Hiring a tax professional to prepare and file taxes is one of the best decisions a digital marketer can make. Much like hiring a professional digital marketer to grow your business is a better choice than doing it yourself. For starters, a professional has dedicated countless hours to learning the tax code so that you don’t have to, and they can help identify all possible deductions to help lower your tax bill. Here are some tax tips for digital marketers that could save them thousands on taxes.
The Potential to Save
There are many opportunities for businesses like digital marketers to save thousands on taxes. You simply have to know where to look, or hire the right tax professional. A tax professional who has a focus on digital marketing can identify even more potential ways to save on taxes. Some great ways a tax professional can help digital marketers save thousands on taxes include: identifying all possible deductions, leveraging tax credits, 1099 issuance, self employment taxes, estimated taxes, preparing and filing returns, audit prevention, and tax planning.
Deductions for Digital Marketers
One important tax tip for digital marketers is knowing which deductions are available to their business. A tax deduction is a qualifying deductible expense that can be used to reduce your taxable income. Knowing which deductions are applicable is one way digital marketers could save thousands on taxes. From a business standpoint, many of your daily operations qualify as deductible expenses. Some common business expenses that could qualify as a deductible expense include: marketing, travel, continued education, website development, software development, and business subscriptions just to name a few. For more information on qualifying deductible expenses for digital marketers, check out our previous article about the benefits of hiring a digital marketing focused accountant here.
Tax deductions and tax credits often get confused. While both work to reduce one’s tax liability, there are some differences on how they achieve it. Instead of reducing your taxable income with a deduction, a tax credit reduces your tax liability. The R&D tax credit is the perfect example of a tax credit that can help reduce the tax liability for digital marketers. It was first introduced in 1981 to help new businesses offset some of the costs associated with research and development. Fast forward a couple of decades, and now more because of technological advances, more and more industries are able to take advantage, including digital marketers. An example of a qualifying R&D activity for digital marketers is software development, like new and improved CRM software, or software that helps track, monitor, and optimize marketing campaigns. The best way to find out if you qualify for the R&D tax credit is to talk to a tax professional who is focused on digital marketing. You can learn more about the R&D tax credit here.
When it comes to digital marketing there are a lot of different areas to specialize in like content writing or SEO. At times it may be prudent to hire a professional to handle a different part of the campaign or who specializes in the specific service your client needs. When working with other professionals, if the amount they get paid is more than $600 a 1099 must be issued. 1099’s report miscellaneous income for independent workers to the IRS. A tax professional can help ensure that all 1099’s are accurate and issued in a timely manner.
Self Employment Taxes & Estimated Taxes
As an LLC or self employed individual you may be subject to pay self employment taxes. These taxes include social security, medicare, and income taxes. Since there is not employer to remit these taxes on your behalf, the IRS may insist on quarterly payments. If you anticipate to owe more than $1,000 you may be required to pay self employment taxes. Calculating the correct amount to pay can be a bit challenging, a tax professional can help guide you through this process and insure that payment are made on time.
Preparing & Filing
Preparing and filing taxes can be a daunting process for many, which is why allowing a professional tax specialist handle this for you is a good idea. Timeliness and accuracy are key. It might take you several days to complete your tax returns, where a professional can get them to you in a shorter amount of time. This saves you time, which allows you to put forth more effort into your business.
One of the best things about working with a professional tax specialist is the reduced risk of an audit. While an audit could still happen, the chances are a lot less under the guidance of a professional. In the event of an audit, a professional can help you navigate the process. Remember keeping good records of all expenses is the best way to prevent any issues.
Tax planning under the watchful eye of a professional can help set your business up for success. Tax planning helps with timing income and expenses, as well as optimizing investment and retirement accounts.
For more tax tips for digital marketers and other ways to ave on taxes contact one of our tax specialists today!