Tips For New Consultants – Budgeting For Your Taxes

One of the biggest, and most unpleasant, surprises to face the newly self-employed is the higher level of taxation that often comes with that self-employed status. When you are working for someone else, your employer shoulders a great deal of the tax burden that accrues from keeping you on the payroll. But when you leave the nine to five world and strike out on your own, that tax burden falls completely on your shoulders, and if you do not budget your money carefully you could end up short of cash when tax time rolls around. While there are many specific tips for starting a consulting business, all too few of those tips center on the unpopular subject of taxes.
That is why it is so critical for new consultants, and all self-employed individuals for that matter, to budget carefully for the taxes they expect to owe. Putting aside one third of every dollar you make as a consultant may sound excessive, but in fact it is just good business What Is Consulting Pwc practice. Every time you receive a payment from a client, immediately put aside one third of that payment in a special savings account you will use to pay your taxes. Try to find a quality money market account so you can at least earn some interest for setting that money aside.
As a new consultant you might also be required to make quarterly income tax payments, instead of paying your taxes once a year like you did when you were working for someone else. The best way to determine if you will have to file these quarterly tax returns is to check with your certified public accountant. He or she can analyze your own situation and determine if you meet the criteria for quarterly filing. Financial professionals are often the best source of specific tips for starting a consulting business and running that business effectively, so do not overlook the expert advice your CPA can provide.
You can also run the numbers yourself during the year by purchasing a tax preparation software package designed for small business use. This will make it easier to prepare your taxes and determine how much you are likely to owe the IRS at the end of the tax filing season.
As a small business owner, you do have the ability to make the tax bite a little less painful. There are a number of excellent retirement plans designed specifically for self-employed individuals like consultants, and the contribution limits on those plans are quite generous. While in the beginning you will probably need every penny your business brings in, once the business gets going and the money starts rolling in, you can minimize your taxes and maximize your tax savings by putting money in a qualified retirement plan for your consulting business. Among the most important specific tips for starting a consulting business are the tips that help you spend less on taxes and more on growing your business and securing your financial future.
It goes without saying that few among us enjoy paying taxes, and it is certainly true that the tax burden often falls disproportionately on the self-employed. But it is also true that with the right tax planning and preparation, you can reduce the tax bite and help your new Work In Consultancy business thrive.

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