When I started working as an independent consultant, one of the first thing I did was form a corporate as it was required by my consulting job agency to work on 1099 basis. You suppose to get paid more as 1099 vs. W2 because the agency does not need to pay for your payroll tax, buy insurance on your behalf, and administer additional paperwork. So in theory, they would pass on all the savings to you, and you should get a higher pay rates compare to W2. But that is not always the case.
I went to the first CPA I can find down the street, and hired him to form the corporation for me. I didn’t know the difference between an ‘S’ or ‘C’ corporation. I didn’t ask any questions and he didn’t volunteer to educate me. At the time, it wouldn’t have matter if I know the difference between an ‘S’ or ‘C’ corporation. I just wanted things to be simple, and ‘S’ corporate was the preferred choice by many one-man corporation like mine. This may not have been the best choice for me. But that’s another story we shall get to later.
As the financial guru would say. It is not how much you make but how much you keep. In this regard, I did stumbled into forming an entity that was advantageous for helping me save on taxes. Receiving payments through my corporation did allowed me to write off certain expenses before paying taxes. I was able to write off my auto lease payment, gas mileage, certain equipment I bought for work related, and contributions I made to my Simple IRA retirement account. However, as a one-man consultant corporation there wasn’t many other things that I could write off.
Tax expense is one of the highest expense in one’s life time. I think it is worth the time, money, and effort to understand and to utilize the tax code to our advantage just like the rich do.
The first pillar to keep more money is by controlling our tax expense. The #1 partner to help us with controlling our tax expense is an excellent CPA, who is also an entrepreneur, and has excellent process in place. An excellent CPA should help us become a better business owner. Therefore, would help us make more money, and keep more of it.
We have partnered with CPA firms across the country to provide our members with the widest geographic coverage as each state/country may have its own accounting rules. We look for excellent CPA firms that provide comprehensive tax saving strategies, who is also an entrepreneur, and has excellent process in place.