Tax Tips For Entrepreneurs
Taxes, it’s the thing every entrepreneur has to deal with year after year that’s probably the most stressful part of having a business. But today, I’m gonna give you some tax tips for entrepreneurs, you may not have ever heard before.
Now, disclaimer, I’m not a tax expert nor am I a certified public accountant, so why am I giving you tax tips?
Well, I partnered with my friend Ronald Mueller over at Home Business Tax Savings who is considered one of the top experts for people with home based businesses. Believe me, he can help you find the maximum amount of deductions for your business.
Anyway, let’s jump into today’s article about tax tips for entrepreneurs. I’m gonna give you the seven amazing tips to help you as an entrepreneur with your taxes.
Should You Incorporate
It may or may not be worth it to incorporate your business. Now, the typical advice that you get is to incorporate your business, it’s still good advice because there are other reasons to do it.
But if you’re looking to save the most money, you have to remember that depending on what state you live in here in the US, it could cost as much as $800 for you to incorporate your business.
And ultimately, depending on how your business did in terms of profits, you may or may not really save as a benefit of having your incorporated business.
When incorporating, you’re also subject to additional costs like payroll taxes and workmans’ comp. So, just kind of keep those things in mind. Business deductions work pretty much the same for self-employed people as they do for corporations.
And I know the new Tax Reform law, self-employed Americans may also get a new 20% qualified business income deduction.
Saving For Retirement
Saving for your retirement becomes your responsibility when you become self-employed and you start a business. The good news about saving for your retirement is it’s tax deferred income. You’re not gonna be taxed on it now. You’ll be taxed on it later.
Now, the good thing about these investments is they accumulate compound interest over time, tax free. If you can, max out your 401(k). For the year 2020, the maximum there is gonna be about $19,000.
Now, if you’re 50 or older, it’s actually $25,000, so this is definitely a great opportunity for savings. Now, the self-employed person, you actually could have what’s called a SEP IRA.
It actually means that you could save even more. If you’re self-employed, you can contribute up to $55,000 or 25% of your income, whichever is the lesser. For 2019, you can contribute $56,000.
Paying Quarterly Taxes
If you are regularly employed, then your taxes are being taken out of your paycheck each and every pay day. But if you’re self-employed, the odds are, that’s not happening, so it’s your responsibility.
By paying quarterly taxes, you can get yourself out of having to pay a large lump sum at tax time each and every year. This is something that is very important if you are a freelancer or you’re a stay-at-home business as an entrepreneur.
Because at the end of the day, you have to worry about cash flow and if on April you have to dump a considerable amount of money just to pay your taxes, that’s gonna be a burden on you and your business.
Networking can actually be deductible and your network is your net worth. When we’ve talked about entrepreneurship and business, we’ve talked a lot about networking and going to events and joining associations.
Now, those things cost money and you can actually claim those as deductions on your taxes, so it’s actually really beneficial to do those things because they’ll definitely grow your business.
But just know that by doing it, you also have another write-off in terms of your deductions against your business and your taxes each and every year. And I know everyone avoids this because they’re afraid of being audited.
But did you know, this is a fun fact, did you know that less than 1% of taxpayers are ever audited? True story. Besides, the home office deduction is a legitimate business expense and you shouldn’t feel guilty about it.
It is something that you use day in and day out to accomplish your goals and to earn revenue. So, it’s right for you to be able to deduct it.
Now, this is just gonna be a portion of the expenses that go to things like, say, your rent, your utilities in terms of things like the internet, your cellphone bill that you use for your business. As long as you’re being honest about it, there’s no reason to shy away from it.
This is a big one, especially for me, because travel is one of the top three largest expenses in my business. Last year, I spent over $20,000 on travel for my business, and the good news is I’m going to get to deduct a lot of that.
In my case, I kept track of all of my travel, everything from my airline tickets that I purchased through my credit card to all of the rides that I did for cabs, uber, rental cars in terms of, hustling around various cities to meetings and speaking engagements.
All of that is accounted for, and all of my hotel stays. So, I have that for my taxes in order to get a deduction against those expenses because as a public speaker, travel was a huge part of my business this year.
Now, for those of you who are more local, this next tip applies because you can actually claim your gas and your mileage on your car against your taxes as long as you’re doing it for business.
If you are a regular nine to five employee, you wouldn’t have this benefit, so you should definitely take advantage of this as an entrepreneur.
Because while you’re sitting there racking up those miles, running down your car, while you’re sitting there paying those ever climbing gas fees, then you might as well be able to deduct that since it’s an investment that you’re making for the sake of your business.
You’re not sitting in traffic for your health. I know that’s right. So, if you’re going to be sitting there and you’re gonna be dealing with it, you might as well know that there’s a silver lining, and that it is going to go against your taxes.
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Tax Tips For Entrepreneurs – Conclusion
I really want to thank Ronald Mueller for helping me out with the info and the research for this article. I couldn’t have done it without him. The great news is that now you have some things that you may not have known that can help you in your business.
Filing taxes on your own is extremely complicated, so if you’re going to self-file, I would highly recommend that you use Robert’s Guide so that you can get that advice from a certified public accountant and can help you navigate all the difficulties.
Make sure to check out some of my other articles to help you along your journey to starting or growing your business.