December 28, 2004
End Of Year
Business has certainly made the end of the year more complicated.
I've written about some of this before, but here's the general overview. I was a sole proprietorship the past couple of years. If you make more than a certain amount, it is to your advantage to incorporate. I incorporated as an S-Corp in August of this year. Most of my work was later in the year, so most of my year's income went to the corporation.
And now I'm figuring out how to manage the whole thing. I had to figure out my gross income, expenses, and net income for both the Sole Proprietorship, and the S-Corp. In addition, I had personally paid for several corporate expenses, so the corporation had to pay me back. The corporation also reimburses me for mileage, and pays rent for the portion of my house that is used for business purposes.
Then after I get an idea of my net corporate income, I decide how much to pay myself in wages. You're supposed to pay yourself enough in wages and distributions so that you mostly empty your corporate account, but leave some left over for the corporation to pay its expenses next year.
Finally, I had to set up my 401(k) by the end of the year. Fidelity lets you set up a "self-employed 401(k)". Highly recommended to anyone who is a sole proprietorship or a one-person S-Corp. Much better than an SEP-IRA.
I had to figure that all out this week. I ended up writing those three checks, which I had to do by 12/31. I still have a lot of stuff to unsnarl in Quicken. For instance, I have to calculate the percentage of house square footage that is used by the corporation, then take that percentage and apply it to my utilities, which becomes a deduction against the rental income. Yeesh. Then I have to figure out exactly how much money I'm sending to retirement.
On top of that, I had an SEP-IRA from the two previous years, and I've decided to convert it to a Roth. I have to Fedex a form to E-Trade by Friday so it will count for 2004.
This stuff is harder than programming! Unlike programming, all the details don't really fit together into a cohesive whole. Bleah!
Posted by Curt at December 28, 2004 06:17 PM