Use these tips to save on your taxes this year!
So you’re a coach or consultant and you’re killing it this year.
Leads are pouring in, sales are up, you have stellar processes in place, and you’re thrilled to see where your business is going to take you.
First – go you!
Second – don’t let your taxes get away from you!
When things are going well, it can be easy to put managing your business’s taxes on the back burner.
How many of us entrepreneurs have been guilty of riding the high of a fantastic sale or project completion, putting the dull, everyday tasks on hold?
Unfortunately, reality always hits at some point, and if you haven’t maintained a solid tax strategy throughout the year, you might find yourself scrambling to make up for lost time come tax season.
Don’t let that be you! Use these 5 strategies for coaches and consultants to stay on top of your business finances, saving money in the process!
1. Keep Business and Personal Expenses Separate
Mixing business and personal expenses is a huge red flag for the IRS, and could easily lead to an audit. So that should be reason enough to stay on top of your accounts! But beyond that, there are a couple of good reasons to maintain separation of your accounts.
First, a business account allows you to keep track of any tax deductible expenses you have that are related to your business. You’re legally permitted to deduct these expenses come tax time. But if you’re using a personal account for so-called “business expenses,” the IRS views these expenses as hobby costs, not business expenses.
Second, maintaining a separation between your business accounts and personal accounts adds a degree of professionalism to your business. Think about how you feel when your vendor check reads “Julie Smith, Certified Integrative Nutritionist” vs. “Julie Smith” with a polka-dotted background or just your home address?
Bottom Line: Maintaining separate business and personal accounts is professional and also makes it easier to keep track of your yearly deductions.
2. Make Your Quarterly Payments
If you’re self-employed, you’re required to pay quarterly tax estimates to the IRS. And if you don’t pay them, you’re likely to be hit with both late fees and interest. Getting these payments set up can be a bit of a headache, which is where the help of a good tax pro comes in!
Bottom Line: Set up your quarterly payments and PAY THEM! This will reduce money wasted on fees and interest payments to the IRS.
3. Start a Retirement Plan
Folks who are employed by others often take built-in company retirement plans for granted. But when you’re an entrepreneur, the responsibility to plan for the future is all yours. Don’t worry, though. It’s not all that complicated! If you’re self-employed, you can open a SEP, 401-K, or IRA. In most cases, investing in these retirement plans will help you build a nest egg while reducing the tax burden on your business.
Bottom Line: Self-employed retirement investing will reduce your tax burden.
4. Don’t Forget to Deduct Professional Dues and Subscriptions
Do you read specific journals or magazines related to your line of work? Or do you pay yearly dues for certain professional organizations? These costs are all deductible business expenses, according to the IRS. Just make sure you’re paying for them with your business account (see above!).
Bottom Line: Qualifying subscriptions and memberships are tax deductible.
5. Get Professional Advice
If you’re like most entrepreneurs, you likely have a can-do, DIY mentality. But just because we’re professionals in one area doesn’t necessarily mean we’re pros in all areas. In reality, most of us are probably suffering from blind spots in any given field, and tax strategy is certainly one of the most important areas to get things right! Hiring a tax professional can make all the difference between owing a boatload of cash to the IRS and paying your actual fair share.
Bottom Line: Hiring a professional can help you understand your blind spots, so you can make sure you’re meeting your obligations while maximizing your saving potential.
