Vend Raleigh’s Lori Aveni, accountant and Mompreneur, answers questions for Raleigh small business owners.
Vend Raleigh has several smaller Facebook groups that are business specific, you can find links to those groups here. The Coaching and Consulting group now includes those Mompreneurs in professional services. Gaye Esser of Redefine Balance leads the group and together we’ve changed up the format where each month a new Mompreneur leads. It’s been exciting and we’ve seen great interaction there!
This month our leader is accountant Lori Aveni, owner of My Shoebox Bookkeeper, a full-service bookkeeping and payroll firm, specializing in small businesses and nonprofit organizations. Lori has been involved with Vend Raleigh since the very beginning and has been a speaker at both Illuminate conferences. She offered a Q and A that I thought I’d share with all of Vend Raleigh. (You can find Lori on Facebook here.)
I’m a virtual assistant and some of my clients consider me to be a contract employee. What forms should we supply each other to ensure that the IRS gods are happy?
You will need to provide the client with a W-9, which will give them your business name, address, business form, and tax ID number. This may be your personal SSN if you’re a sole proprietor. In January they must provide you with Form 1099 if you earned $600 or more in 2013. That is the form you’ll use for preparing your taxes.
Form W-9 can be found at irs.gov, click W-9 under the Forms & Pubs link.
Follow-up question. Should I provide a w-9 to all of my clients regardless of my earnings?
No, it’s really not necessary unless you expect to come close to $600. Especially if you use your SSN. The fewer people with that information, the better.
E-commerce. All of it.
You need to shop around for the best merchant service to meet your needs. They are not all the same and fees are definitely negotiable! I currently use Intuit Payment Network, and it allows me to drop a link directly into my invoices so people can pay me online. I also use Square when I’m meeting with clients on site and they want to pay immediately.
One tip is that if you collect funds online and the third party provider collects fees, you should record your income at the gross amount and then record the fees as an expense. For example, if I charge $250 for services and someone pays me through Square, I would record income of $250 and an expense of $7.50, with the total deposit being 242.50. This is true for Paypal, Intuit Payment Network, etc. The bottom line is the same but it’s the correct way to record the information for your taxes.
There are some good articles available here through the BBB and Small Business Administration.
If you hire someone for hourly help can you just pay them via paypal and then expense it?
It depends on whether they are treated as an employee or a contractor. If they’re a contractor, you can just pay them straight wages, and your only obligation to them is to provide a 1099 if they make more than $600.
Now here’s the tricky part: you can’t just say “oh, she’s a contractor” and that’s that. There are certain criteria and some of them aren’t necessarily black and white. For instance, I provide all my own equipment, I set my own hours, and I do the same work for lots of people. I’m definitely a contractor. However, I also go regularly to a CPA’s office to work a day or two a week. She sets my schedule and supervises my work, and also provides the equipment. There I’m an employee and I receive a W-2. Confused yet? Here’s a link that will help!