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Self-Employment - 9/18/2008 2:16:58 AM
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RepentanceIsRequired
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From: Home is where the heart is.
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My husband and I have recently begun our own business (restaurant). We are starting week 5. He is the chef and I am to do the books. I have no problem tracking what comes in and out, but my biggest issue is taxes.
(I hope this is the proper thread for this discussion)
From what I can tell when I read the IRS website, I believe my employees (who are all 15 and 16 years old) will be exempt because they are being claimed as dependents by their parents. Would they still then be liable for Medicare and SS witholdings?
Secondly, I'm not sure how to do our own taxes. Do hubby and I both need to fill out a W-4? Again from what I have read, with our business we will need to record and estimate of taxes? And then it also mentioned something like paying quarterly for taxes. I don't know. I am very confused about this part.
If someone would be willing to help explain this to me I would greatly appreciate it. Oh, and as of right now I use QuickBooks Pro and it figures out the taxes for my employees (that is assuming I need to withold for the Medicare and SS).
_____________________________
--Nicole--
"Trying to be a perfect mother is a recipe for perfect insanity." -- SurpassingPeace
"I don't know what I just ate, but it was good" -- recent customer (farmer) at our restaurant.
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RE: Self-Employment - 9/18/2008 10:29:41 AM
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FreeEagle
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From: Minnesota
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Welcome to the headache side of business - Employees (yuck), While they can be of great help, the laws, restrictions and the red tape with government is the main reason I try to steer away from employees. While the 15 and 16 year old's are exempt from paying taxes, you are not exempt from withhold taxes from their wages. You take the taxes out of their wages, and at the end of the year when they file their taxes, they get it all back. And yes you do withhold SSI, and medicare. Paying in quarterly - what this means is the IRS wants their money now. Every quarter you have to file and pay the taxes (taxes, SSI, Medicare, state taxes, unemployment insurance, etc.) that were withheld for all your employees during the quarter. In addition, you have to estimate what your profit (income) was for the quarter, to which you will pay the estimated amount of tax on that profit. You and your husband are not employees of the business, you are owners. Therefore when you file at the end of the year, you will have to file a "Schedule C" to report your profits/losses from your business. To which if you had a profit, the IRS will keep a good share of the estimated taxes you paid throughout the year, and if you had a loss, you may get a refund of part of what you paid in. If either of you have or had a regular job during any part of the year, you'll also have to file W-4's from that job. I highly recommend you get a bookkeeper ASAP, like within 6 months of opening your restaurant. And then hire a CPA at the end of the year to file your taxes. Taking care of the books yourself, especially in the restaurant business, is one of those things that will hurt you. There are already so many hats to wear, you need to keep yourself focused on your customers and the service they deserve.
Furthermore, keep aware of other laws, like in some states the 15 year old's can't work after 9pm. They can't work fryers and grills where they may get burned. One must be 18 to operate a slicer. The list of restrictions are almost as bad as taxes themselves. At least this was some of the laws that were in place, many years ago when I was in the restaurant field. Best of luck!
_____________________________
I will instruct you and teach you in the way you should go;
I will counsel you and watch over you. Do not be like the horse and the mule, which have no understanding but must be controlled by bit and bridle or they will not come to you.
Psalms 32 8-
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RE: Self-Employment - 9/18/2008 1:22:08 PM
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RepentanceIsRequired
Posts: 1110
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From: Home is where the heart is.
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Thank you for your input, it is very helpful. I would like to use the CPA here in town to do our taxes. Hubby thinks we can do it ourselves. I'm really not a big fan of that.
< Message edited by RepentanceIsRequired -- 9/18/2008 1:51:07 PM >
_____________________________
--Nicole--
"Trying to be a perfect mother is a recipe for perfect insanity." -- SurpassingPeace
"I don't know what I just ate, but it was good" -- recent customer (farmer) at our restaurant.
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RE: Self-Employment - 9/18/2008 2:26:01 PM
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macokjc
Posts: 256
Joined: 2/24/2008
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My dad owned his own CPA firm for over 25 years. He is a Christian, and he had a lot of respect from his clients for doing his business by the Bible. One of his biggest headaches would be clients would would come in and throw their mess on his desk - clients who tried to do it themselves. In the long run it would end up costing the client a whole lot more money for him to fix the mistakes, then if he had just done their filings for them. The other thing to remember is that you pay for their knowledge. Tax laws change yearly, and they have to keep up w/ these in order to keep their license. Bottom line - If this CPA is somebody that you can work with - I would have him do the books, at least to start. If it is a decent firm, they will work with you so that eventually you can take over, and only go to them for questions.
