This post was written by Heather Rast.
It’s that time of year again. The time where independent consultants think about this year's work and how to move into the new year with sound footing.
Over the last three years, we’ve had several blog posts and Twitter chats related to reducing tax liabilities and managing expenses. Below are some highlights from the most-loved posts and the Solo PR Pro community.
Collecting on unpaid bills
Ensuring you're paid for the work you do is a critical step to solo success. As you look to do this more effectively in 2012, a few top tips from our March 2010 #SoloPR Twitter chat on this topic include:
- Build collection term language into your contract
- Follow up repeat requests with notice that bringing in your attorney will be your next step to resolving the collection issue
- Screen new clients very carefully; request a deposit for services up front
- One accountant’s position: an LLC can write off tangibles, but not debts related to unpaid invoices for services
Tax and expense help
In a past post for for laid off workers, we shared these tips that apply to anyone:
- Be sure to track any and all expenses while performing work independently. Every parking stub, mile driven, and notebook purchased can help lower your tax liability.
- Be careful not to underestimate your taxes while solo. You’re now responsible for the full amount of FICA instead of half (when employed, your company paid the other half). This can be a rude wake-up call if you don’t set aside enough of your solo earnings for taxes when its received.
- Not sure how long you’ll stay solo, because it wasn’t part of your master plan? You can still earn income consulting if you operate under your own name and use a Schedule C when filing your taxes.
Passing along expenses to clients
During a recent #SoloPR chat, we discussed how to bill expenses to clients, and participants shared the following advice:
- Have a monthly “Administrative” line item for retainer clients that covers consulting-related expenses. Those expenses are built into the hourly fee charged project-based clients.
- Some advised that every expense is different. Some are direct billed, others split between clients, while still others are considered the cost of doing business (and accounted for within the rate).
- Consider passing expenses along as a clear, detailed line item on the invoice after pre-arranging in advance for the expense in the contract.
- Consider “accelerating your expenses” by buying things you know you'll need (and can afford) now instead of early 2012. By doing so, you'll enjoy the tax break of the expense now. Investments like desks, an ergonomic chair, a secondary computer, or new printer can be bought now so that the expense shows up on the 2011 ledger. If you pay for them in January 2012, chances are you'll have incurred no interest on the credit card charge plus have received the tax break.
What are your favorite year-end strategies? Let us know in the comments!
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