by yafco | Apr 12, 2023 | Uncategorized
Freelancing: the life of setting your own hours, being your own boss and carving out a career that suits your needs. This independence can be incredibly rewarding, but that doesn’t mean it doesn’t come with its own challenges – and one of those can be tax planning.
As a freelancer, you’re responsible for estimating and paying your taxes instead of an employer working it out for you. But it doesn’t have to be a cumbersome task. The secret? Year-round tax planning.
We’re running through the reasons why this method is the best way to handle stress around tax season, as well as the different ways you can help your future self by implementing year-round tax planning.
Let’s dive in.
Why tax planning makes sense for freelancers
Freelancing is essentially running your own business – and with that comes certain responsibilities, like tax planning. There are several benefits to a year-round strategy; here are some reasons why you should consider tax planning to make your life easier.
Fluctuating income streams
Being your own boss means generating your own work – and with every business, it’s natural for there to be peaks and troughs. This irregularity in your income means it’s difficult to predict annual earnings.
By planning and regularly monitoring your taxes throughout the year, you can better understand your potential tax liability and avoid any nasty surprises when tax season arrives.
Quarterly payments
The IRS requires freelancers to pay estimated taxes quarterly. Because of this, it’s important to stay on top of your incomings and outgoings to ensure you’re not overpaying or underpaying.
Year-round planning will help you stay on track with making the estimated payments to avoid any fees or penalties from late payments or not paying enough tax. You can also ask for help from a tax preparer in NYC to make sure you’re always updated.
Tax deductions
As a self-employed freelancer, there are many different deductions you can take advantage of to reduce your overall tax liability. Some examples include home office costs, IT equipment and travel expenses.
On the flip side, keeping track of every receipt and invoice can be a pain to ensure you’re making the most of these deductions. Breaking up the process into smaller chunks with year-round tax planning makes the process much more manageable.
Retirement planning
Freelancers need to be proactive about retirement savings, as they don’t have access to employer-sponsored retirement plans. To top it off, there are different retirement account options to maximize contributions to – and the whole process can quickly get confusing if you don’t keep on top of things.
Year-round tax planning is therefore a great way to ensure you’re making the most of every retirement plan you contribute to, reducing your tax liability at the same time. It’s a win-win!
How to implement tax planning
If you’re sold on the benefits of a year-round tax planning strategy, here are some ways to get the most of the process.
Track everything
Keep detailed records of your income from all sources throughout the year and ensure you hold onto every receipt. This will make it easier to calculate your estimated quarterly taxes and file your annual tax return.
You can keep track of these incomings and outgoings in several ways – some freelancers favor a spreadsheet, while others prefer to use accounting software. However you go about it, the main focus is keeping accurate records to make your life easier.
Use software
On that note, accounting software has progressed over the last few years to become a favored option by freelancers and accountants alike. Services like QuickBooks and Xero are two popular examples of accounting software that help you estimate taxes, track expenses and reconcile balance sheets.
If you decide to hire an accountant to help with your taxes, like our CPA in NYC, they can even directly access your account (with permission) which further streamlines the process on both sides.
Stay informed about tax law changes
Tax laws and regulations can change yearly, leaving you open to being caught out by a new rule or tax threshold you weren’t aware of. Awareness of significant changes can help you update your year-round strategy accordingly.
Following reliable news sources and attending webinars will help to keep you on top of any changes in the regime. Hiring an accountant can also minimize this issue, as they will keep you informed of any changes to the tax regime that might affect you.
Contribute to a retirement plan
Maximizing your retirement contributions can help you save on tax, as the contributions are counted as deductions. It’s therefore an important aspect of a year-round tax planning strategy.
The three most common retirement plans for freelancers are SEP IRAs, SIMPLE IRAs and Solo 401(k)s. Evaluate your financial goals, income, and retirement needs to determine which retirement plan best fits your situation. From there you can set up regular contributions to look after your future and reduce the overall amount of tax you need to pay each year.
