The #1 way to save taxes as a business owner or independent contractor.
The #1 question I get from business owners or independent contractors who my office in Orange County, CA is how do I save on taxes. Well the answer is quite simple, track your expenses! The process is not difficult once set up, but can be a tedious task that might just need to be delegated to a bookkeeper or accountant.
How to track your expenses, properly?
- Need a Tax ID for Your Business. If you don’t have one already you can apply for online on the IRS website fairly easily.
- Separate Business Bank Account. As a business you do not want to be commingling your personal and business expenses, which is the reason you will need a business bank account.
- Use a bookkeeping app or Hire an Accountant. We recommend using QuickBooks Online, as it is the most widely used bookkeeping software and its easy to use. You will need to connect your business bank account and/or credits card to QuickBooks and then you will see your transactions automatically populate as you use your account.
- If you drive for business, track your miles! There are various mileage tracking apps that can help with this, or you can do it the old fashion way and just keep a mile log on a spreadsheet.
What can be written off?
IRS says you can expense, or write off, anything that is ordinary or necessary for your business to generate income. This is vague because there are so many types of business, and what can be considered an expense for one business might not be an expense for another. Take for example e-sport athletes, they generate income by playing video games and streaming it live online. They would definitely be able to expense the purchase of video games or equipment, however me as a tax professional would not be able to.
If you work from home however, you can write off a portion of your home expenses against your income.
I can’t tell you how many times I get new clients who look to my ceiling for deduction because they did not track their expense throughout the year. Not only does waiting until the last minute to find all your deductions take a lot of time and is stressful, but you are most likely missing some expenses, and are paying more than you should in taxes.
If you are in need of some help with your taxes or bookkeeping services feel free to reach out to us here in Orange County, CA.
4630 Campus Dr #203
Newport Beach, CA 92660