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Tax Tips

Here are some tips to keep in mind. This list is not meant to be exhaustive but to show you how exhausting taxes can be unless you leave them to the experts.


Self-employed professionals, contractors, and consultants are responsible for taxes and employer contributions for Social Security and Medicare. This is important to remember when pricing out consulting engagements “ you have to allow extra revenue to pay for this tax. For instance, $10,000 in revenue = $1,412.95, the proportions continue up to $106,000.

Accounting we will go

Thinking about starting your business on a shoestring, great. However, think again about keeping your receipts in a shoebox. It is more effective and better business to keep a detailed report of your financial activities. Not only will this save you headaches in the long run but it can help you manage your business for the future. For instance, you can generally determine how much you spent on business expenses, generate a list of non-paying clients, or estimate your tax obligations for next quarter.

Accumulate expense receipts

Getting receipts together is a nuisance. They usually end up in car visors, or laundered once they've been left in pants pockets. All those $10 receipts for coffee and muffins you shared with clients can add up to a nice tax deduction at year end. Same for lunches, gasoline for business travel, and items you buy at the office supply store.

Getting mileage out of it

The Internal Revenue Service allows you to deduct 50 cents per mile traveled for business. This often adds up to a hefty deduction, especially for salespeople and contractors traveling between work sites. Keep a calendar or notebook in your car, and tally the daily miles, identifying the clients or work sites visited. Your mileage log is the best evidence if you find yourself (heaven forbid) in the middle of a tax audit.

Consider a payroll service

For a reasonable fee, a payroll service will create your paychecks, deposit tax money with the federal and state governments, and file all the necessary quarterly paperwork. All you have to do is track your employees' hours and call them in. Left to your own devices, a missed payroll tax payment can become your biggest IRS nightmare.

Don't base decisions solely on write-offs

Just because the IRS allows a generous depreciation deduction for a new truck doesn't mean you should buy it. Does your business need a new truck, or other piece of equipment? The word write-off doesn't mean the government is paying for the item. If you spend $30,000 on new equipment, the tax savings could be as much as $10,000. However, you've still had a $20,000 impact to your cash flow.

Don't co-mingle funds

Your personal expenses should be paid out of a personal bank account, and your business bank accounts and business credit cards should be used for business purposes only. Of course, if there is money in the business account, and the mortgage is due, it's tempting to write that check. However, to stay under the IRS radar, it's important to transfer money to your personal bank account to pay personal bills.

Save for retirement

You can borrow money to buy a home, finance a car, higher education, new appliances, just about anything except for retirement. And even though it may be 20, 30, or 40 years away, the time to act is now. There are tax advantages for contributing to your 401(k) or an Individual Retirement Account (IRA). And it doesn't have to be a big amount. You can set up monthly deductions from a bank account, or even weekly payroll deductions, which you won't even feel.