Consult with a professional
If you’re new to the world of freelancing or a seasoned pro, taxes can be the biggest headache of the financial year. If you’re unsure about any aspects of tax planning, you can risk being on the wrong side of the IRS.
Hiring a tax professional can help you navigate the tax laws and develop a strategy tailored to your specific needs. Being the best provider of CPA services in NYC, we’re experts in providing tailor-made tax advice if you need a helping hand.
Final thoughts
Tax planning isn’t just a once-a-year activity – it’s an ongoing process that requires diligence and attention to detail. By staying proactive and organized with your tax planning, you’ll be well-equipped to navigate the complexities of the tax system and minimize stress.
The right partner, like our experts in NYC tax planning, can help you to make the most of your tax allowance and take on the hard work so you can focus on the rest of your freelance business. Ahad & Co works with a range of clients to fulfill their tax and accounting needs – get in touch today if you think we’d be a good fit.
by yafco | Apr 5, 2023 | Uncategorized
“In this world, nothing is certain except death and taxes,” Benjamin Franklin famously said. Whether freelancing or running a business, you’ll know about being classified as an independent contractor. That’s why you need an effective tax plan for your unique situation.
But how can you keep more money and pay less in personal taxes in NYC? You can use a few tips and tricks to reduce your bill. These tips will help you save more money while staying on the right side of the law.
Let’s get started.
What is an independent contractor?
An independent contractor is a self-employed individual who provides services for other people or businesses without being on their payroll. In other words, they’re a freelancer.
The net of who falls under the independent contractor title is pretty broad from the IRS’ perspective. Traditional freelancers like writers and musicians will fit into this category, as well as self-employed lawyers, doctors, and dentists.
Independent contractors must pay their social security and Medicare taxes and submit a tax return each year to the IRS. Freelancers aren’t eligible for employee benefits, even if they’re working with a business long-term.
Deductions to take advantage of
Tax deductions are a great way to ensure more money stays in your pocket.
You can use many different deductions, but we’ve outlined the most common ones here to give you a starting point.
Home office deductions
If you have a home office to work from, deducting a portion of your utilities and insurance to lower your tax bill is possible. To qualify for this deduction, your home office must be your primary place of business. You must also use it regularly and exclusively for work.
Keeping good records of your home expenses will help you to calculate the correct portion you can deduct.
Travel expenses
If you ever need to travel for work, such as visiting clients or attending a conference, then you can deduct many of these expenses from your tax bill. Flights, trains, hotels and meals all count as tax deductions, but be sure to check on the IRS website first to check what you can claim.
If you travel regularly, be sure to keep track of your expenses. When paying your tax bill, the last thing you want is missing receipts.
Tax advise and fees
Did you know you can deduct the money you spend on hiring an accountant to look after your taxes from your taxable income?
Let’s say you hire a CPA in NYC. Not only do you get a qualified professional to handle your tax liability and navigate the complex tax world on your behalf, but you can also deduct these fees from your tax return.
Other top tips
Once you’ve gotten your tax deductions in order, you can use the strategies below to help reduce your tax liability and give you more hard-earned cash back in your pocket.
Contribute to retirement accounts
Nobody likes to think about it, but retirement is around the corner sooner than you think. One of the best ways you can reduce your tax bill today and save for tomorrow is to up your retirement account contributions.
Traditional Roth IRA contributions can be tax-deductible, but specific rules exist around spouses and workplace retirement funds. Read more about the contribution limits here.
Stick to deadlines
You must pay the IRS in quarterly installments if you owe more than $1,000 in yearly taxes. Missing the deadlines can result in extra fees and penalties, which rack up costs.
The deadlines usually fall in the middle of April, June, September, and January. Keep an eye on the calendar, or let a professional accountant handle the hard work so you can focus on running your business.
Look at incorporating
If you’re doing well with your business, incorporating it into an LLC could save you money in tax. Corporation tax is lower than income tax, and more deductions may be available to you.
If you are considering incorporating your business, it’s essential to consult with a tax professional to determine if it’s the right move for you. Talk to our business tax accountant in NYC, and we would be happy to help.
