How QuickBooks Self-Employed can help your private music studio
Updated: Jun 25, 2019
Do you love music and are you great at teaching? Have you decided to make a business out of giving music lessons but have no idea what financial tools to use? Or have you already built up a private studio and are looking for something better than Excel and a paper calendar to keep everything organized?
Then you have come to the right place!
In this post I will outline how to use QuickBooks Self-Employed to keep your finances organized as an independent music teacher, ensuring you are prepared for tax time and that you have a clear picture on the profitability of your studio.
Step 1: Complete the Tax Checklist
One of the first things you should do after creating a QBSE account is to complete the Tax Checklist. You will see a prompt in the top left corner. You will be guided through questions about your tax status, healthcare profile, and vehicle information. Be prepared to know your filing status, W-2 income (if you have any), vehicle make and model, cost of the vehicle, and basic health insurance information. Throughout the year the software will estimate your quarterly tax liability as you enter income and expenses, saving you more time for teaching!
Step 2: Connect Bank Accounts and Review Transactions
After you fill in your tax profile the next thing you need to do is connect any and all bank accounts and credit cards that you use for your business. All banking activity will go through your transaction feed for you to manually review and classify as business, personal, or split between the two. You can set up automatic classifications (called rules) for regularly recurring transactions, letting QBSE do more of the work for you. Categories are already created based on how the IRS classifies business expenses on Schedule C, so by the end of the year, all of your business expenses are neatly categorized and ready to be plugged into your tax software without any further classifications from you. QBSE also comes with a reports tab allowing you to view your business' profit and loss, mileage, and more!
Step 3: Download the App
The next major step is to download the app. The QBSE app lets you take pictures of receipts and includes a mileage tracker so you can deduct all that time spent driving to and from students homes, rehearsals, gigs, etc. You can also view your dashboard and classify transactions like you would in your browser.
Step 4: Pay Quarterly Taxes
QuickBooks Self-Employed predicts your quarterly tax liability as you classify business income and expenses. As you get closer to the due date that prediction becomes more accurate. You can pay using three different methods:
Directly on screen with the QBSE/TurboTax bundle by clicking Pay Now.
Without the bundle QuickBooks can print a voucher for snail mail by clicking Pay Now.
Just labeling your payment as Estimated Taxes when it comes through the transactions feed.
Odds and Ends
The reports tab is filled with insightful reports including a mileage log, profit and loss statement, and tax summary.
The invoicing feature is not set up for recurring transactions, so I do not recommend it for teachers who need to invoice the same people month after month. Using studio management software like My Music Staff, Music Teacher's Helper, Fons, etc. will help you organize your payment system and calendar.
I also recommend Everlance for mileage tracking in case you want an alternative to QBSE tracking.
Employment income should be marked as personal income.
I also want to point out that QBSE is not budgeting software. It will tell you what you have spent on office supplies and gasoline, but not any personal expenses. Marking expenses as personal just excludes them from business expenses and they do not show up on any reports. For personal budgeting I recommend You Need A Budget (YNAB). You can get a free month with this link.
Even after learning the ins-and-outs of QBSE some people decide they would rather hire someone to maintain their account as a personal bookkeeper. If that sounds like you then please fill out this questionnaire and I will be happy to contact you for a complimentary consultation.
Please share your thoughts on this post. Was it helpful? Do you need more detailed information? Are you interested in a self-paced course that takes you through each step and leaves out all the guesswork? If there is enough interest I will create such a thing on Udemy!