Accounting 10 Companies Can Use Free Cash Flow To 10 Sure-Fire Ways An Independent Contractor Can Save Money On Taxes

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

Tax laws are written by politicians, and the IRS writes laws that favor society the way they and their constituents want. It’s something accountants and tax preparers are taught every tax season.

Politicians today want workers for the rich so they can live in big houses and take vacations and their employees can dream of winning the lottery. Those who want to help others pay taxes paid by honest taxpayers to dishonest people instead of really needy people. However, you can help yourself pay less tax and make sure your tax dollars go where they count.

Big business and rich people spend money on accountants to figure out how to get taxes and what laws politicians want to pass. As a small business person you want to take advantage of the same laws that rich people spend big money to get.

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

  1. Operate a business bank account because making deposits into your personal account leaves it open to IRS scrutiny. If you want to keep the IRS out of your personal account you must deposit all business money into an account used only by your business. This is 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 $25 in gifts per client, if you are not included the donations go on your personal form, but you can spend all advertising you do for your business on your Schedule C. When asked to give a gift or donation, ask if there is an opportunity to advertise instead.

  1. Never go into business without essential equipment. Any necessary equipment is deductible, so buy what you need to make the most money. Don’t wait!

  1. If you are traveling for business, the travel is also deductible. Hire your spouse to work the booth at the convention and you’re both covered for the trip. As long as you both work on the show, what you do in the evening is your business.

  1. Track every business mile you drive. This is often a large deduction for a small business so it is important to consider each trip to the bank or post office, store, supplies, etc. Commuting miles are not deductible unless you commute to your second job (which includes self. employment) and follow special rules. Find out if you qualify.

  1. Know what expenses are considered “normal and necessary” in your industry and track every business expense that fits into this category. Doing so will lower your deductible. Any business expense offsets your business income.

  1. Spend money in the last few months of the business year for anything your business needs to move forward. Do this and you’ll lower your taxes and your business will grow exponentially.

  1. Anyone who double-dips should be turned in, and we should ever Add to their income. Dishonest people take their regular income from taxpayers in the form of ineligible social security disability, tax free income, free housing, earned income checks, tax credits, taxpayer subsidized assistance, medical, etc. and double dip by keeping 100%. They make all the income for themselves. People who lie about their income or the number of children they have so they can support them to the taxpayers are cheating you and raising everyone’s taxes. An independent contractor pays 17% of their earnings in Social Security as well as state and federal taxes. This means you can multiply a double dipper’s payout by at least two because they don’t pay. These people steal from taxpayers like you, your spouse, parents, children and others, and many make more money than some of these people. If every honest taxpayer turned in one or two of these dishonest double cheaters, we’d have more tax dollars for those who really need our help. Use IRS Form 3949a, it can be anonymous and you can get a reward.

  1. Invest now for your retirement. Anyone can save money for retirement, and most receive an IRS deduction for any or all money saved. A business owner can set up a SEP and save 25% of their compensation for retirement. It may be hard to drop this figure now, but if you do, you’ll pay less tax and have more money waiting for you when you’re older.

  1. Pursue the IRS to change the current tax laws to your advantage. Numbers are overwhelming, so you may want to join a group of like-minded businesses before you start, but then you should work to change the tax laws in your industry’s favor. Perhaps there is a group for business owners in your industry. Check there first. It worked for other industries in the past and it will work for you.

Whether you’re an independent contractor, self-employed person or small business owner, you’ll pay less tax if you follow these 10 simple rules. Skip one or two and you’ll be paying more than big business and more than your fair share.

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