Published in MorningBrew on March 29, 2022
“I usually review transactions weekly just to make sure everything's in order with no unexpected expenses.”
An example of an unexpected expense? “We had to fax something—which was just insane in itself. We used an online fax service and it was 25 cents. Later, we got billed $90 for a subscription to this thing, and we had no idea about it. Little things can always come up, especially with subscriptions.”
Why bother tracking your business costs? Because you can deduct biz expenses that the IRS considers “ordinary and necessary.” Examples could include home office expenses and car mileage and depreciation. And, great news—you can take the standard deduction for your personal income and itemize your business deductions at the same time.
“The biggest thing that an LLC does, and especially for freelancers, is create that layer of protection between your personal assets and the business assets,” DeVore told Money Scoop. Each state has its own rules and regulations around how your business can be considered for an LLC.
An LLC can be taxed either like a sole proprietorship or partnership, or it can be taxed like a S–Corporation. This can have great tax benefits, because you can treat business owners as employees and put them on payroll, which can reduce the amount of self-employment taxes you need to pay.
But keep in mind, the salary must be “reasonable” and not too low. This means that non-wage distributions (which aren’t subject to self employment taxes) from your S-Corp can’t replace your payroll.
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