USA How do I pay myself?


Joined
Nov 16, 2020
Messages
1
Reaction score
0
Country
United States
I'm not sure how to explain this, so I'll try my best.
I'm self-employed.
I do freelance work for a website.
I don't know how to pay myself though.
I mean I don't know how to make the journal entries for my accounting books.
So far my books just look like a fancy checkbook.

I was told by my tax person to have a separate account for my freelance payments and a personal bank account.
I pay myself out of my freelance payment bank account to my personal bank account once a month, sometimes(I lost work after COVID and couldn't pay myself some months).

I don't know how to classify these listings when making journal entries though.
The money I make freelancing is income.
The money I pay myself is categorized as dividends.

Also, I have no expenses.
Should I put my earnings in retained earnings?
And then take some out of retained earnings into dividends?

Should I have separate books for each bank account?
I'm using GnuCash for bookkeeping.

If I need to give more info, please let me know.
I'm kind of new to accounting, so I apologize if this is a dumb/weird problem.
 
Ad

Advertisements

Joined
Dec 28, 2017
Messages
13
Reaction score
1
Country
United States
I never figured out GnuCash but when I ran my first business I used quicken (fancy check register). You should have a separate business account (some banks still offer them free) and try not to pay any bills or make deposits with your personal acct. You don't get "paid" since you own the business, but you can "draw" money out when needed. You will pay tax on the business profit whether you take money out or not (as Schedule C attached to your 1040). The business will show all income less expenses (your draw is not an expense). You will also need to pay self employment tax (ss/medicare) if you make over I think $400 a year but that shows up on your 1040. You can take expenses for a portion of your phone, internet, a website and hosting, and business miles on your car (check irs rules as sometimes if you only drive to one client, it doesn't count as it is like commuting, but other business errands may count after initial stop). You can also take a large deduction for your health insurance if you set it up correctly. Your business sounds pretty easy to bookkeep and do the taxes. I would suggest using FreeTaxUsa (sure wish they had a referral program!) as it can handle personal, business, rental, trust, etc all for free federal and only around $15 for state efiling! Don't let the corner tax franchise scare you into paying hundreds!
 
Ad

Advertisements

Joined
Dec 16, 2020
Messages
7
Reaction score
0
Country
Pakistan
Please don't get me wrong but the terminology u are using is of a company not an individual sole proprietor. I mean dividend and retained earnings are used for companies.
Don't take my reply seriously as I am a student and have zero practical experience. Ask a professional to help you out.
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Similar Threads


Top