Enough Is Enough: 3 Questions To Ask Your CPA About Your Business's Future
Whether you freelance periodically or own and operate your own business, ensuring you are paying your taxes in the most effective and efficient manner possible should be a priority. Unfortunately, many freelancers and business owners struggle during tax season because they are not familiar with the various rules, regulations, and deductions that are available to them. Hiring a CPA, or certified public accountant, can be a great investment. Accounting services can be beneficial not only during tax season, but all through the year for improving your personal and business finances. Here are a few things you should discuss with your CPA about your business.
If you are bringing in a good amount of income with your business, you should pay the appropriate amount of taxes. However, it is important to take deductions when you can because these deductions are legitimate business expenses. Most freelancers and small business owners are surprised by the different expenses they can deduct.
For example, if you use your vehicle for your business in any form, you can claim maintenance on the vehicle and gasoline costs. In addition, you may be able to claim some of the miles you drive for your business.
Any supplies purchased for your business are also legitimate expenses you can claim on your taxes. If you purchased a computer, phone, office furniture, or even office supplies, these items can be claimed. If you run a photography business and need a new camera or other equipment, it can all be claimed.
Finally, a home office is also something to consider deducting. To qualify, the home office must be a separate room in your home that is used solely for your business. It cannot be used as an exercise room, family room, or guest room part of the time.
Ask your CPA about what type of deductions you can qualify for before it is time to file.
When you work for a company, you will most likely have the option of contributing to a retirement plan, such as a 401(k) plan. A percentage, which you designate, comes out of your paycheck automatically and is then invested into a retirement account. By having the money taken out of your check before taxes, you have peace of mind knowing you are investing without really missing the income.
When you work for yourself, saving for retirement can be a bit more challenging because you do not have the option of contributing to a traditional 401(k) plan before taxes.
Fortunately, your accountant can help you determine how and how much you need to save on your own to retire by a specific age. There are many programs available to freelancers and small business owners who want and need to invest.
A traditional IRA, Roth IRA, Solo 401(k), or high-interest savings account are all possible options for self-employed individuals who want to invest and save.
Running your own business may be a life-long dream, but your main goal should be to be successful. In most cases, the key to a successful business is turning a profit, which means your business is bringing in more money than it is spending.
Unfortunately, many freelancers and business owners continue to run their businesses even though they are spending more than they are making. This can lead to financial distress that affects your business and personal finances, and it can also lead to emotional and physical stress.
Your accountant can help you determine if your business is making enough to cover all of your expenses. If not, your accountant may recommend cutting your losses and getting out of the business before it affects your personal finances.
Hiring a CPA can be a great investment for your business.