Successful Blog

Tax tips for freelancers: is it a business or a hobby?

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By Sharita Hutton

For Chicago based Aubre Andrus, writing is her life. The author of seven children’s books, a blogger, and website copywriter, Andrus calls herself a triple threat when it comes to her work. “I mix marketing savviness with journalistic integrity and creative writing thanks to various positions I’ve held in the past,” Andrus said.

But instead of waking up every morning, and heading into the office, Andrus is finding her roles in media through freelance work and it turns out she is not alone.

It is estimated that there are 42 million people in work operations based on “freelance” principles and the number continues to grow. That is, these workers have a great deal of freedom in how much and when they work, who they work for and what they get paid. The freedom comes to a halt when it comes to taxes because even if just a little extra income is being earned, that money is reportable income. Plus, special reporting rules apply to some freelancers.

“My least favorite part about being a freelancer is dealing with tax-related issues. I dread tax season and I had no idea what to do at first,” Andrus said.

Freelancers need to track what they earn because even if they don’t get a 1099 or W-2, reporting this income is required by law – even when the payment is made in cash. When freelance work becomes the main source of income or a full-time job, income and expenses need to be reported on Schedule C. Also, when freelancing becomes a business, self-employment tax may be owed, along with quarterly, estimated tax payments. An advantage of operating a business is that expenses can directly offset income, which means a freelancer can show a loss.

“I pay quarterly taxes,” Andrus said. “There a lot of decisions freelancers need to make when it comes to finances, and these are decisions that shouldn’t be made on your own.”

H&R Block Tax Professional Riley Holmes has advice for freelancers. “As a small business owner, you are most likely to report your business income in the year you receive it and deduct your expenses in the year in which you pay them. Sometimes it may be advantageous for you to defer some of your billing until the next year, but once you have access to the income you must report it.”

When freelance activities are at the “hobby” level, all related expenses can be deducted as miscellaneous itemized deductions. But, the deduction is limited to the total revenue from that hobby and it is only for the expenses in excess of 2 percent of adjusted income.

The more you operate your business in a professional manner, the more likely the IRS will treat it as a profession rather than a hobby, making it important to

  • Track all income (it is reportable and taxable)
  • Save receipts (you could be able to deduct some expenses)
  • Secure digital and paper records (be sure to back them up, too)
  • Separate bank accounts (makes it easier to keep good records and file accurate tax returns)
  • Know tax rules for business model (it makes a difference if you have a business or a hobby)
Author’s Bio: Sharita Hutton helps bloggers and other entrepreneurs navigate tax issues. For more information about the difference between having a freelance business and a hobby and other tax topics, contact an H&R Block tax professional. To find the nearest H&R Block office, visit www.hrblock.com or call 800-HRBLOCK.

4 Fear Busters To Jumpstart Your Business

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By Kevin Kelly

In my latest book, DO! The Pursuit of Xceptional Execution, I interviewed entrepreneurs from around the world. They lead some of the world’s most compelling brands and companies, ranging from one to 3,000 employees, with turnovers from $100,000 to $130 million. I call them the Xceptionalists. They hail from Buenos Aires, Argentina to Bologna, Italy; from Des Moines, Iowa to Galway, Ireland. They run app companies, consultancies, clinics and sprawling technology corporations.

Given that half of all new business fail in the first five years, how did they deal with fear and survive their early failures?

1. Stop fearing feedback

Xceptionalists treat failures as feedback and a prelude to future success. Ben Milne of Dwolla said, “… I have failed in making adaptations to the product… I have failed at selecting business partners. I nearly went out of business three times in my career. When you are failing the key point is to just admit it. … The longer you drag it out the less chance you have.”

According to Peldi from Balsamiq. “Mistakes don’t really matter that much as long as you fix them straight away and put your hand up. … It is very much the lean start-up way: throw it out there and listen.”

Why fear feedback? Why stigmatize failure in the workplace when it’s bringing you closer to achieving your organizational goals. If you want to find the next big success, failure comes with the territory.

