From ASME San Francisco Section March 1998 Newsletter:
Small Business Report: March 1998
by Eric E. Worrell, P.E., Small Business Committee Chair, ASME Region IX and San Francisco Section
This column, past editions, upcoming small business events, The Small Business and Consultants Referral List and more are on the web at http://www.ccnet.com/~eew/asmesfsb/. For ASME International's Small Business page and Engineering Solutions Directory, go to http://www.asme.org and click the "Business Center" link.
Schedules haven't quite worked, so we've had no Bay Area Small Business Meeting of the Month for February and March. Plans are for next one to be April 16 with Santa Clara Valley Section's meeting. Look for details in your April newsletter or on the web.
A new "World Wide Projects Directory" has been added, on a trial basis, to http://www.asme.org/smallbiz/. I found a rich listing of contacts for major projects around the world. This could be very valuable to companies of all size looking to contract or subcontract on major projects. Please check this out and return your comments to let ASME know if this is worth continuing.
Many a newly independent consultant will be surprised at how quickly April 15 arrives. With your first business tax return, you may be amazed by the large amount of time needed to collect, organize and interpret relevant information and documentation. From painful experience, here are a few ideas that may help others get through the process more easily.
First, START NOW, if you haven't already. Since time is short, have the state and federal automatic extension requests on hand -- plus a plan to get them postmarked by the deadline. If you use the extensions, continue working until your taxes are done. Otherwise, the next deadline may be an equally big surprise.
Take a little time to contemplate the process and plan your approach. This may be a good time to restrain the stubbornly independent, do-it-yourself inclinations that many of us engineers are subject to. Time spent puzzling through taxes is time not spent on paying work and business development.
You may be able to best use your time by getting up front advice from an experienced tax pro. The pro can answer questions of interpretation that are vague in the code and reassure you about deductible expenses that you may otherwise forego. It may be best to pay for the work a tax pro knows well, while sticking to billable work that you know well.
If you do it yourself, consider the available tools. After developing my own spreadsheets in Excel, I now wish that I had taken the hit on cash flow and time to buy, learn, and use QuickBooks Pro and TurboTax. Both are highly recommended by a CPA friend who I talked with after building the spreadsheets. TurboTax should have the forms you need. Otherwise, with time short, you'll want to go to your nearest IRS office for forms and publications or download them via the internet (http://www.irs.ustreas.gov/ or ftp.irs.ustreas.gov). Your legislators' local offices may have state forms that are not available at your library or postoffice. These are on the web at http://www.ftb.ca.gov.
If just starting in business for yourself, learn the tax rules and start planning now. Keeping complete records is burdonsome but critical to preparing your tax returns. It is also important to have an accurate picture of your business finances. You will save much time by establishing and using a system to efficiently record business expenses and other needed information.
Clear separation of business and personal expenses can prevent much agony. It takes a tremendous amount of time to separate out expenses combined on checking, credit and telephone accounts. A few minor changes may be needed to ensure that your home office deduction can't be challenged. The IRS requires written documentation such as use logs for certain depreciable capital items, such as automobiles and computers, that have part business and part personal use.
Several times I have been told, be truthful, but also be aggressive to be sure you are treated fairly. Best wishes. Eric
If you have comments or input for small business activities, this column or the small business web site, please contact Eric E. Worrell, P.E., The Ergonomic Energy Works, (back on my own) P.O. Box 271923, Concord, CA 94527-1923, Phone/Fax (510) 689-4579, eew@eew.com.