Time your income and expenses
Choosing when you bill clients and pay taxes can help you game the tax system and give you some flexibility. For example, you could prepay some expenses before the end of the year to take advantage of deductions.
Another option is to delay billing a client until the following tax year. This reduces your taxable income for the current year and allows you to pay taxes on the payment in a future year when your tax rate may be lower. If you want us to figure this out for you, check out Ahad&Co’s NYC tax planning.
Utilize tax credits
Tax credits are a dollar-for-dollar reduction in the taxes you owe, so make the most of them if you’re eligible. These are subject to income limits, and you may need to jump through some more hoops to qualify, so read up on what’s required before you apply.
Common tax credits include the Earned Income Tax Credit (EITC) for low-income workers and the Child and Dependent Care Credit if you have kids in childcare while working. Depending on your circumstances, you can also get tax credits for retirement savings and healthcare.
Hire a professional
Hiring an expert to handle your taxes is wise if you’re worried about staying on the right side of tax laws. To get you started, get in touch with our accountant in NYC.
An accountant can find deductions and credits you may have yet to learn you qualified for, navigate the tricky tax system and ensure everything is above board.
You can also save time and peace of mind by letting a professional handle the details, leaving you free for other business areas. You can also deduct the expense from next year’s tax bill – so it’s a win-win situation.
Wrapping up
Reducing your tax liability as an independent contractor requires thoughtful planning, strategic decision-making and professional guidance. With these tips, you’ll be making savings in no time.
Don’t know where to start with your taxes? Click here to learn about Ahad & Co’s suite of tax advisory services. From individual tax planning to foreign tax services, we’ve got you covered.
by yafco | Mar 29, 2023 | Uncategorized
Investing in real estate could be a sensible choice if you’re looking to build wealth and expand your portfolio. There are solid returns to be found and it’s a popular choice for those looking to retire.
Navigating the complexities of tax law can be a daunting task. However, it’s essential to get the basics to ensure you’re paying the right amount of tax.
Armed with in-depth experience in providing CPA services in NYC, we, at Ahad&Co, will dive into the types of taxes you can expect to pay on real estate, the different types of property investments available, and how you can make your investment go further with our top tips on being tax efficient.
Let’s get started.
Taxable income on real estate
Before you invest in real estate, you should know which kind of taxes any income you make might be hit with. Let’s go into the different types of tax you can expect to see for real estate properties.
Rental income
If you have tenants in a property, the rental income you generate will be considered taxable. This means you’ll need to declare the income on your tax return each year and put aside money to pay income taxes.
There are a few ways to reduce income tax liability through different investment structures and deductions, which we’ll talk about later.
Capital gains tax
If you buy a second home to rent out or as a holiday home, you could face capital gains tax (CGT) if the property appreciates in value.
CGT rates vary depending on how long you hold the property for. If you sell after less than a year, the short-term rate is the same as your income tax rate. For anything over a year the rates are either 0%, 15% or 20%, depending on your personal circumstances.
Estate tax
If you’ve inherited a property from a loved one that’s passed away, estate tax may be due. This is tax on the value of the individual’s estate, which often includes property. Estate tax is currently levied at 40%.
If you’re worried about the estate tax, the reality is it only affects a small number of people. The federal estate tax only applies if the assets are worth more than $12.92m, as of 2023. On top of that, most states don’t have laws in place for estate tax.
Understanding the different real estate types
Understanding the different types of real estate investments is important for investors looking to build a diversified real estate portfolio. Here are the most common types of real estate available on the market.
Residential property
This is the most common type of asset class for most individuals to invest in. Many people choose a residential property to create a nest egg for retirement.
It’s worth noting that these properties are often subject to state and local regulations. They may also require regular upkeep and maintenance, depending on the age and build of the property.
Commercial property
Anything used for business purposes, like an office or warehouse, counts as commercial property. The tax implications of these are slightly different to residential properties and usually need more up-front cash to invest.