2. Face and floor it

In the early 1970’s, during the height of the political turmoil that rocked Northern Ireland, Agnes McCourt, owner of Unislim had a very frightening encounter with an armed and masked gunman, Agnes’s husband wanted to cease all business links in Northern Ireland and relocate to Southern Ireland. Agnes agreed to the house move but continued to develop the her business. Why? “In business, one has to be fearless and do what one’s inner voice tells you is the right thing,” she told me.

Devon Brooks co-founder of the unique women’s personal care business Blo Blow Dry Bars, was sexually assaulted and went through the ensuing harrowing judicial process. She made a personal commitment that she would never let her past get in the way of taking action. Devon told me, “Sometimes you live life, and sometimes life happens to you. But you always get to choose what you do about it.”

3. Find the source of the fear

Like many Xceptionalists, when fear raises its head, Patrick McKeown of Asthmacare had a strategy that works for him. He asks three questions:

  • What is the best possible outcome?
  • What is the worst possible outcome?
  • What outcome falls between the above two?

McKeown says entrepreneurs who survive in the long term take calculated risks, and tend not to take monumental courses of action with their head stuck in the sand. So the fear has no gone away, they just understand it a little better.

4. Flow floors fear

For our Xceptionalists from Brazil, WeDemand.com, fear was never an issue. They have been so immersed in an industry they love, they haven’t had the time or the inclination to be afraid. “I would tell entrepreneurs not to be afraid. If you sit around and just wish about your idea, nothing will happen. All you can lose is money and there is no shame in trying,” said cofounder Bruno Natal.

So in essence, there is nothing to fear. The challenge for you the entrepreneur is to find your passion and make fear history.

See more extracts from Kevin Kelly’s new book “Do! The pursuit of Xceptional Execution”

Author’s Bio: Kevin is an internationally acclaimed leadership and motivational speaker and best selling author. For more information: http://www.kevinkellyunlimited.com.

Will Securing Funding for Your Business Venture Be Difficult?

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Among the most frequently asked questions for those interested in starting a business is, “Is it hard to secure funding?”

The answer will depend on a number of factors.

Credit ratings will effect people trying to get a loan. If bad credit is a factor, securing funds will be harder than for someone with a good credit history.

It is harder now than it was before 2008 to secure a loan. Lenders are more stringent with loans and securing credit is harder for those with less than stellar credit ratings.

Family Loans

Loans from family members have started many a successful business.

These loans can often be paid back at a slower rate than with non-family. Relatives aren’t always interested in charging late fees or interest to loans.

This isn’t true for every situation, but for the most part, family loans are the easiest to repay if a business is successful. Most loans of this nature are small, though there have been large loans from wealthy family members. The larger the loan, the more likely the relative is to treat it as a ‘real’ loan.

Full Time Jobs

Quite often the best way to secure funding for a new venture is to make the money yourself.

When you are working and saving money toward your own business you have no loan to repay. This route will typically take much longer than taking out a loan, but the reward is knowing you have no creditors.

Some people that take this route become consultants and work on their product on the side. They develop the product for the people they are offering consulting services and then change their business model at a later date to sell the product they’ve created.

Angel Investors

Angel investors are individuals that offer funding to start ups.

These people are wealthy and invest in new businesses in order to help them grow. While this sounds appealing, most angel investors will expect a return on their investment. This means you must create a product or service that sells well or a company that is good enough to merit another larger company buying it.

Not every new business owner will want to sell what they think of as their ‘baby’, so keep in mind that angel investors look for start ups that will turn a profit through sale of it or many sales of service/product.

Funding Companies

There are companies that work in essence like angel investors.

These companies are seed funders and also venture capitalists. The former offers small amounts to new companies, literally seeding it with capital. Seed companies offer advice to brand new businesses which is a boon to new owners.

Venture capitalists offer large amounts, hundreds of thousands, sometimes millions to new business, but these are better reserved for someone that has started a company in the past with good results.

