Solopreneurs

9 Tax Savings Tips for Solopreneurs

9 Tax Savings Tips for Solopreneurs

Venturing out on your own? Solopreneurs are growing in numbers in this on-demand, on-your-own economy. The Bureau of Labor Statistics recently reported that, in 2015, there were more than 15.5 million self-employed in the country. That's an increase of 1 million from the previous year. Some studies estimate that more than 40% of the American workforce will be independent workers by 2020. 

Considering these larger number of solopreneurs, there's a growing level of importance to be tax-savvy. If you are operating your own business, working from home, consulting, or doing other freelance work, you could be overpaying in taxes. Here's how to save.

 1. Travel Mileage

Many solopreneurs routinely drive from one location to the next. You may be able to track your mileage and deduct the cost of transportation to and from work-related events on your income taxes. For ease, consider using an app such as Everlance. This is an automatic tracking app that can easily help you log miles that you can later convert into tax savings.

 2. Take the Home Office Tax Deduction 

If you operate your business from your home, the home office tax deduction may apply. Specifically, you must have a designated area of the home that is used solely for work-related tasks. It could be a home office, a section of the basement, a bedroom, or some other area dedicated to your job.

A portion of the expenses to run your business there, potentially even a portion of the mortgage, property tax, and utilities, become tax deductible if you have a specific location dedicated to your business.

 3. Save Receipts for Added Deductions 

Any time you spend any money to build or manage your business, get a receipt for it. Whether you use a scanner to collect these digitally in a file or a simple file system, this is one of the best ways to add up deductions for your taxes later on.

 4. Select the Right Business Formation 

This can get tricky for some solopreneurs, which is why it is so important for you to work with a tax pro. However, the right business formation and minimize the risk of double taxes, reduce some liability threats to your personal property, and save you money on taxes. Depending on your situation, turning your company into an LLC or even a corporation may offer cost-savings.

 5. Deduct Development Expenses

Go back to school to improve your skills. Invest in professional seminars or training. Work-related education can be a business expense if it meets some requirements. The education must improve or maintain your skills in your present occupation or may be required under law, such as licensing requirements.

 6. Pay Estimated Taxes Including Self-Employment

You don't want to wait until the end of the year to submit estimated taxes. Doing so will lead to a fine. It's necessary to pay-as-you-earn under federal law with quarterly taxes due to most businesses. This includes self-employment tax.

 7. Always Have Solid Record Keeping 

How does this save you money on your taxes? Without it, you'll spend a sizable amount of money on taxes come audit time. Have a record-keeping system in place that you use every day to manage your business income and expenses.

 8. Manage Separate Services 

To get bigger discounts, ensure the services you use, whenever possible, are separate from personal use. For example, you can have a business phone and a personal cell. This way, the business phone becomes a deduction. The same is true for the Internet connection. Computers, webcams, Skype or conferencing tools, and any other tools you use for the business should be separate from personal use to claim deductions.

9: Document Marketing Costs

Whether you are printing marketing materials or creating a website and blog for your company, these marketing expenses are potentially tax deductions. This includes the set-up and management of these tools.

Solopreneurs are pushing aside working for a boss and reaping the rewards of higher salaries and more freedom. With the help of these tax-savings tips, along with an experienced tax service, you can ensure every dollar you earn is working for you in the best possible way.

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Sonu Shukla

Sonu Shukla

Sonu Shukla is a CPA, accountant, and tax preparer based in Orlando, FL. Sonu Shukla can assist you with your tax preparation and planning needs. Sonu is more than just another accountant in Orlando, Florida; he is a small business owner himself. It is a position in life that grants him the perspective and insight to emphasize with his clients, bringing them the best service possible. A Certified Public Accountant and a Certified Financial Planner, Sonu possesses the skills, education and experience to demonstrate unerring business acumen and passionately planned financial strategies. Being proactive is key for Sonu, tailoring highly efficient tax plans for his small business clients, all in a one on one environment where he and the client can bounce ideas around until every detail is worked out.

SONU SHUKLA, CPA, P.A.
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