There can be great returns found in commercial property if you’re looking to make an income from this asset class, as well as write-offs and deductions to further reduce your tax liability.
REITs
Real Estate Investment Trusts (REITs) are professional companies that own and invest in real estate. Investing in a REIT means buying shares in the company rather than the property itself, which is handy if you’re not interested or experienced in managing multiple properties.
As REITs are a company, they’re subject to swings in gains and losses, whereas a property tends to steadily increase in value. Investing in a REIT depends on your risk appetite and what type of returns you’re looking for.
Is your head spinning from all the different options and you don’t know where to start? Get in touch today to find out how the best personal tax accountant in NYC can help you with your taxes.
Top tips for real estate taxes
Now you’ve got the basics of real estate taxes and types of assets available to invest in, here are our top tips for ensuring you can stay on the right side of the tax man.
Here’s what you need to know.
Keep records up-to-date
Keeping hold of documentation makes sense for any investment, especially taxes. Be sure to track your expenses and any income gains for your real estate investments including repairs, management fees and renovations.
You’ll also need to keep track of your rental income and any other sources of income related to your investments. You can make this easier by using software or hiring a professional to look after your investments. Ahad&Co provides business consulting in NYC if you need someone to keep an eye on your current investments.
Take advantage of deductions
For real estate investors, there are a range of different tax deductions you can take advantage of. Some examples include certain property taxes, mortgage interest and even depreciation.
These deductions can add up to make a serious dent in your tax liability, so it’s well worth reading up on the different types you can use. Doing so can build a successful real estate portfolio while keeping your tax bill as low as possible.
Form an LLC
If you want to invest in multiple properties, creating a Limited Liability Company (LLC) may be more tax-efficient. This separate legal entity protects you personally from any liabilities to do with your investments.
LLCs offer tax benefits depending on your circumstances and give you more flexibility in deciding who decides on property maintenance.
LLCs are relatively easy to form and maintain compared to other business structures, but consult a lawyer to check you’re ticking all the boxes.
Hire a professional
Investing in real estate can be a big step. If you’re concerned about making the right choice for you, consulting with a professional who specializes in tax law will help you structure your investments in a way that minimizes your tax liability.
Final thoughts
Are you ready to take the next step in your real estate investment journey? See how our specialists in NYC tax planning can help you keep as much of your hard-earned money with tax planning methods tailored to you.
by yafco | Mar 22, 2023 | Uncategorized
When it comes to self-employment, every penny counts – so you want to keep as much of your hard-earned money in your pocket. Whether you’re a consultant, small business owner, or freelancer, there are deductions you can make use of so you’re not leaving money on the table when it’s tax season.
Our guide to the differences between types of self-employment and the most common deductions you can use to boost your bottom line will put you on the path to success with the IRS.
Let’s get started.
What are tax deductions?
Every self-employed individual or small business dealing with business taxes in NYC has incomings and outgoings to provide a service. When the tax man comes knocking, tax deductions are a way to reduce your taxable income and lower your overall tax bill.
Tax deductions are claimed on your tax return and can be either above-the-line or itemized. Above-the-line deductions include IRA contributions or student loan repayments; itemized deductions are directly related to the cost of running a business, like home office equipment or car mileage.
Understanding the various tax deductions available to you can help you maximize your savings and keep more of your hard-earned money.
Sole Proprietorships Versus Independent Contractors
The tax implications for sole proprietors (such as a freelancer) as opposed to independent contractors (like IT consultants) are broadly similar, with some differences it’s well worth being aware of.
A sole proprietor is where the business isn’t separate from the person, and therefore no legal distinction. An independent contractor provides a service to other companies on a contractual basis.
The deductions both of these types of self-employed status can claim are broadly similar, though they may differ on technicalities. For example, sole proprietors can claim a home office deduction if they use a portion of their home exclusively for business purposes, while independent contractors may not be able to claim this deduction if they have a separate office space.
If you’re not sure which status applies to you or have a question about how to apply deductions according to your tax status, you can get in touch with Ahad&Co’s business tax accountant or personal tax accountant in NYC.