There are many ways to fund a new business.

With careful consideration choosing the one that is right for your new business will become clear. Consider the stage of planning or start up you are in, how much funding you need, and how far you plan to go.

Photo credit: capitalcabin.com

About the Author: Tina Samuels writes on ways to accept credit cards online, social media, healthcare options, home improvements, and small business solutions.

How Much Do I Pay This Employee?

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When you are a small business owner, it seems as soon as you’ve made one decision, the next one surfaces, and you are back trying to figure out the best thing to do.

One decision business owners are often faced with, and it can be a tough one, is how much to pay employees.

You don’t want to over pay as you’re probably on a budget (and you do need to make money), but you want to pay them what they are worth to keep them with you and happy.

Here are some tips on cracking the code on this … .

Create a range

First off, before any hiring is even done, really before the interviews begin – set a salary range.

Decide on the least you would pay and the most you can pay, and you’ll have some flexibility when it comes to choosing the best candidate and for negotiation purposes.

Look at qualifications

Someone with more relevant degrees, qualifications and experience is usually expecting (and deserving) a higher salary than someone with less.

If you are looking for that highly qualified, experience laden employee, expect to pay for it. If you want someone with a little less experience and education, you can probably get away with lower pay.

Do some comparisons

You can’t really just come up with numbers off the top of your head.

You need to look at some salary comparisons. BUT, you need to look at them as apples to apples. Don’t compare a salary in Chicago to one in Batesville, Arkansas.

Also, don’t just look at job titles, look at job descriptions.

Titles can cover a pretty broad range, but descriptions cover the nitty-gritty, and you can compare just what people are doing to what they are getting paid.

Think about business size.

Sometimes bigger corporations can pay more, but you have things to offer as well, that may not fall under salary. Your company can be more personalized and flexible, offer better benefits or stock options – sometimes that can be worth a lot!

Look around your area and see what other companies your size and in your field are paying employees. You want to stay competitive so qualified people will want to work for you.

When to offer increases

So you have a current employee wanting more money…

• Be careful – offering one raise out of the normal standard you have set can set a precedent you can’t afford to follow.

• Is your employee telling you he or she has an offer for more money? If so, it’s risky all around. If it’s true, it means they’re looking and thinking about it. You may need to keep your eye out. If they are worth it, and budget allows, you may need to offer more to have him or her stay, but know it’s risky – they still could leave.

• If their job descriptions and duties increase, it may be time for more money.

• The best thing to do is have clear policies with documentation of when raises are awarded. You can go by this and keep it cut and dry.

• Bonuses and commission are a way around a salary raise. You pay these once and are not committed to them in the future.

No one said running a business is easy. You’ve got employees to keep happy and budgets to adhere to, plus you need to make money.

However, you need to pay your employees fairly or they will go elsewhere.

Photo credit: nbcchicago.com

About the Author: Heather Legg writes on a variety of topics, many related to social media, small business and Bobby Kotick.

The Reason My Small Business Needs a Presence at Trade Shows

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Everybody wins when companies have the opportunity to interact directly with buyers, which is exactly why trade shows are so beneficial.

In terms of a buying and selling market, nowhere are business connection opportunities and company publicity as prevalent as with large, industry-wide trade shows.

So, in terms of benefits, why should your business have a presence at trade shows in today’s market?

Product Testing

Trade shows are a testing ground for new products that result in instant consumer feedback.

What this means for your business is, if you’re still trying to get a product line off the ground, trade shows offer a platform to put that product on a small-scale market, see how it performs, and receive reviews in real-time.

Market Access

Whether a seller or a buyer, trade shows offer a unique way for businesses to gain access to a market they otherwise wouldn’t have the ability to tap.

In other words, vendors with limited market access due to distance or company size are able to use trade shows as a one-stop shop for getting their voices heard and products seen.

