Starting with the basics, consultants are eligible to deduct various expenses that are commonly incurred in the operation of their consulting business. This section clarifies the types of expenses that can be written off.
Legal and Professional Fees
You can deduct fees that you pay to attorneys, accountants, consultants, and other professionals if the fees are paid for work related to your consulting business.
Home Office and Marketing
Marketing consultants who work in a qualified home office may perform market research; create traditional, email, or social media marketing campaigns; design charts or graphs; or meet with clients.
Travel Expenses
When you are traveling for business – whether you are going to a meeting, at a professional organization conference, or entertaining a client, you can write off several expenses on your 1099 including flights, gas, lodging, and meal expenses.
Tax Deductions in Detail
The CRA has a list of the common business expenses that you can write off. These include travel, advertising, office expenses, professional development, consulting services, research, and analysis.
Self-employed individuals or business owners may deduct the proportion of computer use attributable to the business. Employees, however, cannot write off this expense. Fees for CPAs, lawyers, and other related business consultants and advisors are deductible.
As a business owner, any expense that is incurred in the course of running your business may be eligible for a tax deduction.
Understanding the tax obligations and planning for them can be challenging for consultants. This part of the text helps guide consultants on what to expect and how to prepare for taxes.
Quarterly Taxes
Estimating quarterly taxes on time is crucial. Quarterly self-employment taxes are usually due around April 15, June 15, September 15, and January 15.
How Much to Save
The specific consultant tax rate depends on earnings and location. For example, a consultant earning $100,000 a year falls into the 24% bracket.
Several factors determine consultant tax services pricing, including expertise, experience, location, and case complexity.
Tax consultants can be helpful for major life events like marriage, divorce, childbirth, inheritance, job loss or start, home purchase or sale. They are skilled in handling property, federal, and payroll taxes.
Making the Decision
Choosing the right tax consultant is crucial. Consider potential tax savings, time to prepare/appeal a case, and time away from work when deciding to hire a professional versus using software.
Importance of Record-Keeping
Track deductible expenses like mileage, supplies, phone, and laptops to lower taxable income. Deductions reduce taxable income, and it’s vital for new entrepreneurs to keep records to maximize write-offs and reductions.