Updated: Dec 12, 2022
Welcome to Profit First Taxes, we help coaches and consultants scale upwards with legal tax and accounting strategies.
Today’s topic: ways to stop overpaying in taxes and increase profits by at least 30%.
I have a client who paid 3k in taxes last year and only grossed 20K, the very first strategy that I helped her implement is…
1st Strategy-Separate her business and personal expenses- when she came to me practically in tears because even though her business grossed 20K, she didn’t make a profit and still had to pay that 3 thousand in taxes. She hadn’t paid it yet and the penalties were adding up.
(Mixing business and personal Funds) These aren’t a good practice because,
If you should ever get audited, you would have a difficult time explaining what the business expenses are, from personal expenses, which could then lead the IRS to believe that your business isn’t really a business and classify your dream a hobby.
Possible missed deductions-It’s way too easy to overlook deductions you may be entitled too.
When it’s time to file your taxes, you now have the worse job ever of going through all your financials and separating what’s personal from business. This can be very time consuming and costly.
2nd Strategy- Tracking business miles
She said there’s only one car for both business and personal so tracking miles is confusing.
She mentioned one day, she had a business meeting with a client, her son to pick up from daycare and a Birthday party event all in the same day. So, at 10am she heads to her meeting with the client, things went well, and they booked her. Next, she drove to the party supply store to get a few items for the event she was hosting at 3pm. Then it was noon and she had to get her son from daycare and head to the event. After the event was over, she headed home. On the way home a client called at the last min needing to see her space for an event the next day. She then turned around and met with the client. At the nights conclusion she stopped to buy dinner and head home. She wanted to know how at this point she should track those miles. And since her son was with her is it considered personal miles?
These deductions can be confusing-And many business owners are not sure how to track business miles
We set up her mileage tracker and I helped her understand how to record miles, even with only one car being used for both business and personal.
3rd Strategy-Home office deductions- She rents an apartment and although she has a business location, she does a copious amount of works from home. She didn’t know she fits the criteria to get this deduction.
Many entertainment business owners believe claiming home office deductions, will make the IRS start looking closely at their taxes and they would possibly get audited.
Or They just aren’t aware they can claim home office expenses.
Some of the criteria for claiming a home office are…
You conduct your business mostly at home or
You have a business location and still conduct a lot of your business at home
By not implementing these strategies you could risk overpaying taxes and profiting little to nothing.
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