10 surefire ways an independent contractor can save money on taxes

10 surefire ways an independent contractor can save money on taxes

Tax laws are written by politicians, and they write the laws for the IRS to adjust society the way they and their constituents want. It’s something accountants and tax preparers learn every tax season.

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

Big business and the rich spend money on accountants to figure out how to get around taxes and give to politicians to pass the laws they want. As a small business person, you can take advantage of these same laws that the rich spend big money to get.

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

1. Manage a business bank account because depositing into your personal account leaves it open to IRS scrutiny. If you want to keep the IRS out of your personal account, you should deposit all business money into an account used only by your business. This is how big business keeps the IRS away from their other money.

2. Don’t give away or donate, advertise instead. A business is only allowed one gift of $25 per customer, donations go on your personal form if you’re not registered, but you can spend all advertising done for your business right on your List C. When asked to gift or donate , ask if there is an opportunity to advertise instead.

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

4. Travel is also deductible if you’re commuting. Hire your spouse to work the booth at a convention and you’ll both be covered for the trip. What you do in the evening is your business, as long as you’re both in the show.

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

6. Know what expenses are considered “normal and necessary” in your industry, and track every business expense you make that fits into that category. You’ll miss out on less than your deductible if you do. Any business expenses offset your business income.

7. Spend money in the last few months of the business year on everything your business needs to thrive. Do this and you’ll lower your taxes and grow your business faster.

8. Anyone who double dips should be turned in and so should you never add to their income. Dishonest people take their regular income from taxpayers in the form of Unearned Social Security Disability, Tax Free Income, Free Housing, Earned Income Checks, Tax Credits, Taxpayer Funded Support, Medical, etc. and double dipping by keeping 100% of any income they make for themselves. People who lie about their income or the number of children they have so they can get the taxpayers to support them are cheating you and making everyone’s taxes higher. An independent contractor pays 17% of his earnings into Social Security plus state and federal taxes. This means you can multiply a double dipper’s money by a minimum of two since they pay neither. These people are stealing from taxpayers like you, your spouse, parents, children and others, and they make a lot more money than some of these people. If every honest taxpayer would turn in one or two of these dishonest double swindlers, we’d have more tax dollars for those who really need our help. Use IRS Form 3949a, it can be anonymous and you could win a prize.

9. Invest money now for your retirement. Anyone can save money for retirement, and most get an IRS deduction for some or all of the money saved. A business owner can set up a SEP and save 25% of their compensation toward retirement. It may be hard to give up that figure now, but you’ll pay less tax if you do, and when you’re older, the money will be waiting for you.

10. Follow the IRS to change current tax laws in your favor. There’s power in numbers, so you’ll want to join a group of like-minded businesses before you start, but then you need to work to change tax laws to benefit your industry. There is probably a group for business owners in your industry. Check there first. This has 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’ll pay less in taxes. Miss one or two and you’ll pay more than big business and more than your fair share.

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