10 Sure-Fire Ways An Independent Contractor Can Save Money On Taxes

The tax laws are written by the politicians and they write IRS laws in order to tailor society in the manner they and their constituents want. This is something taught to accountants and tax preparers every tax season.

Politicians today want workers for the rich so that they can live in bigger houses and take vacations their employees can only dream about winning the lottery to get. Those who want to help others end up giving the taxes paid in by honest taxpayers to dishonest people, instead of those truly in need. However, you can help yourself to pay less tax and make sure your tax dollars go where it counts.

Big business and the rich spend money on accountants to figure out how to get around taxes and give to politicians to get what laws they want passed. As a small business person you get to take advantage of those same laws that the wealthy spend the big bucks to get.

Here are ten sure ways you can use the IRS and your small business to your advantage, just like big business, and pay less taxes.

  1. Run a business bank account because depositing into your personal account leaves it open to IRS inspection. If you want to keep the IRS out of your personal account you must deposit all business money into an account only used by your business. That’s the way big business keeps the IRS away from their other money.
  1. Don’t gift or donate, advertise instead. A business is only allowed one $25 gift per client, donations go on your personal form if you’re not incorporated, but you can expense all advertising done for your business right on your Schedule C. When asked to gift or donate, ask if there is an opportunity to advertise instead.
  1. Never go without needed equipment in a business. Any necessary equipment is deductible, so buy what you need to make the most money. Don’t wait!
  1. Travel is deductible too if you are going for business. Employ your spouse to work the booth at a convention and you’re both covered for the trip. What you do in the evening is your business as long as you both work the show.
  1. Track every single business mile you drive. This is often a big deductible for a small business so it is important to consider every trip to the bank or post office, store, for supplies etc. Commuting miles are not deductible unless you’re going to your second job (which includes self-employment) and follow special rules. Learn whether or not you qualify.
  1. Know what expenses are considered “normal and necessary” in your industry and track every business expense you incur that fits this category. You’ll miss less of what is deductible if you do. Any business expenses offsets your business income.
  1. Spend money in the last few months of the business year on anything your business needs to get ahead. Do this and you will lower your taxes and get your business growing faster.
  1. Anyone who is double dipping should be turned in and you should never add to their income. Dishonest people take their regular income from the taxpayers in the form of undeserved social security disability, tax-free income, free housing, earned income checks, tax credits, taxpayer-funded support, medical, etc. and double dip by keeping 100% of all income they make for themselves. People who lie about their income or the number of children they have so they can make the taxpayers support them are cheating you and making everyone’s taxes higher. An independent contractor pays 17% of their earnings into social security plus state and federal taxes. That means you can multiply a double dipper’s money by a minimum of two since they pay neither. These people steal from taxpayers like you, your spouse, parents, children and others, and many make more money than some of these people do. If every honest taxpayer turned in one or two of these dishonest double dipping cheaters we would have more tax dollars for those who really need our help. Use IRS form 3949a, it can be anonymous and you can earn a reward.
  1. Invest money now for your retirement. Anyone can save money for retirement and most get an IRS deduction for any or all money saved. A business owner can set up a SEP and save 25% of their compensation toward retirement. That figure might be hard to give up now, but you’ll pay less in taxes if you do, and when you’re old you’ll have money waiting.
  1. Go after the IRS to change the current tax laws to your benefit. There’s clout in numbers so you’ll want to join a group of like businesses before you start, but you should then work to have the tax laws changed in your industry’s favor. There is probably a group for business owners in your industry. Check there first. This worked for other industries in the past and it will work for you.

If you follow these 10 simple rules as an independent contractor, self-employed person or small business owner you will pay less in taxes. Skip one or two and you’ll pay more than big business does, and more than your fair share.

Source by KiKi Canniff

Diana McCalpin is an accountant who manages a Certified Public Accounting Practice in Laurel, Maryland which performs audit, accounting and tax services to customers. She loves to share information with clients to help them grow their businesses and be profitable.

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