Although April 15th has passed, now is a great time to check in on your tax status and take steps towards lowering your tax liability and maximizing your deductions. Let’s take a look at the top 5 things an owner-operator can do mid-year to ensure their tax bill is manageable in the upcoming year.
Tip 1: Tax Estimates
The number one way to manage tax liability as an independent contractor is to submit quarterly tax estimates in a timely manner. Owner-operators are responsible for calculating and paying their own tax, as they do not have an employer withholding tax for them.
Financial services companies such as ATBS will calculate tax estimates based on actual earnings and email their clients when the tax estimate form is ready. With a couple of clicks you can download the tax estimate form, sign it, and submit payment to the IRS.
Not submitting tax estimates each quarter will translate to a large tax bill on April 15th. Part of being a business owner is taking responsibility for your taxes. Be sure to review your tax estimates and confirm that your financial provider makes this process easy and manageable.
Want to better understand tax estimates as an owner-operator? Call your ATBS business consultant and bring your tax-related questions to the table.
Tip 2: Storage
Put your tax returns and supporting documents in a secure location so you can retrieve them at any time. If you apply for a loan or financial aid, you will need tax forms and filings. It’s helpful to have these right at your fingertips. Find a central location in your home and consider investing in a secure, fireproof and waterproof safe. Whatever storage system you employ, make this a routine for all the members in your household.
Tip 3: Monthly Sort
Designate an hour each month to collect and sort all receipts that are related to your business. Being an independent contractor means your tax liability will be directly related to how many expenses you deduct. Often times the more you can deduct, the lower your tax liability.
Owner-operators can receive more than 100 tax deductions to lower their tax liability, and every year ATBS scans 1,000's of tax filings to ensure our clients capture every tax deduction possible.
Tip 4: Consult a Professional
The best time to review your prior year tax return is outside of peak tax season. During this time you can identify new strategies to help lower your tax bill. Give your ATBS business consultant a call and let him/her know your tax goals so you can gain a road map towards success. Tax season is when tax professionals are managing hundreds, even thousands, of tax filings and may not be able to give every client their full attention. Consider summer and fall as the best seasons to learn about and employ new tax strategies.
Tip 5: Itemize Your Deductions
Bundling a number of larger deductions may help minimize your tax burden. Consider an early mortgage payoff, a charitable donation, a large medical expense and/or a business asset purchase. Together these write-offs could translate to a lower tax burden.
Owner-operators enjoy the freedom of owning their work schedule. However, this freedom means additional responsibilities to the IRS. Like every aspect of your business, a little bit of time and consultation with a professional could yield significant changes to your bottom line. ATBS is prepared to discuss taxes year-round but mid-year is the best time to review your tax situation and come up with a plan for year-round tax success!