Oh no - it's here, the slow and enveloping shadow that is tax season has arrived. Perhaps sometime around the last week of February you felt a tingle in the back of your mind that said, "Hey I should start thinking about my taxes." And there's a good chance you ignored it. But then maybe sometime around early March you thought, "Oh man, I should really look into my taxes" and there's a good chance you ignored that too. So now March is coming to a close and April 15th is rearing its ugly head and all that is left to say is, "These taxes aren't going to do themselves."
But before you dive into the intimidatingly deep pool that is doing your taxes here are some surprising expenses you may be able to write off as an IC.
From the paper you are printing your reports on to the very pens you use to sign your checks, it all counts as a business expense which can be deducted. Just like a major corporation you need supplies to maintain your office, and just because you aren't buying sticky notes a pallet at a time doesn't mean you don't get a tax credit for all those binders, staples, slip covers and ink cartridges. Beyond physical supplies the category of office needs extends beyond the physical as defined . Many independents are happy to find out that their Internet and phone bills can also be exempt from their taxes if used extensively for work purposes. It may come as a surprise to many but if you really think about it, often times your email or cell phone are three or four times as important to your business as your ability to staple papers just saying.
Speaking of surprising deductions, many folks are also unaware of the depth of transportation and travel write offs that exist. Everyone knows that business trips are generally a write off, but so is day to day travel if it is essential to your business. Many times independent consultants are required to visit on site locations, or attend conferences and events. The gas, tickets, tolls or fees for such travels are all things that can be expensed and deducted when it comes time to file as long as you take the time to track and log them.
Since you work for yourself, you must pay both halves of your payroll taxes but as your own employer, you're entitled to deduct half - it's as simple as that. Many people fail to take full advantage of this, or they incorrectly calculate it and miss out on a major portion of it.
Getting your name out there isn't easy, and it's not cheap either. As an independent you are not only your own boss but you are also your own HR Department, your own accounting firm and most of all - you are your own PR and Marketing team. Advertising efforts can span a rather large gap, whether it's a local TV commercial, a sponsored ad or even as simple as attending a professional meet and greet - it all falls under the umbrella of marketing efforts. So the next time you hang up a couple posters around the block, or even if you feel ambitious and vie for some Super Bowl airtime, they all can be deducted.
During your quest to find better venues and means by which to advertise you may stumble across a few national, local or state groups that you feel could contribute to your business. Whether these groups constitute potential clients, or a network of professional peers - if they contribute to the growth and profitability of your career then they can be deducted. The same goes for subscriptions to magazines, reports or mailers that provide you with valuable information or insight that you can actively use to grow as a consultant.
Did you know that MBO Partners offers a business center and mobile application that makes tracking your expenses simple? If you want help managing your back office, give us a call and we'll get you set up today.
Learn how to calculate a cost-based bill rate with our new, easy-to-follow video tutorial.
News and notes for independent professionals and their clients. This is the October 17, 2016 edition.