
Two years after quitting my job: 2013 in review - kanamekun
http://nathanbarry.com/2013-review/
======
zefhous
I plugged his numbers into a Numbers spreadsheet I use for estimating my taxes
including self-employment tax. This should be the maximum that he would owe
for 2013, though there is surely more that he can deduct.

It accounts for his wife and child, but does not take into account any
personal deductions like mortgage interest, donations, or anything else. The
state rate is approximately correct for Idaho where he lives though the state
uses brackets below $10,000.

Just from the amount of deductible self-employment tax he's close to using
itemized deductions, but would have to add more personal deductions to get to
that point.

    
    
        Business income: $256,725.00
        Business expenses: $65,000.00
    
        Self-employment tax amount: $19,233.48
        Self-employment tax effective rate: 7.49%
    
        Federal tax amount: $34,625.50
        Federal tax effective rate: 13.49%
    
        State tax amount: $12,463.45 (assuming flat rate of 7.4%)
    
        Total tax amount: $66,321.43
        Total tax effective rate: 28.38%
    
    

Here's a screenshot of the sheet I used:
[http://cl.ly/image/1N3M3U3Z2X2x](http://cl.ly/image/1N3M3U3Z2X2x)

~~~
chiph
Nathan needs to get a CPA to do his taxes. I finally got one about 2 years ago
and had him look at some of my older returns. Turns out I wasn't accounting
for rental property income correctly, and he was able to get me several
thousand back (plus interest!) from the IRS. Totally worth it.

~~~
WalterBright
I agree. With the amounts he's dealing with, a CPA is necessary.

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ZanderEarth32
I subscribe to Nathan's emails (some of the only emails I read regularly,
they're that good and useful btw)and was really happy to read he had such a
successful year. But I was also saddened to see that he admitted to not having
as much money in his bank accounts as he had hoped or planned. He mentions
that taxes were huge, but being employed rather than self-employed myself, is
he paying that much more in taxes than he would be if was just a salaried
employee at a regular company?

~~~
skittles
The self employed pay 15.3% of gross income to FICA and Medicare taxes. This
amount cannot be avoided (no tax breaks). Employees pay roughly half this
percentage. It's also very easy for the newly self employed to see the money
rolling in and spend it. One has to be disciplined enough to set aside enough
for taxes in a separate account.

~~~
stirno
This isn't necessarily true. Its fairly common to have an S-Corp (or LLC
filing as S-Corp) dodge a significant chunk of the self-employment tax by
paying a lower salary and then shareholder distributions for the rest.

Balance is important here as the IRS watches these situations closely, but any
decent accountant should help someone down this path.

~~~
skittles
After looking into this, it looks like the IRS will ding you if you pay
yourself less than what it would take to hire someone to do the same job.

~~~
stirno
The IRS will, effectively, value your job in the event of an audit and
determine whether you paid yourself reasonably compared to your market for
your skills, experience, etc.

I had prepared an example that showed you could actually pay less in FICA,
while still being reasonable in the eyes of the IRS. Maybe not ideal to post
it here though.

~~~
a8da6b0c91d
How do those CEOs with $1 salaries get the all clear? Their compensation is
all capital gains, yeah?

~~~
Romoku
Long term capital gains is less than the alternative minimum tax. Executive
compensation probably consists of a mixture between stock options and company
paid expenses (airfare, company car, vacations, travel, nice office equipment,
etc).

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nathanbarry
I'm a little late to this thread, but if anyone has questions (especially ones
unrelated to taxes) I'm happy to answer!

~~~
jbigelow76
What kind of content are you providing to the subscribers of the $100/mo.
forum? And are you using actual forum software or some other CMS to manage the
community?

~~~
joelhooks
I'm a member, and I didn't even know there was going to be content, outside of
the conversation when I signed up. The value I get out of it is a place I can
have candid conversations about the business I am building and get actionable
feedback from Nathan (and the other smart peeps). Actionable stuff that will
definitely increase revenue more than the cost of admission.

It's tough to do this stuff in a vacuum. I've got a hipchat room I hang out in
regularly that has the same vibe, and there is value in hanging out with smart
& motivated people working towards similar goals.

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GrinningFool
OT: Tried to sign up for his newsletter. On firefox, a whole lot of Nothing
Happened - no error, no nothing. Even disabled my anti-tracker plugin of the
day (do not track me) to make sure it wasn't interfering.

On Chrome it worked, but didn't really give me visual indicator that it did -
if I didn't have my phone nearby, I wouldn't have known that I got a
confirmation email.

Not such a good first impression of software that's supposed to specialize in
email conversion :(

~~~
nrs26
I had the same problem with Chrome. A confirmation screen would be cool. The
newsletter and sample chapter are both great though, definitely worth checking
out.

~~~
ufukbay
It sadly didn't work at all for me. Getting the following error on Chrome
(Version 31.0.1650.63 m): XMLHttpRequest cannot load
[https://app.convertkit.com/landing_pages/4811371/subscribeFr...](https://app.convertkit.com/landing_pages/4811371/subscribeFromId).
No 'Access-Control-Allow-Origin' header is present on the requested resource.
Origin '[http://nathanbarry.com'](http://nathanbarry.com') is therefore not
allowed access.

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nicolethenerd
What app is that "Did you write 1000 words today?" a screenshot of?

~~~
fuddle
It's the Commit app, also made by Nathan:
[https://itunes.apple.com/ca/app/commit/id473527073?mt=8](https://itunes.apple.com/ca/app/commit/id473527073?mt=8)

~~~
nathanbarry
Yep. I just redid the app for iOS 7. I guess that should have made it into the
year in review post.

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mathattack
Great story. Thanks for sharing.

While others are focusing on the $s, 2 non-cash things jumped out at me.

 _And then… taxes. Which are brutal._ I suspect it's the administrative
overhead, rather than the taxes themselves. This can take away a lot of energy
and focus.

 _Now that he is getting a bit older (2 years old) it’s been harder to take
long flights with him._ Kids don't travel well when they're old enough to
walk, and too young for iPads. this will get better in a year.

~~~
nathanbarry
Ha, yep. I think this is a phase he will grow out of. I expect travel to
resume in a few years.

~~~
mathattack
Don't worry. Kids get more awesome every year.

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dmourati
Makes me want to write a book! Have to wonder what I know that isn't already
out there in published form.

~~~
peacemaker
There are an unlimited number of books out there that you haven't published
yourself :) Just write about something you know and enjoy the process.

~~~
dmourati
Thanks! I've found a book by Guy Kawasaki called APE that discusses self
publishing. [http://www.amazon.com/APE-Author-Publisher-Entrepreneur-
How-...](http://www.amazon.com/APE-Author-Publisher-Entrepreneur-How-Publish-
ebook/dp/B00AGFU5VS) He references OP's book as an example. I love when things
cycle back on themselves like that.