Common Deductions For Self-Employed Professionals
Now you’ve got the basics of tax deductions and which category you fall under down, here are some of the most frequently claimed tax deductions for self-employed individuals.
Health Insurance
A major tax deduction for self-employed people is the cost of health insurance premiums for yourself and your family. This is a valuable tax benefit, as it helps to offset the cost of health insurance and reduce your taxable income.
To claim this deduction, you need to pay for health insurance yourself rather than any employer-sponsored plan, and the plan needs to be in your or your company’s name.
Home Office Deduction
With the rise of side hustles and hybrid working, many self-employed people use their home space for work. But did you know that you can claim home office expenses as a result?
There are two ways of working out the deduction – either by working out the square footage of the home office or the regular method, which involved itemizing each expense for the office. You can include a portion of rent, mortgage, insurance, utilities and internet bills depending on your circumstances.
Self-Employment Tax
One of the most useful deductions you can take advantage of is the self-employment tax deduction, which covers social security and Medicare. Currently, the self-employment tax rate in the US is 15.3%.
Usually, the contributions you make towards these would be matched by your employer, but with freelancing, you’ll need to pay more tax to match this level. As a result, the IRS allows self-employed individuals to deduct that equivalent amount.
Vehicle Expenses
If you use your car or another business vehicle, then you can claim back the running costs of the car on your tax return. Typical use cases are driving to job sites, meeting with clients and running business-related errands.
You can either deduct via mileage calculations or the actual expenses method. It’s vital to keep accurate records of business mileage and expenses for the vehicle, as the IRS may disallow the deduction if your records and receipts aren’t up to scratch.
Retirement Contributions
Everyone should be adding regular contributions to their retirement accounts, and the IRS makes life easier for self-employed professionals by allowing deductions up to a certain limit.
Like the self-employment deduction, employees at a company would have an employer-funded retirement plan. For the self-employed, this is either a Simplified Employee Pension (SEP) or an Individual Retirement Account (IRA).
You can find more details from the IRS on pension contribution limits here. It is important to note that contributions to a traditional IRA may be tax-deductible, while contributions to a Roth IRA are not tax-deductible. If you’re feeling lost, please drop us a line to see how the best tax preparer in NYC can help.
Meals and Entertaining
Meeting with prospective clients or travelling for work where you need to cover meals mean you’ll incur expenses. Thankfully, these can be a tax-deductible perk as long as they can be proven to be related to business only.
Usually, the limit set by the IRS is up to 50% of the cost of the meal. For 2021 and 2022 only, this rises to 100% of the meal.
Only certain things fall under this category – for instance, groceries don’t count, whereas a meal at a restaurant does. Keep good records and receipts so you don’t lose out on claiming back.
Loan Interest and Bank Fees
If you have a separate business bank account, there may be monthly or annual fees associated with it. You can claim these fees back as a tax deduction.
Similarly, if you’ve taken out a loan to help your business, the interest payments on the loan can be a deduction. To claim a deduction for loan interest you must have a valid loan agreement in place, be obligated to pay the interest, and must have paid the interest.
Final thoughts
Maximizing deductions is a key strategy for the self-employed to keep more money in the bank. By understanding the deductions available and keeping accurate records, you can always make sure you’re getting your dollar’s worth.
Click here to get expert advice from one of the best providers of CPA services in NYC. We work with a range of companies of different sizes in multiple industries, so we’re well-versed in the ups and downs of businesses.
by yafco | Mar 17, 2023 | Uncategorized
From managing daily operations to growing the business, running a small company is no mean feat. That’s why any good businessperson knows it’s important to have a solid financial foundation to ensure success.
However, dealing with financial planning alone can be cumbersome and take up your valuable time as a business owner. Outsourcing your financial planning to Ahad&Co’s business consulting in NYC may be the best option if you find yourself weighed down with the financials.
Here’s our guide to the benefits of a professional financial planner and what they can do for you.
Let’s dive in.