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RE: Self-Employment - 9/18/2008 2:42:42 PM
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GroupW
Posts: 2911
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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Personally, I think you're getting good advice here. I'm a finance geek and thinking of starting my own company. I won't be doing the books, even though I'm perfectly capable. It's just not worth it. There are too many things that can be overlooked.
Chances are a CPA will find ways to save you money on your taxes in the long run. I think that while they don't necessarily pay for themselves, they money they can save you makes having an accountant a cheap little bit of help.
You're going to be busy enough just running the place. Get some help.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Self-Employment - 9/18/2008 3:20:29 PM
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BlueAdept
Posts: 99
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For payroll, I would hire a firm (like the CPA) to handle the payroll, and payroll taxes. I know in several of the businesses I have worked for, they had to file weekly the withheld taxes. So if you have taxes withheld and you fail to file timely, you have penalties. MAKE SURE YOU KNOW THE DEADLINES!
You may not need the CPA to handle a lot of what you are doing, but you really should have him (her) come in and go over everything to make sure you are handling it correctly. In the long run it will very likely save you a lot of headaches and problems.
Cash businesses are PRIME targets for IRS audits, because it is so easy to not deposit cash into the right account (pocket it and not pay the legal taxes.) I am not saying that you would do that, only that is why the IRS tends to audit cash businesses.
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RE: Self-Employment - 9/19/2008 12:09:46 AM
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vicbhe
Posts: 62
Joined: 4/24/2005
From: Arkansas
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Just wondering if you are doing this as a corperation or a sole proprieter. I ran my business as a sole proprieter. I was given some bad advice years ago that incorperating was of no benefit to me as a small company. Worst advice I ever listened to.
Get a good accountant.... again I did my own books to save money. 2nd worst business decision I made. A good accountant will work with you to point out things you need to be doing to shelter yourself from taxes, make suggestions, keep you up date as to if you are making money or not, and make sure you are paying all the proper taxes on those employees.
Don't underestemate what those employees cost you. Its more than just their hourly wage. You pay half their SS/medicare tax, you carry large amounts of insurance on them.
This is not to scare you but just be aware....... a friend of mine opened a gas/convience store some years ago. It started out great. Then a few months later there was a natural gas leak in the back room. Two employees felt sick and went to the hospital to be cheked out. His insurance shot through the roof and he ended up losing the business as the higher premiums bankrupted him.
All that aside there is nothing more rewarding than owning your own business. It's not for everybody, but for some of us, it's the only way.
_____________________________
“You cannot improve your righteousness by tearing down the righteousness of others”. W.O. Vaught
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RE: Self-Employment - 9/19/2008 10:11:37 AM
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P31W
Posts: 2972
Joined: 6/13/2005
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quote:
I would like to use the CPA here in town to do our taxes. Hubby thinks we can do it ourselves. I'm really not a big fan of that.
I would suggest that you pay to sit down and have someone like a CPA help you understand how "you" can do this own your own. If you want you can sit down with a retired one or a retired bookeeper who kept books for many businesses.
I believe one of the reaons we have succeeded in business is because we understand taxes so well and have saved the hundred or so dollars per month (now for 25 years) doing our own business taxes.
It's part of your business and you do need to understand it. You need to understand that as much as you need to understand what your customers like to eat.
We sit down with our CPA a few times a year to look at our overall game plan. We also have our CPA do our taxes at the end of the year. The month to month stuff is very easy to do and will only take you a few minutes each month once you get the hang of it.
Remember you are now a 'business owner" that means the buck stops with you. If all you wanted to be concerend with was cooking for people you could go get a job and let someone else be the "Business Owner". Know your Business - inside and out. Own your Business and don't let anyone else know more about your Business than you and your husband do.
quote:
I was given some bad advice years ago that incorperating was of no benefit to me as a small company. Worst advice I ever listened to.
I tend to agree in a general way that for most small businesses there is not reason to incorporate. What happened to you?
< Message edited by P31W -- 9/19/2008 10:33:38 AM >
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RE: Self-Employment - 9/19/2008 10:19:41 AM
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P31W
Posts: 2972
Joined: 6/13/2005
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quote:
Chances are a CPA will find ways to save you money on your taxes in the long run.
