Five Tax Tips for Independent Contractors
Tax Day is here and it’s time to pay the man. As an independent contractor funds have not typically been withheld from your earnings throughout the year. Hopefully you have been putting aside some savings for this expense or better yet, have been sending quarterly payments in anticipation of the total owed so you’re not surprised with an unexpected expense all at once. It’s not all doom and gloom though, as a self-employed stylist, there are deductions you can take that you might not otherwise be able to claim as a salaried employee.
1. Tools and Supplies
Have you purchased scissors, products, styling tools, sinks, mirrors, or a smock this year? If so, keep your receipts. You can write this off as a reduction on your total income!
2. Car and Mileage Expenses
If you use your vehicle as a part of your trade, you can use that as a deductible expense. If you use your car for business and personal, make sure you’re only deducting what would be considered the business portion. For example, your daily commute to and from the salon would not be tax deductible, however, if you need to go on-set or to an event, keep track of the mileage and even any maintenance, license fees, and car repairs. A portion of that can be claimed as a business expense.
It is paramount to keep up on trends and always important to improve your skills. Any relevant classes or subscriptions you use to keep up on the latest trends are considered write-offs. If you have to leave town to take that class, you can deduct the travel, food, and lodging expenses as well.
It’s never too early to plan for your future. You can set-up a SEP IRA, an individual 401K, or an IRA. Each one has its own tax advantages that you will want to talk to your accountant about to determine what makes the most sense for your business but at the end of the day, you will be able to save for your future and save yourself some expense in the short-term at the same time.
If your state or locality requires licensing, you can write that off. Any local business licenses to operate can be applied as a deduction against your federal taxes. Check out the U.S. Small Business Administration site, and based on your zip code, you can find the licenses and permits you need for your business.
Finally, always be sure to consult with a tax accountant to make sure you’re taking advantage of every deduction due to you and are doing it properly. It may cost you a little up front, but it will save you in the long run.