7 Tax Tips Every Entrepreneur Should Know

As a creative entrepreneur, there are tons of different aspects of your business that you absolutely love. Meeting new people, growing your brand, and spending your day working on your biggest passions are all definitely perks of the trade.

But, even though the self-employed life offers those definite upsides, there are still a few groan-worthy things that come along with them. What’s one of the most dreaded, cringe-worthy tasks? Taxes.

Yes—I get it—the word alone was likely enough to send a cold shiver up your spine. After all, most creative entrepreneurs have that in common: They loathe taxes. But, love ‘em or hate ‘em, taxes are a necessary part of successfully running your own business.

Luckily, if you’re well informed and well prepared, the tax process doesn’t need to be as painful as you might initially think. In fact, there are a few key tax tips that can help to take a lot of the headache and hassle out of the process. Here are seven of my favorites, so you can tackle those taxes and get right back to the work you love.

1. Stay Organized

When it comes to managing your finances, organization is key. Paying your taxes will be much easier if you keep all of your business’ financial information in order throughout the year.

So, ensure that you have a dedicated system in place for keeping track of your income and expenses. Whether you want to use software like QuickBooks or FreshBooks, or you’d rather setup a spreadsheet to track things on your own, the important part is to have a method in place to keep you organized.

It might take some time to setup, but it’ll end up saving you hours when tax time rolls around!

2. Consciously Save

Taxes are painful for everyone—nobody likes to see big bites taken out of their bank accounts. But, when you’re employed full-time, taxes aren’t something you actively have to think about. The money is simply taken out of every paycheck.

This isn’t the case when you’re self-employed. [clickToTweet tweet=”Taxes are something that you need to be consciously saving for.” quote=”Taxes are something that you need to be consciously saving for.” theme=”style1″] You should plan to tuck away at least 30% of your income to go toward taxes (painful, I know), as you’ll need to pay both income tax and a self-employment tax—which covers things like Social Security and Medicare.

I always recommend setting up a separate savings account dedicated to just taxes, so you aren’t tempted to touch those pennies on a rainy day!

3. Remember Your Quarterly Payments

I know that dealing with those quarterly tax payments can be a hassle, but it’s important that you don’t skip them. Making sure that you pay your taxes quarterly will help you avoid pesky penalties (not to mention a major financial burden) come April 15.

So, set a reminder on your phone or mark it down in big, red letters in your planner—you need to pay your quarterly taxes in June, September, January, and April.

4. Take Your Deductions

Needless to say, it’s important that you keep track of all of those expenses that you can write off at tax time.

There are tons of different deductions you can take, including your tools of the trade (like a new camera or computer), furniture for your office, website hosting, design services, business cards, and even mileage to and from different meetings and events.

If it relates directly to your business, chances are you can take it as a deduction. Your best bet is to keep track of everything (don’t forget your receipts!) and talk to your accountant about individual questions when tax time comes up.

5. Keep Things Separate

While you want to (and should!) take all of the deductions you’re entitled to, you should also make sure you’re keeping your business-related expenses completely separate from any personal purchases. In fact, it’s helpful to set up an entirely separate checking account or credit card specifically for your business.

This is helpful for a couple of different reasons. For starters, it instantly makes your business purchases more legitimate. Secondly, your expenses are much easier to sort through at the end of the year. And, if you’re working with a tax accountant, you’ll save yourself some money in tax preparation costs by being organized!

6. Save For Retirement

As an entrepreneur you do not have the benefit of an employer sponsored retirement plan however, there are many great options for you such as an IRA, Roth or even something called a “solo 401k”, moving a chunk of your money over to a retirement account is a smart strategy.

What makes this so great, other than the fact that you’re planning ahead and preparing for retirement? Well, the money that you move isn’t counted as income, which means you have a smaller chunk to pay taxes on.

There’s a limit on exactly how much income you can deflect to retirement. But, it’s an awesome option that can help you both prepare for the future and save some money on taxes!

7. Work With a Professional

There are tons of great resources out there to help you with your taxes. But—let’s face it—typing in a question into Google, you don’t always get responses from people qualified to answer your question leaving you even more confused and overwhelmed.

If you begin to feel like you’re in way over your head, it’s smart to sit down with a professional. Yes, it will cost you some money up front. However, in the end, a tax professional will likely end up saving you a chunk of cash. Since they’re experts, their trained eyes can spot deductions and other hidden surprises that could end up working in your favor! These professionals range from accountants, CPAs, or CFPs. Just make sure that they are qualified and acting as a “fiduciary” on your behalf.

Paying taxes will likely never be something that you look forward to. However, armed with the right information, tax time doesn’t need to be quite so terrible. Use these seven tips, and you’re sure to make the process as painless as possible!

This post originally appeared on Socialyte Capital.

About the Author: This post originally appeared on Socialyte Capital. Noa Hoffman is a Certified Financial Planner™ who helps young creative entrepreneurs plan early and make smarter financial decisions in order to live the lives they truly want. If you would like to learn more about Noa or Socialyte Capital, you can reach her via Twitter.