Year end review
Posted 29 November 2014 - 10:08 AM
Now is the time to assess your equipment purchases for 2014 if you want to get additional tax depreciation by the end of year deadline. Figure out what that purchase of new or used equipment before the end of the year could help.
This note could also make those holding gear they want to sell out it up and maybe find a willing buyer?
I know I'm always looking for good buys now myself.
I am also using this time to both see what I've paid in taxes this year and what I might need to pay by April. To my surprise I didn't pay as much as I thought and I was shocked to see what I might have to pay and/or put into retirement to decrease my taxes. Either way now I have a plan for April and it's not going to be as bad as waking up to a huge bill that I can't cover! Now that I know I may end up paying less than I think and I'll have a wonderful surprise.
I'm really tired of the hands off mode of actually budgeting for future bills in anything other than rough estimates. Sure we all know roughly our bills but to know very close on a screen in front of us is vastly different.
We all used to just overwhelm our bills with big pay days that would solve anything, sure you still can but that is only available to an increasingly smaller number of operators.
So as hard as it may be pull out that gunk and look at it.
Posted 29 November 2014 - 02:59 PM
With that info there are no year end surprises
Posted 29 November 2014 - 08:49 PM
Interesting stuff... I've had the same accountant for 22 years now. His technique has evolved along with my business. I don't have quite as scientific of a system as it sounds like you two do but I do have a 'formula' if you want to call it that. I basically want to owe nothing or very little ($5000 or less to the IRS at the end of the year). I don't want to get money back as that money could have been earning for me verses doing nothing while the IRS held it.
I know on a crappy year I can put about $5,000 into my SEP, an average year $10,000 and a great year close to $20,000. So by the end of March I try to have 5k in the SEP and then by the end of June another 5k (which will either go into the SEP if the year is looking good or savings for tax time if it's looking crappy). Then basically if I'm just doing okay, I have 6 to 9 months to save another 5k and if I'm killing it I try to save another 15....
The math isn't always perfect but I'm rarely more than a few grand high or low by Christmas.
If you don't mind sharing, I'd love to hear or see a more specific breakdown of your systems.
Posted 30 November 2014 - 07:35 AM
I do kind of the same thing with incremental deposits by quarter. To get there I try to save 'say tripod' job income to tax and retirement income and keep it in separate account or deposit it right away so it doesn't get spent elsewhere. Its fun to play around each year with which type of job goes to that account.
Yes my accounting has evolved over the years to accomodate the changing business. I do now use my calendar much more for tax warning notes and due dates so things are not a surprise. I use it to make myself look and see what I've done or not done and it keeps me from avoiding the subject. I also use the calendar to record payments on those jobs so at a glance I can see if an old job hasn't paid. I do need to do the monthly check balancing much better.
I got into real estate 5-6 yrs ago to investigate all those supposed deals out there and have learned a lot which was my plan. I don't have enough for property purchases and RE is a dicey investment (if you don't know what you're doing) but I do dabble in some aspects of real estate purchase which goes toward both income and maybe retirement but as we speak I'm still working on it as a plan. Its fun to see what people think about real estate, the studies in people is where you see good and bad and learn the most. It's a very hard way to make a living at though so don't enter it expecting to make a ton and but that's another subject.
I have recently found this book "The only math book you'll ever need." It's like 1997 but in really simple way it shows you how to calculate a return on bonds. Ways to calculate mortgages and about 30 other things. Very helpful stuff you didn't even know you didn't know. Amazon is selling used copies for $4. I'm giving copies to everyone I know. Its a great book for the bathroom, quick 5 min of reading and you've learned something.
I really like the subject of financial planning and see what I (cringe) did stupidly in my youth and hope to correct. Its a strange world and the idea of security when you can't work scares me so I'm constantly searching for a way to bulletproof myself over the next years.
It scares me to death when I see or hear people kind of our age proudly say 'I've got nothing saved.' I am stunned and yes I get bills and income and all that but I also see those same people living larger than I do so some of it is self inflicted. I hope it works out for them.
So I bring this up to help, I have a millionaire friend (who was cheap as I've never been) said remember in 10yrs a loaf of bread will cost you $15. Yikes, he's right!
Posted 30 November 2014 - 10:08 AM
Tnx.... Good discussion. I think we could all learn something listening to other peoples plans..
Posted 30 November 2014 - 03:34 PM
Let me ask this, as a freelancer, is it preferable to pay quarterly estimated taxes based on last years income? Or pay at the end in April? Or some other method?
Posted 30 November 2014 - 03:45 PM
Ask your accountant is the easy answer mine said I should pay quarterly because I had a hard time amassing all of it in April so it made me budget better
Things change over time so what works now may not work in 5 yrs so keep asking your accountant.
Posted 30 November 2014 - 07:19 PM
The easiest trick for me to keep things balanced as one whose income was and still is 1/4 - 1/3 based on equipment rental (1099 income) was to claim 0 exemptions on the payroll side. It's never pretty to read the pay stubs to see how much tax is withheld, but it worked well to counterbalance the rentals.
Posted 30 November 2014 - 11:42 PM
same here with the 0 on the exemptions. I change it throughout the year though, At the beginning of the year I fill out 0 exemptions, depending on what the percentage of 1099 work has been by June/July, I start adding Child, Head of Household, , Etc.. to the deductions. Worked well over 20 years now.
never a problem...except the time that a production company reported they paid me TWICE the actual amount that they did in rentals... IRS came back with a penalty bill and nasty letter, to which my accountant responded with a nastier letter, then the IRS sent me an all clear letter a couple of weeks later... I love having a tough, all knowing CPA