This is true. Save you money on your taxes....but it may cost you profits that you need.
CPAs look for ways to save you money on your taxes (that may not be the best move to make - sometimes being cash strong is better than being new vehicle/equiptment strong)
Lawyers look for liability issues
The Boss - you must take into account all they have said and see if it's wise or not for your particular situation. If saving you taxes by purchasing new equiptment is really a 'wise' move or it's it a better move to pay more taxes now, put that money in your pocket that remains and save it to open yet another store in the future.
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RE: Self-Employment - 9/19/2008 10:26:52 AM
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P31W
Posts: 2972
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quote:
Cash businesses are PRIME targets for IRS audits, because it is so easy to not deposit cash into the right account (pocket it and not pay the legal taxes.) I am not saying that you would do that, only that is why the IRS tends to audit cash businesses.
I don't know where she lives but in my area it's the state tax commission who is more likely to audit you. I have discovered that they are very generous and kind to you when you are green behind the ears. (I am sure there are some exceptions) and with time and "you learn" the ropes they begin to expect more and more from you as they should. In my area they are more times than not wanting to insure we pay the sales tax we owe.
I like going though audits. I've learend about going though them. I have not had a bad audit other than one woman who ended up being fired. Even then she didn't do anything illegal she was just always in an ill mood. I laugh alot. Believe it or not most of the people who audit us end up being our friends. We always have to get audited by the "new folks" because our friends cannot aduit us.
quote:
For payroll, I would hire a firm (like the CPA) to handle the payroll, and payroll taxes. I know in several of the businesses I have worked for, they had to file weekly the withheld taxes. So if you have taxes withheld and you fail to file timely, you have penalties. MAKE SURE YOU KNOW THE DEADLINES!
Even if she has to make weekly deposits (I bet she willl only have to make monthly because her business sounds small) she is going to the bank at least every week and will make the payment when she makes her deposit. It's not going to be much work. Only a few minutes.
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RE: Self-Employment - 9/19/2008 11:31:34 AM
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NoShow
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Joined: 5/10/2005
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quote:
ORIGINAL: P31W
I like going though audits.
...probably tell your dentist, "No, shot for me, just start drilling."
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RE: Self-Employment - 9/19/2008 11:35:25 AM
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NoShow
Posts: 462
Joined: 5/10/2005
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I actually, wouldn't go to a CPA first to do payroll taxes. Any good bookkeeper can do it, so find a bookkeeper that specializes in payroll. Also, check out Paychex, Costco and Wells Fargo to get comparative rates.
I could do our payroll, but for the cost (it's relatively inexpensive) it's worh outsourcing.
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RE: Self-Employment - 9/19/2008 12:31:25 PM
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myka
Posts: 797
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I've done payroll for our business before -- it was such a hassel. That was before the payroll companies that exist now. We also have used a payroll company at the advice of our accountant. It didn't cost very much, and it was well worth it. They can handle all the payroll tax issues as well as payroll deductions, like health insurance and whatnot. We had an accountant who would do our end of year taxes. It is a really good idea to talk to an accountant about these things and to get some advice. At first, we had a consultation with the acct., and he was able to give us some advice (like using the payroll service and about the structure of our business).
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RE: Self-Employment - 9/19/2008 2:44:36 PM
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rhippie
Posts: 665
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From: Rich The Hippie
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quote:
ORIGINAL: FreeEagle
In addition, you have to estimate what your profit (income) was for the quarter, to which you will pay the estimated amount of tax on that profit. You and your husband are not employees of the business, you are owners. Therefore when you file at the end of the year, you will have to file a "Schedule C" to report your profits/losses from your business.
This may be inaccurate if you have elected to be treated as a Corp; either a "regular" C Corp or an "S" Corp for tax purposes. If you have made such an election/business model then you wouldtreat yourself as employees of the business and pay yourself a salary which would be subject to all of the various withholdings. There are some rather significant reasons to elect such treatment and your accountant can advise you more.
T
_____________________________
Stand up for what's right....even if you're standing alone
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RE: Self-Employment - 9/19/2008 2:48:39 PM
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rhippie
Posts: 665
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From: Rich The Hippie
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quote:
ORIGINAL: P31W
I tend to agree in a general way that for most small businesses there is not reason to incorporate. What happened to you?
Of all the good advice I have seen you give over the years that I have agreed with this is probably the first time I have ever disagreed with you. There are some very good tax reasons for incorporating any size business but there are even greater liabilty protection reasons for doing so, imo.
