This will be the first year that I've made enough money that I need to do my taxes.

I'm totally unclear on the relationship between my personal checking account, plain-old-quicken, and Quickbooks.

Do I use Quicken to balance everything, then import that data into Quickbooks?

Thanks,
ATPG

Let me preface my comments by saying I am not an accountant, and it would be wise to seek professional tax advice on this matter. That being said, here is how I handled it:

When I operated as a sole proprietor, and co-mingled business and personal funds, then using Quicken was the easiest way to go. I simply created a class for business expenses and one for personal expenses and labeled every check I write. When I did my taxes, I ran a report for business expenses and put that on Schedule C as a business deduction.

Now that I operate as a Subchapter S corporation, I use Quickbooks for my business bookkeeping, since my accountant likes a double entry bookkeeping system for business. Since I do not co-mingle business and personal funds, but pay myself a salary, I use Quicken only for my personal accounts.

Since this is your first year making money as a magician, I assume you are operating as a sole proprietor, so simply create separate classes in Quicken to track business expenses.

It would also be a good idea to start reading tax books for small businesses and start looking for small business accountant. Congratulations on making money with magic and good luck.

I use Quicken myself and created a separate account for all the transactions. It was the simplest way to go and a great way to keep it all organized. I can then run reports from all the data. It seems to work well for my needs. Hope this helps.

As an unincorporated sole proprietor, I use Quicken, and it is more than satisfactory.

Regardless of what software you use, and whether you have a separate business entity, such as a corporation, you should have a separate checking account for your business. You should not commingle business and personal funds.

All funds received from your business should go into the business account, and all expenses (to the extent possible) should be paid from your business account.

If you use a credit card to pay for some business expenses, either get a credit card dedicated to the business (preferable) or write a separate check from the business account to pay for the business expenses on the credit card and write a personal check to pay for the personal expenses on the credit card.

If you pay cash for a business expense (say, parking or a book at a magic lecture), get a receipt or write a memorandum of the expense and write yourself a reimbursement check from the business account for the cash expenditure.

To pay yourself from the business, write a check to yourself and label the memo field of the check "draw" and make a similar entry in the check book.

At the end of the year, your accounting will be "self-working." Your accountant will love you, and you will not be pulling your hair out of your head to find all your deductible expenses.

--Rick

Thanks Rick, but now I feel like a dork for blowing $60 on Ebay for quickbooks. Your explanation makes perfect sense—and probably easily imports into tax software. Forget the accountant!

ATPG

Well if you have Quickbooks, you can always use it to generate paperwork like invoices or statements...

JN

Since I'm an accountant, I'll ignore your last sentence.

If you have not purchased Quicken then I would suggest you use the QuickBooks you purchased from eBay. Just as easy to learn as Quicken.

Jim's comments above as well as the other posts are right on the money.

What's the advantage to QBooks besides its capacity to generate documents?

And would I again keep my personal checking account here?

Thanks,
ATPG

QuickBooks is a true double entry accounting system. It is suitable for clients who not only need to track expenses but keep a balance sheet for tax or reporting purposes. Most sole proprietors do not have this need, however.

Quicken is more of a check register type system. Very easy to use and print checks from.

Both systems allow you to print checks (highly useful). QuickBooks does allow you to print invoices and track your accounts receivables.

In your case, ATPG, since you have already purchased QuickBooks, I do not see the need to purchase Quicken. If you do have both, you'll be fine with Quicken and maybe you can resell your Quickbooks and recoup your $60.

To answer the last questions, yes you can keep your personal accounts in QuickBooks. In QuickBooks you set up catagories for your income and expenses—you would have "personal" catagories and "business" catagories. As suggested above, I would also recommend that you have two separate bank accounts—one for personal and one for business.

Personally, since I use QuickBooks in my business, I have set up a separate file, or company, to keep my personal checking account. This allows me to just have QuickBooks on my computer and not use or need Quicken or pay for two different softwares.