

Cornered Office
with Mir Kamin
I'm a freelance writer and mother of two working from home, which theoretically means I can set my own schedule so as to best accommodate my family. In reality, "flexible hours" often equals "working too much." Yes, I'm my own boss; no, that doesn't mean life is easy. It's hard to leave the office when you live there. But I love what I do and feel very lucky. And not just because I get paid to work in my pajamas.
To learn more about Mir, check out her profile on Work It, Mom! or visit her blog at http://www.wouldashoulda.com/
I’m going to do something I’ve never done before, pretty soon. I’m really nervous about it, too.
I’m meeting with an accountant.
This is something it might’ve made sense to do a bit earlier in my freelancing career, but it’s hard to justify the cost of an accountant when you’re not actually making very much money. (Or so I told myself, anyway.) Now I’m in need of a lot of guidance and the guilt is weighing me down. Plus—having never been to an accountant before—I have no idea how this will go; how he’ll view my conduct and my mistakes.
I’m not Catholic, but what I envision for this meeting in my mind’s eye looks an awful lot like every movie scene involving a confessional that I can remember. “Bless me, Mr. CPA, for I have sinned. I have not made quarterly tax payments. I did not allocate the proper amount of money for my retirement fund. And I haven’t been to the dentist for a while, either. What? Oh, sorry… I got carried away there.”
When I first started freelancing, it was towards the end of the year. My (paltry) freelance income for those few months didn’t really impact my taxes.
My first full year of freelancing, I did okay. I mean, I think for my first year it was a perfectly respectable income. Uncle Sam felt differently, which was ultimately good news for me; once I factored in all of my deductions, I didn’t owe anything.
2007, though, was the turning point. The good news? I made a living wage this year. That’s really exciting until I remember that I haven’t paid a dime in taxes yet. *ulp* And as if that wasn’t going to complicate things enough, I also got married, moved, and have owned two houses for half the year.
That sound you just heard in the distance was my copy of TurboTax spontaneously combusting.
Going to an accountant will be good. He’ll help us get things figured out for this year’s taxes, and we’ll determine what I should be doing about estimated payments moving forward. (I’m “excused” this year because I didn’t owe last year, and as long as I pay up in April, that’s fine with the government. But next year I could face stiff penalties if I don’t pay quarterly, and that’s in addition to all of the crying I’ll have to do when it’s time to pay.) Maybe we’ll do some retirement planning. We’ll finally have that talk about whether or not I should incorporate.
It’s gonna be good. All good. I’m lucky to have been successful enough to have these problems.
Please remind me that I said this when the accountant tells me how much money I owe, because my very rudimentary math tells me I am going to be very, very sad come next April.
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We finally did this for the first time, too. We’re not freelancers, but Knight takes a ton of private contracts on the side, which is similar since taxes aren’t taken out. Neither of us has had a job in the last three years where we’ve contriubuted to any type of retirement, so we set up something there, too.
We also bought life insurance.
I feel so GROWN UP. Yuck.
Rachel May | October 2nd, 2007 at 8:14 am
Good for you, Mir, for taking this step. Whether or not you choose to work with an accountant on an ongoing basis, having a professional’s input from time to time is invaluable.
I would be very surprised if the accountant advises you to incorporate. The usual arguments in favor of incorporating have to do with limiting personal liability associated with your business activities — default of business loans, payroll obligations, and the like — which most likely do not apply in your case. Taxes and fees for incorporated businesses are much higher than for DBA individuals, so I can’t see an upside for you there.
However, you MUST start retirement planning as soon as possible, if you haven’t done so already! You may wish to ask the accountant for a referral for a financial planner. IRA, life insurance, the works. The sooner the better!
RuthWells | October 2nd, 2007 at 10:17 am
We’ve been using a tax accountant for a few years; when we first bought our house we just didn’t want to deal with TurboTax anymore. The $150 we pay him once a year is so worth it! His office also consults for small business stuff, and I’m thinking of setting up a meeting with him here soon, as I try to take on a few more freelance assignments and go part-time at my “day” job. I’m still nervous about the meeting, though. I know what you mean, Mir!
Lee | October 2nd, 2007 at 11:20 am
RuthWells, please don’t yell at me!
I do have a retirement account, so it’s not as though I haven’t done any planning. I’m just feeling disorganized and frankly I’m still missing the days of the 401k account complete with a company match.
Mir | October 2nd, 2007 at 11:29 am
Sorry, I didn’t mean to scold! ; )
I used to freelance many moons ago, setting up business & accounting systems for self-employed types like your pretty self. It has never ceased to amaze me how willfully and completely some people manage to ignore/avoid such important aspects of managing their affairs. Good on you for not being one of them!
RuthWells | October 2nd, 2007 at 12:45 pm
I feel your pain…this is my first year of significant 1099 income (in addition to my FT work), and it looks like I’m going to have to pony up a LARGE chunk of change come April and start making estimated tax payments going forward. Ugh.
What really stinks is having to pay the self-employment tax in addition to income tax.
TracyB | October 2nd, 2007 at 12:54 pm
Mir, I’m an attorney south of Atlanta. E-mail me if I you need a reference for your area or if I can answer any questions.
Mandee | October 2nd, 2007 at 8:01 pm
The first year I went to an accountant, she saved me $1200. It may not be as bad as you fear!
The other thing she did was help me plan my tax savings. Now I put away a set percentage of my income every month into an untouchable tax account. Far less painful that way.
MaryP | October 4th, 2007 at 5:36 am
[...] so the other topic I wanted to touch on was this: Remember back when I said that I was getting ready to visit an accountant and figure out my tax situation? I bet you thought I was never going to come back to that. [...]
Work It, Mom! | A Community for Professional Moms | November 15th, 2007 at 7:55 am
[...] may recall that I already steeled myself for a rude awakening when it came to figuring out my taxes, and I’ve since gotten some excellent advice, an estimate of what I owe, and several paper [...]
Work It, Mom! | A Community for Working Moms | December 13th, 2007 at 7:46 am