Tennessee plumbing professionals know tax time is here, and few are happy about it. If you’re a plumber who’s worried about your tax bill, you’re not alone.
The sad fact is that many professional contractors don’t take advantage of the many tax tips that can help them save money. So, instead of taking money out of your pocket to pay more taxes than you owe, use these 10 tax-saving tips and keep those dollars for yourself. Here’s how to do it.
While federal income and self-employment taxes are the same from state to state, certain factors vary for Tennessee plumbers. Sales tax is a particularly complex aspect for plumbers, as the regulations vary by state. If you do business in multiple states (which is common, since Tennessee has 8 border states), be prepared to deal with different laws for each one.
Please, please don’t assume you can keep track of your expenses and deductions in your head. We guarantee you’ll forget purchases that could have saved you money if only you’d documented them. Use a spreadsheet, notebook, or shoebox to throw your receipts in, or an app on your phone to screenshot purchases throughout the year. Note the date, amount, and description of the purchase. Getting in the habit of doing this all year can save plumbers literally thousands of dollars in taxes.
Related: How Much Do You Make After Taxes
A way to conveniently keep records of potential tax deductions is to open a business bank account and run all business purchases through it. Whether buying tools and materials, paying your employees, or traveling for work, a bank account notes every expenditure. At the end of the year, you can make quick work of gathering your deductions by pulling your bank statements off the bank’s website.
In addition to a bank account, a business credit card is a great way to keep expenses organized and accounted for when tax season rolls around.
There are dozens of deductions plumbers can use to decrease their tax bills. Before you file, dig out every one of them, from your new work laptop to that 300-mile run you did for a big client 6 months ago. Even the small ones add up to tax savings.
“When are taxes due?” is a common question independent contractors like plumbers ask. Add reminders on your calendar that keep you informed of tax days. These alerts can help you avoid filing taxes late and owing expensive penalties.
As an independent contractor, you are responsible for making sure you pay your share of taxes. The government wants its money before the end of the year, so it set up a quarterly tax payment program. Plumbers should make quarterly payments in April, June, September, and January. You may send the payments on your own or set up automatic deductions from your bank account.
Save for a comfortable retirement and decrease your tax bill by socking some of your profits away in a retirement account. The most common account for independent contractors is the Simplified Employee Pension Plan (SEP). Plumbers can invest 25% of their net earnings, or a maximum of $61,000 for 2022 or $66,000 for 2023, into the tax-sheltered plan.
Related: 5 Tips For Smart Small Business Bookkeeping
If you work out of your home, even part of the time, you can use the office space as a deduction. There are some rules about doing this, such as the space must be dedicated solely as an office. If, for example, you have a section of your kitchen set up as an office, you can only deduct that part of the space, not the entire kitchen. A home office deduction can sometimes save you big on the taxes you owe.
Think about it. You wouldn’t think it was wise for a regular person to try to fix a broken pipe. They should call a professional plumber! The same premise applies to taxes. Reach out to a reputable CPA firm in Tennessee for more money-saving tax tips and advice.
Tax time can be stressful, especially for independent contractors like plumbers. Following these tips can help you wrangle the unwieldy tax beast into something more manageable and less costly.
Plumbers in Tennessee have a great option for their income tax and all their accounting needs. Chaliff + Associates has been helping plumbers manage their taxes, bookkeeping, and accounting needs for years, and we would love to work with you, too. Let us be part of your team and contribute to your company’s success.
Spend your time serving your customers and building your business by leaving your accounting needs to us. Schedule a call with us today to learn how we help plumbers with their unique accounting needs.