Aug 19, 2023
Understand the tax implications of your business.
John was a freelance web developer. He had been working for himself for several years, and he had always filed his taxes as a sole proprietor. However, he had never really taken the time to understand the tax implications of his business. He just assumed that he would pay the standard self-employment tax rate, and that would be it.
One year, John decided to hire a tax accountant to help him with his taxes. The accountant
quickly realized that John was not taking advantage of all of the tax deductions that were
available to him as a sole proprietor. For example, John was not deducting his office rent,
business depreciation, cost of goods sold, business mileage, or professional liability
The accountant helped John to file Schedule C for the first time. As a result, John was able to deduct over $10,000 in business expenses. This significantly reduced his taxable income, and he saved thousands of dollars on taxes.
John was so impressed with the savings that he had achieved by filing Schedule C that he
decided to continue using a tax accountant every year. He also made sure to keep better
records of his business income and expenses. As a result, he has been able to save even more money on taxes in the years since.
John’s story is a reminder that sole proprietors and single-member LLCs can save a lot of
money on taxes by filing Schedule C. By deducting business expenses and paying self-
employment taxes, sole proprietors can reduce their overall tax burden and save money.