Publicity Costs

Small businesses simply don’t turn into large companies without large-scale publicity. And, although trade shows aren’t necessarily large-scale events, they’re a launching point for businesses both large and small.

So, for those companies without the means to market, advertise, and publicize on a national scale, trade shows are essentially a marketing shortcut. As long as the products are worthy of attention, trade shows are a great way to create industry-wide buzz.

Attaining Market Knowledge

Because trade shows are a stomping ground for like-minded businesses, simply attending an industry trade show will help your business gain essential knowledge in terms of product trends, sales techniques, and the future of the industry.

Your business should consider trade shows as a marketing crash course and go into the event with an open mind and willingness to learn.

Even if you leave the trade show without selling a single product, the market and industry knowledge gathered is worth its weight in gold.

Time Saving Factor

With trade shows, the time-consuming process of setting individual appointments is almost non-existent.

Because trade shows are a one-stop shop, your business has the ability to meet with potential buyers on a continuous basis throughout the length of the event without the inconvenience of scheduling times and locations.

Lower Costs

When multiple buyers and sellers interact continuously from one location, it saves both parties a lot of money. And, as opposed to approaching buyers one-on-one, your business can market by group, which is a popular trade show mentality.

Not only that, but the main reason buyers attend trade shows in the first place is to buy, so they’re already in the right mindset when they arrive.

So, when your business decides to make an appearance at trade shows, it’s beneficial for everyone involved.

As a business owner, what have your experiences at trade shows been like?

Photo credit: tucsonexpocenter.com

About the Author: Adam Groff is a freelance writer and creator of content. He writes on a variety of topics including personal health, how to be first on Google, and business.

If You Don’t Know Where You’re Going, You’ll Never Get There

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By Jennifer Dunn

Where is your business headed in 40 years? Yes, that question probably sounds ridiculous to you right now. You’re busy trying to survive another year, month, week or day, or even attempting to get your business off the ground in the first place. At what point are you supposed to think about 40 years in the future?

Honestly, you should be thinking about the future, because it will be here at some point. While you may not have to specifically worry about 40 years ahead, you should be considering where you want your business to be. If not, it could lead to some pretty bad situations for you that could lead to the demise of your business.

If you don’t have a plan for your company, it’s like it’s a plane without a destination – you can fly high for a while, but at some point you have to come down. If you don’t know where that is, you could be in for a rough landing.

Goals and Vision

Everyone has a vision for their business as well as a reason for getting into business in the first place. This reason could be absolutely anything – you wanted to spend more time with your family, or had a great idea for a product, or wanted to escape the rat race. It could even be to prove to yourself you could do it.

There is no wrong or right answer here. Your reasons are your own. The point is you have to honor those reasons and your vision for your company. If you don’t, you could end up with a monster you can’t control.

For example, let’s say you wanted to never compromise your product line as you believe it can change the world. It’s a lofty goal, but a great one nonetheless. Now let’s say you have an opportunity to sell your company to a bigger company. At some point you may realize the big conglomerate wants to change your product. Now you have a big problem – do you choose the money or the reason you went into business in the first place?

Find Your Destination

While this initially may not seem like such a big deal, eventually moving away from your original goals could lead to a point where you abandon your business. If you struck out on your own to spend more time with your family but you let your company get so big that you no longer have no time for them, you’ve defeated the entire purpose of starting your company.

This is why it’s important to look toward a destination for your company. If you have a place in mind for your company to land, you can make better decisions that will keep you happy and invested in your business. Even if something unexpected pops up you’ll be able to handle it with ease as you know where you want to end up.

Keep in mind this destination and your goals may change. You may start out wanting to make a ton of money and get rich but switch it later on to just being comfortable and being happy working on your own. Again, there’s no wrong or right answer – just make sure it’s what you want for your business and yourself!

Where are you heading?

Author’s Bio: Jennifer Escalona Dunn is the owner of Social Street Media where she writes about small business, tech and finance for sites like WePay and Outright. You can find her on Twitter @jennescalona.