Going solo: Accounting tips for freelancersDecember 11, 2008: 10:19 AM ET
How to keep your retirement savings on track when you're out on your own.
Joe Vitale, New York City
I recently left a staff job and am working as a freelancer. I'd like some advice on how to best manage my bookkeeping. Do you have any recommendations on interest-bearing checking accounts that I can link with an account to set up a retirement savings plan such as a SEP?
By Myrlande Davermann, Fortune Small Business contributor
A good bookkeeping program is essential when you're running your own shop. Susan Lee, a tax consultant and financial planner with Freelance Taxation recommends Intuit's (INTU) QuickBooks, a popular choice for small businesses.
For a checking account, check out brokerages such as Charles Schwab. It offers interest-bearing accounts that have automatic withdrawal options for funding different retirement plans.
But approach automatic withdrawals with caution: Lee warns that the first year of freelancing rarely goes smoothly. Income might not come in as regularly as you expect. Lee recommends underfunding your retirement account and setting aside the extra cash in a separate account. That way, it will be available if you need it. When you do your taxes at the end of the year, you can figure out what you can afford and sock the money away.
A SEP-IRA, which stands for Simplified Employee Pension Individual Retirement Account, will allow you to contribute up to 20% of your net self-employment income into your retirement account, up to a maximum of $46,000. If you have a lot of cash you want to tuck away for retirement, another option worth investigating is the solo 401(k), which will let you make contributions both as an employer and as an employee (of yourself).
If you don't have inventory or complex business arrangements, another software program that could fit your needs is Quicken, says CPA Terry L. Jones. She recommends you seek out tax and accounting assistance from a qualified CPA with experience working with to working with freelancers.
"This is a specialized area, and you need a good advisor on your team," Jones says.
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