Here at Havig Tax & Consulting, we focus on helping small business owners and self-employed individuals save money on taxes.

 

When we meet with clients, sometimes they ask what our favorite tax tips are? And we have a lot! But here are just a few to get you started:

 

Make Estimated Tax Payments throughout the year if you don’t have taxes withheld and paid from your paycheck. Income tax is a pay-as-you-go tax and most people have tax withheld by their payroll provider. If you’re a small business owner, you may not have that luxury! Making estimated tax payments (also known as quarterly tax payments) to both the IRS and State will prevent them from charging the penalty for underpaying estimated tax payments, and also may be easier to budget throughout the year instead of paying a large bill at tax time.

Understanding how to classify the people who do work for you as either employees or contractors can save you from a huge headache. An employee is generally considered anyone who performs services, if the business can control what will be done and how it will be done. What matters is that the business has the right to control the details of how the worker’s services are performed. Independent contractors are normally people in an independent trade, business or profession in which they offer their services to the public.

Maintaining separate books and bank accounts for each business will not only help you keep track of your expenses, but can be a vital shield during an audit or lawsuit. Accountants call this the “corporate veil”, meaning that you aren’t comingling personal and business funds, or comingling funds between businesses. It shows you recognize each company is its own distinct entity. This will help protect your personal assets and funds in case of an audit or lawsuit, as well. We’ve seen cases where an IRS auditor classifies all expenses in a business bank account as “personal” because the client ultimately couldn’t determine which ones were actually for the business.

 

As always, you should consult with a tax professional about how to do these correctly. Be sure to make an appointment with our office if you’re interested in setting up a time to discuss these or other ways you can slash your tax bill.