Going from a W-2 employee to being your own boss is great, but one of the major hurdles that new small business owners need to master is tax planning. Mike Jesowshek runs a virtual tax firm that specializes in helping small business owners and shares his One Big Tip on how to make the most of your tax strategies.
When Mike stepped out of his marketing job and into the new realm of tax accounting, he took a lot of helpful business practices with him. One of the primary factors was the idea of a virtual business. While most tax firms still have brick and mortar locations, Mike’s virtual firm, Jetro, stands out among the crowd.
Owning several businesses himself, Mike noticed a need for a tax firm that had the flexibility and rates that only a virtual firm could offer. While he admits that he missed out on the experience gained by working for a public accounting firm, his fresh perspective allowed him to create a new model that worked for him.
Mike’s One Big Tip is for small business owners to focus on tax planning. “When most people think of taxes,” he says, “they think ‘I see my accountant in February, March, or April to prepare and file my taxes. Then they send it off and I don't talk to that accountant again until next February, March, or April.”
The reality is that, by that time, the tax year is over and it’s already too late to take advantage of many of the tax strategies available to you. Tax planning is considering your tax year before the bill comes due.
While altering your numbers or neglecting to report income isn’t recommended, there are many ways to legally reduce your tax liability. For the most part, this comes from lowering your taxable income. As a W-2 employee, there isn’t much you can do to lower this number outside of contributing to your retirement. This is because your taxes are taken out of your gross income before you even see it. You only spend money after taxes.
However, as a small business owner, you can flip this mindset on its head and consider ways to spend money before taxes. Things such as dinner with potential or current clients, mileage in between offices or worksites, and costs associated with a home office can all be deducted from your taxable income, which in turn lowers your tax bill.
Taxes are incredibly complex and can easily be oversimplified. Hiring a professional may cost money upfront, but they’ll likely save you far more in the long run. To learn more about how you can use these helpful strategies to save on your small business taxes, you can visit Mike at www.jetrotax.com.