I'm going Independent, where do I begin??

Below are some basic tasks that you need to complete.

1) Establish a separate checking account, preferably at a bank that offers online access, funds transfer, and a strong ATM network.

Most banks offer low activity business checking accounts with very low annual fees.

2) Obtain a credit card for the business.

We recommend the American Express Business Management Account. It has no annual fee. If you travel a lot by plane, take advantage of the American Express Business Platinum Card. Anytime you fly with Northwest, Continental and Delta, you will have free access to their airport lounges. Visa, Master Card, and Discover also offer business accounts at no or low annual fees. 

Why do I need these first two items??

It is very important for you to maintain separate records not only to keep your tax data organized, but to avoid the confusion of separating your business and personal items with each financial statement. Tax filings are much easier and the IRS frowns upon the mixing of business and personal expenses.

3) Obtain an expense log book to record travel mileage, meals, lodging expenses you incur in the course of your work etc.

As an independent, even "commuting mileage" is deductible

4) Purchase a fax machine

5) Obtain an malpractice insurance policy that satisfies the liability requirements of the facilities or practice that you will work in.

6) Set aside a minimum of 35% of your paycheck for estimated taxes

Employers normally withhold federal, state and local taxes. They also pay a half (7.65%)of the FICA (Social Security) tax on your behalf. As an independent and self employed, you are liable for all income taxes and the entire 15.3% of FICA. You are also required to make quarterly installments to the taxing authorities every Jan, Apr, June and October.

Some banks will give you a separate savings account linked to your checking. This is a good way to keep tax payments away from your main source of funds.

7) Organize your receipts the way the IRS expects you to report them.

Open and print the following file: Organizer for Independent Contractors . Each category of expense should have its own file.

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