_____________________________
Stand up for what's right....even if you're standing alone
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RE: Self-Employment - 9/19/2008 2:55:45 PM
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rhippie
Posts: 665
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From: Rich The Hippie
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quote:
ORIGINAL: myka
I've done payroll for our business before -- it was such a hassel.
I've set most of our clients (I'm a tax accountant) up with an online, direct deposit, payroll company that we have worked with for the past few years. This firm has an extremely low payroll processing cost, files the appropriate forms, pays the taxes and gives you alerts to inform you when things are due. It is a do-it-yourself service so you need to spend about 30 minutes a week inputting the hours etc.
For my clients that would rather not use the 'net I recommend that they use Quickbooks Payroll. It's a little bit of a hassle to set up but it has a very small learning curve and can do everything on your computer including printing the checks, direct deposit if you want it to, and it will print all of the appropriate Federal and State payroll forms.
_____________________________
Stand up for what's right....even if you're standing alone
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RE: Self-Employment - 9/19/2008 8:24:05 PM
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MrsTracy72
Posts: 1762
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I have been audited and am so thankful for my CPA. I thought I could do my own taxes, but once we got done with all of the writeoffs that I didn't even know about and the self employment tax and some other things, to me, it was worth the money. Plus he is a business expense so I write him off too. So in my opinion, I would at least for the first couple of years, use a CPA and once you see how things are done, then maybe try and do it yourself. But the file early in case you mess up and decide you want an accountant.
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RE: Self-Employment - 9/21/2008 12:36:22 AM
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RepentanceIsRequired
Posts: 1110
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From: Home is where the heart is.
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Wow everyone thank you so much for all of your advice.
quote:
I recommend that they use Quickbooks Payroll. This is what I currently have and am using. I bought it specifically for the fact that it does calculate the tax witholdings for my emloyees. It is taking me a little time to learn it.
We are a partnership. And someone was wondering, but we are in Nebraska. We have received from the state, the first set of papers for our sales taxes. My husband and I own the restaurant. It is a very small operation with only three employees. We don't carry any health insurance. I do my deposits daily. I am the only one who handles any money during business and when I close out it has to be down to the exact penny. I will have to see if doing a consultation with the CPA here in town will cost me anything.
_____________________________
--Nicole--
"Trying to be a perfect mother is a recipe for perfect insanity." -- SurpassingPeace
"I don't know what I just ate, but it was good" -- recent customer (farmer) at our restaurant.
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RE: Self-Employment - 9/21/2008 12:50:56 AM
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bzirk
Posts: 2945
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From: Where the deer and antelope play
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I don't mean to be noisy but do you have an LLP?
I don't know if you're running Vista on your computer. If you're not and you upgrade, Vista has been notorious for having problems with Quickbooks. That issue aside, you can do the payroll pretty easily with a program like that.
_____________________________
may the God of hope fill you with all joy and peace in believing, so you will abound in hope by the power of the Holy Spirit. Romans 15:13
Great quote: I just ain't God and don't know it all. -- SonInMe1
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RE: Self-Employment - 9/21/2008 12:54:04 AM
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RepentanceIsRequired
Posts: 1110
Joined: 9/14/2005
From: Home is where the heart is.
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quote:
ORIGINAL: bzirk
I don't mean to be noisy but do you have an LLP?
I don't know if you're running Vista on your computer. If you're not and you upgrade, Vista has been notorious for having problems with Quickbooks. That issue aside, you can do the payroll pretty easily with a program like that.
Forgive my ignorance, but what is an LLP?
We are running XP, not Vista.
_____________________________
--Nicole--
"Trying to be a perfect mother is a recipe for perfect insanity." -- SurpassingPeace
"I don't know what I just ate, but it was good" -- recent customer (farmer) at our restaurant.
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RE: Self-Employment - 9/21/2008 1:25:46 AM
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RepentanceIsRequired
Posts: 1110
Joined: 9/14/2005
From: Home is where the heart is.
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Thank you bzirk for that info. As it is a late night, I saved it and will read it on Monday.
(on a side note) It is funny I have taken this advendure on. In school I loathed math. And now, my business depends on me doing the numbers.
_____________________________
--Nicole--
"Trying to be a perfect mother is a recipe for perfect insanity." -- SurpassingPeace
"I don't know what I just ate, but it was good" -- recent customer (farmer) at our restaurant.
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