Bookkeeping Your Way To Lower Taxes

Bookkeeping, or the process of properly recording your business expenses and maintaining support for those expenses is a critical role of ANY business. Unfortunately, most business owners disregard bookkeeping at their peril.

In addition to the obvious requirement to maintain books as a business owner for tax purposes, it can also help you to operate your business more effectively. Properly maintained and timely bookkeeping can help you understand where your money is going. It can help you invest in the right areas, and make tax savings opportunities more obvious.

Let’s discuss the importance of maintaining your books from a regulatory standpoint. Yes, if you are audited, the IRS will want to see your “books” (financial records supporting your tax return). This better not be a box full of receipts, because the IRS will win that argument all day long. In fact, the IRS can take a trip back in time and reassess your taxes for prior years. In some cases, if your records are bad enough, there is no statute of limitations and they can go back as faaaar as they want.

Did you know that even HOW you maintain your books can impact your taxes? For example, do you ever eat at restaurants? For employees, this is a nondeductible expense. You, the independent contractor, are in luck! This can be a deductible expense if you follow the rules. It is important that you expense your meals and entertainment through your business. The same is true of any expense that you might have normally expensed from your personal account (cell phone, supplies, etc). Do you know how to shift taxable income to your children? Did you know that you can shift income to a C corp at a lower tax bracket? This involves more sophisticated bookkeeping for which you’ll want to involve a professional (hint: that’s us).
You need an advisor who can guide you through the process of how to set up your entity, bank account, EIN, payroll, bookkeeping, etc to make sure that you are properly taking advantage of all the benefits of being an IC. We can help–this is all we do and we’re freakishly good at this.

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Tags: business expenses as a freelancer, freelance financial records, freelancer business records, independent contractor business bookkeeping