtytips.com. I'm glad you're listening. Cha-ching. That's all for now. Courtesy of MoneyGirl, your guide to a richer life. H5N1 bird flu is spreading in some animals. If you work with poultry, dairy cows, wild animals, or with raw, unpasteurized milk, wear protective gear, and take precautions. cdc.gov/birdflu, a message from CDC. Hey, everybody. It's Rob Lowe here. If you haven't heard, I have a podcast that's called "Literally, Blue Rob Lowe." Basically, it's conversations I've had that really make you feel like you're pulling up a chair at an intimate dinner between myself and people that I admire, like Aaron Sorkin, or Tiffany Haddish, Demi Moore, Chris Pratt, Michael J. Fox. There are new episodes out every Thursday, so subscribe, please, and listen, wherever you get your podcasts. your podcasts. You