4 Tips for an Independent Contractor to keep more of your earnings in 2011
1. Create a habit to log all of your business-related expenses. Don’t forget mileage from your home office to the client’s office, tuition and related expenses, professional fees and more. Extra tip: If you have a smart phone, there are some great Expense-Tracking apps where you can also take pictures of your receipts! (Xpenser or free ones). How easy (if you make this a habit)! These expenses can really rack up some good tax savings at the end of the year!
2. If you are a W2 employee or using an ‘Employer of Record,” ask if they use an Accountable Plan for payroll purposes. This model reduces your tax liabilities immensely by reducing your taxable income by all of your business-related expenses (see above). Put your money in your pocket instead of Uncle Sam’s.
3. Do price comparisons with your insurance brokers to ensure you are getting the best premiums for your health care insurance, as well as your business insurances such as Liability, Errors and Omissions, Umbrella policies, etc. This can be hundreds of dollars a month in premiums (these premiums can reduce your tax liabilities, so keep track of them!). By the way, health care insurance ‘deductibles’ are not able to be written off on your taxes…just the premiums…so it is better to have a higher premium with lower deductibles (rather than lower premium and higher deductible) when it comes to a tax savings.
4. Stay on top of your invoicing and collections. Make it a habit to immediately invoice a client on the same day your hours end. Make a friendly reminder phone call when the invoices are 30/60/90 days old (and email a statement).
Go through an Employer-of-Record that gives you access to the above services (Accountable Plan, free access to business insurances, group health care insurance. Invoicing and collections and more). Try: www.BenefitsForConsultants.com