Benefits of a financial planner
The right financial planner can play a vital role in helping small business owners reach their financial goals and grow the company. Here are some of the benefits business owners notice when they first hire a financial planner.
Expertise
A financial planner is a subject matter expert in corporate finance. If you’re starting a business for the first time and aren’t trained in financial planning, the acronyms and jargon can quickly become a headache.
Financial planners have the training and experience to provide tailored advice and recommendations based on a small business’s specific financial goals and circumstances. This way, you can avoid falling foul of any rules and regulations.
Holistic approach
A financial planner has a bird’s eye view of the business that involves planning, cash flow management, retirement planning and tax, to name a few.
This makes your life easier as a financial planner’s comprehensive analysis of all of the financials of the business will make sure everything is working well together. A financial planner can also guide you on how to allocate your resources, manage risk, and reach your financial goals.
Saves time
There’s no denying that filling out tax forms and looking at spreadsheets to try and make big financial decisions can waste your time. This is the time which could otherwise be spent growing the business and making strategic decisions. You may also not be playing to your strengths and spending too long on the business financials.
This is where hiring a financial planner can make a big difference. By outsourcing your financial planning to a professional, you can free up time to focus on other aspects of your business.
Improved financial decision making
With their expert knowledge and guidance, a financial planner can often be a great help in making key strategic decisions based on your financial position. They can look for areas to improve cash flow, where the budget can be trimmed and a plan to move towards those goals.
A good financial planner can also advise you on how best to take advantage of tax deductions to reduce your liability and identify any risks to the business earlier than you might spot them. All of this, in turn, helps you to make smarter business decisions.
What can a financial planner help with?
Now you’re familiar with why a financial planner could be beneficial to you and your company, let’s look at some of the different areas they can help you save time and money.
Budgeting and cash flow management
A financial planner can develop a budget for you and manage your cash flow to keep the business out of financial difficulties, spot any issues early on and grow the company.
When it comes to budgeting, a financial planner can help you create a comprehensive budget that considers your business’s expenses and revenues. Operations, marketing, salaries – a financial planner would have it covered.
As for cash flow management, the financial planner could sort out all things to do with your balance sheet by tracking cash flow, managing accounts receivable and accounts payable, and ensuring you have enough cash in the bank for unexpected costs.
Record keeping
Any business needs to keep track of things for tax season and when auditors come knocking. A financial planner can help ensure the records are valid, up to date and in line with any regulation changes.
A financial planner can also look over historical records to notice any patterns in the data which could be useful for predicting future finances. This can then help you make better, more informed business decisions you may not have noticed before.
Tax planning
Feeling overwhelmed with NYC tax planning and understanding tricky tax laws? A financial planner can help you understand the tax laws and regulations that apply to your business and develop strategies to minimize your tax liability.
Choosing the right business structure, taking advantage of tax deductions, and reducing your liability in line with other financial areas of your business are all things a financial planner can help with.
Retirement planning
When it comes to retirement funds, this can be a real headache to understand as a small business – especially if you’re taking on employees and also bothered by business taxes in NYC.
A financial planner can help you understand the different retirement plans available to small business owners, such as a Simplified Employee Pension (SEP), a Simple IRA, and a 401(k). They may also be able to advise on where’s best to invest the retirement fund according to your financial goals.
Risk management
Unfortunately, unexpected losses and events can pop up at any time. A financial planner helps you to future-proof your business by warding off any incoming storms and putting aside enough money in the business to cover those unplanned expenses.
A financial planner can also help put together risk management plans such as contingencies and thinking ahead for economic downturns. They may also be able to help you with recommending insurance options if you have property or need liability insurance.
Wrapping up
By working with a financial planner, you can develop a comprehensive financial plan tailored to your specific needs and financial goals. Remember: a financial planner is your partner in making the business a success, and a good one is worth their weight in gold.
If you’re looking for a specialist team that provides small business consulting in NYC and can be your partner in helping your business’ financials, look no further. Our experts are well-equipped to advise you on any financial planning challenges you might be facing. Click here to learn more.
