If you’re in the U.S., tax season is upon us. Ugh!
OK, so the topic of taxes might not sound that exciting.
But getting a handle on your taxes and finances is one of the most important things you can do to run and grow a healthy business.
Fortunately, taxes don’t have to be stressful. It’s all about planning and getting the right kind of help.
You’ll hear from Diane Gardner, a certified tax coach, Quilly award recipient, and best-selling author who has saved her clients millions of dollars.
She works specifically with freelancers and entrepreneurs on how to decrease owed taxes to the lowest legal limit and increase business cash flow.
Diane shares how to maximize your deductions, make your tax planning easier, and minimize your tax liability as you move into higher brackets. And that’s just for starters!
If you’re a U.S. freelancer, this episode is for you!
The notes that follow are a very basic, unedited summary of the show. There’s a lot more detail in the audio version. You can listen to the show using the audio player below. Or you can subscribe in iTunes to get this show delivered straight to the Podcasts app on your smart phone, tablet or iPod.
NOTE: The podcast audio and show notes for this episode (and all episodes) are provided for general information purposes only. They do NOT constitute legal or financial advice, and we make no warranties about the completeness, reliability or accuracy of this information.
Consult with an accountant or other financial professional before making any financial decisions or taking any actions regarding your taxes or personal/business finances.
Tell us about your business and the types of clients you serve
Diane Gardner works with successful service businesses that want to the least amount of tax that they legally while also growing and increasing their profits.
What’s the biggest mistake you see freelancers make when it comes to taxes?
The biggest mistake is lack of planning. Taxes are an uncomfortable topic. So people choose to ignore it and then they get slapped at tax time.
If you work with a professional and put together a plan, you can potentially save some money. Think of your tax accountant as a partner in your business that goes way beyond tax filing.
Think of your tax accountant as a partner in your business. His/her involvement should go way beyond tax filing.
How can freelance writers maximize deductions?
- Entity type. Successful entrepreneurs will eventually outgrow their business entity type. If you started as a sole proprietor or single member LLC, you might be paying thousands more in tax each year than if you transitioned to a different entity type. Therefore, it’s good practice to have an entity analysis as your business changes and grows.
- Retirement planning. Many entrepreneurs are so busy they don’t think about retirement planning. There can be some great deductions here.
- Hiring family members. Employing family members can be very tax advantageous. Even your children might be eligible if they’re over the age of seven.
When should people go from sole proprietor to LLC or S Corp or something along those lines?
When your net profit hits the $80K to $100K range, it’s time to look at this carefully. Most writers don’t have a lot of overhead, so you can reach this point faster than a lot of other entrepreneurs.
You need to do a cost-savings analysis to make sure that your savings will be more than your costs of moving to a new entity type.
Usually, it makes sense to start with a simple entity type and move up to a more sophisticated type later.
What changes should we be aware of under the new tax law?
Tax calculations used to be:
Total income – exemptions – standard deductions or itemized deductions = total taxable income
This has changed to:
Total income – standard deductions or itemized deductions = total taxable income
If you have children under 17 years old, your tax credit increased from $1000 to $2000 per child.
Meals and entertainment used to be deductions. Entertainment is no longer included. You can only deduct meals.
Tell us about the 20% deduction that some businesses have
This deduction is called a qualified business income deduction.
The corporate tax rate dropped from 35% to 21%. Legislators recognized that with that lower rate, every business would want to become a C Corp. So they came up with this new deduction.
However, if you’re selling your skills (as opposed to a product), you can’t take full advantage of this deduction. It drops off as your income goes up.
Are there any new regulations we should be aware of for income earned in 2020?
The tax law we got last year will be in place until 2025. So the lower tax rates are here to stay for the next few years — unless a new government tries to do something retroactively.
What do we need to know as we become more successful and move into higher tax brackets? How should we prepare?
- How many years do you have until retirement? What do you have in place already? What can you put in place that could become a tax deduction for your business?
- Medical benefits. Depending on your business entity type, you might be able to write off your medical benefits. Writers don’t have a lot (or any) employees so these kinds of strategies can work well.
Don’t let fears about taxes slow you down. Maximize your earning potential and then work with a professional to maximize your tax savings.
Hire a tax accountant who understands your industry and will work with you to plan and develop strategies over the long term.
Where can listeners learn more about you?
Find Diane’s tax planning guide and request a copy of her newest book: Unleash the Power of Tax Planning.
Diane also offers free discovery sessions where she looks at your tax returns and lets you know how you’re doing.
Plus … whenever you’re ready, here are 4 ways I can help you grow your freelance business:
1. Grab a free copy of my book for ESTABLISHED writers/copywriters.
You’ll discover how to quickly and predictably reawaken dead leads, generate new client opportunities and convert not-yet-ready prospects into freelance writing clients. — Click Here
2. Download a free copy of my new book for writers who are NEW to freelancing.
I’ll show you the 3 things you need to do to get your business off the ground safely and land your first paying client faster. — Click Here
3. Join my implementation program and be a case study.
I’m putting together a new implementation group this month. If you’d like to work with me to grow your income quickly with better clients (and become one of my new success stories). Just email me at [email protected] and put “Case Study” in the subject line.
4. Work with me privately.
If you’re a 6-figure writer who’s trying to earn more in less time, with less stress, I might be able to help you get there faster than you think. Email me at [email protected] … put “Breakthrough” in the subject line and I’ll get back to you with more details.