Presented by: Cullen G. Williams, CPA Brian M. Carle, CPA Jeff P. Russell, Esq.

EMPLOYEE VS INDEPENDENT CONTRACTOR  Receive wages reported on a W-2  Responsible for ½ FICA taxes (7.65%)  Taxes withheld from paycheck  Responsible to employer  Uses employer’s tools & resources  Receive payments reported on a 1099-MISC  Responsible for 100% of FICA taxes (15.3%)  No taxes withheld  Responsible to self  Uses own tools & resources

 1099-MISC received does not always mean you have a business  Profit motive  Level of personal enjoyment  Examples  Mary Kay  Making furniture  Drag racing

 Sole Proprietorship  Limited Liability Company (LLC)  S Corporation  C Corporation  Partnership

ORDINARY & NECESSARY ALLOCATION OF PERSONAL USE  Examples could include, but are not limited to:  Cost of product sold  Insurances specific to the business  Legal fees for establishing business  Accounting fees for bookkeeping, planning, and tax preparation  Certain office supplies  Certain travel  Examples of personal use items typically include, but are not limited to:  Automobiles  Cell phones  Computer & internet  Meals

 Business purpose  Amount spent  Receipt, credit card/bank statement, etc  Cell phone logs  Mileage logs  Repair receipts  Vehicle registrations

 Separate bank accounts  Business revenues and expenditures in business account  Personal revenues and expenditures in personal account

No Expense RecordsW/Expense RecordsDifference Gross Revenue $ 30,000 $ - Expenses - 15,000 Net Taxable Income $ 30,000 $ 15,000 $ (15,000) Federal Income Tax $ 7,500 $ 3,750 $ (3,750) State Income Tax 2,385 1,193 (1,193) Social Security & Medicare 4,590 2,295 (2,295) Total Tax Liability $ 14,475 $ 7,238 $ (7,238)

 Spreadsheets ( Microsoft Excel) – Sample income statement posted on the “Resources” tab of our website  QuickBooks  Apps

 Quarterly tax planning  Making estimated tax payments  Set aside money to pay quarterly estimates  Retirement accounts  Health insurance

Cullen G. Williams, CPA Williams & Associates, P.A. 11 Debeck Drive Holden, ME ph EXT 17 f Brian M. Carle, CPA Williams & Associates, P.A. 11 Debeck Drive Holden, ME ph EXT 16 f Jeff P. Russell, Esq Russell Law, PLLC 16 Sunset Avenue Hampden, ME ph