How to Get the Most Out of Taxes and Bookkeeping for Contractors

September 07, 2024•3 min read

Independent contractor taxes and bookkeeping are important but sometimes forgotten. Brad discussed with Melissa Broughton of Busy Bee Advisors who provided invaluable insights into how contractors can better manage their finances.

Five things you should know from your Tax Preparer

1. The Importance of Industry-Specific Knowledge

Melissa emphasized the need for contractors to work with tax professionals who understand their specific industry. Different types of contractors—whether they are general contractors, roofers, or handymen—have unique financial needs and challenges. A tax professional familiar with your line of work can offer tailored advice that can save you money and help you grow your business.

2. Proactive Tax Planning

One of the standout points Melissa made was the importance of proactive tax planning. Rather than just meeting with your tax preparer once a year, she recommends having regular check-ins throughout the year. This allows for better planning and can result in significant tax savings. Melissa mentioned that her clients often see savings ranging from 30% to 60% compared to what they were paying before.

3. Setting Up Your Books Correctly

For new contractors, Melissa stressed the importance of setting up your books correctly from the get-go. This includes having a separate business bank account and investing in accounting software like QuickBooks Online. She also mentioned that while hiring a bookkeeper might not be necessary initially, getting professional help to set up your chart of accounts can save you a lot of headaches down the line.

4. Understanding Business Entities

Melissa touched on the different types of business entities—sole proprietorships, LLCs, S-Corps, and C-Corps—and how each can impact your taxes and liability. She recommended consulting both a tax professional and an attorney to make the best decision for your specific situation.

How to improve your financial health

1. Find a Tax Professional Familiar with Your Industry

Start by asking potential tax professionals if they have experience working with contractors. This can make a significant difference in the quality of advice you receive. Look for someone who is proactive and willing to meet with you multiple times a year to discuss your financial situation and tax planning.

2. Set Up Your Books Correctly

If you’re just starting out, make sure to open a separate business bank account. Invest in accounting software like QuickBooks Online, and consider getting professional help to set up your chart of accounts. This will make it easier to manage your finances and ensure you’re capturing all possible deductions.

3. Regularly Review Your Financials

Don’t wait until the end of the year to look at your financials. Schedule regular check-ins with your tax professional to review your books and discuss any upcoming expenses or investments. This proactive approach can help you make better financial decisions and save on taxes.

Managing your finances as a contractor doesn’t have to be overwhelming. By finding the right tax professional, setting up your books correctly, and regularly reviewing your financials, you can take control of your financial health and set your business up for success. For more detailed advice, consider reaching out to Melissa Broughton at Busy Bee Advisors and take advantage of the resources they offer, including her book, "The 4-Hour Bookkeeper."

Remember, the right financial planning today can save you a lot of money and stress in the future. Take these steps seriously, and you’ll be well on your way to a more profitable and sustainable business.

Resources

Join my free Facebook group for Contractors: https://www.facebook.com/groups/contractorprofitblueprint

Free Sales Guide: https://theprofitclub.hammerandgrindpodcast.com/sales-training-optin

Profit Journal: https://www.lulu.com/shop/brad-huebner/profit-journal/paperback/product-ype4j9.html?q=profit+journal&page=1&pageSize=4

Direct Links

Schedule a consultation with Busy Bee Advisors

https://calendly.com/info-busybeeadvisors/30min?month=2024-06

Instagram account of Busy Bee Advisors

https://www.instagram.com/busybeeadvisors/

Facebook account of Busy Bee Advisors

https://www.facebook.com/SacramentoBookkeeping

Melissa Broughton's LinkedIn profile

https://www.linkedin.com/in/melissa-busy-bee-advisors-5686962bb/

Book Recommendations:

Atomic Habits by James Clear and Penguin Audio

Blue Ocean Strategy by W. Chan Kim & Renee Mauborgne

Brad Huebner

As a former Marine from Southern Indiana, Brad understands the importance of leadership, grit, and determination. After the Marines, Brad worked various jobs until he founded a successful construction business specializing in high-end Handyman and Residential Remodeling, completing over 2,500 jobs for 900+ customers. Now focused on coaching, Brad helps contractors break free from the crazy cycle of struggle, driven by a passion to support those striving to build businesses with integrity, ensuring they don't give up on their dreams. He believes everyone has the opportunity to create abundance in their life, business and community, but oftentimes they fall short due to a lack of knowledge. His mission is to grow people, create community and live abundantly.

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