How Marketing Agencies Do Taxes
To know how to save on taxes for your agency, you need to know how to do taxes for your marketing agency. Saving money on your taxes is all about knowing what you can write off, making sure you’re up to date with your filing, and often finding an accountant. It’s not exciting, but neither is overpaying on your taxes.
Most marketing agencies will do their taxes through an accountant, because they will know things that you don’t. They’ll know things that I don’t – it’s a career because there’s a lot to learn, and if you knew it all you would go to be an accountant. If you can’t afford to hire an accountant, then accounting software will often get the job done.
There’s a slew of good accounting software out there, and they can all help you save on taxes for your agency. This software – and later on professionals – will catch write-offs and deductions that you don’t even know exist. There is a lot of variation from country to country, state to state, and county to county and each have a ton of little details that you’ll miss – a little help goes a long way.
If you want to keep the cost of running your business as low as possible, you need to get your taxes done and done thoroughly. Marketing agencies can quickly rack up a huge tax bill with all the payments coming in and out, but knowing how to do taxes for your marketing agency can minimize that. If you’ve done your own taxes, you know that deductions very quickly add up.
You’re not going to get a refund for running your agency, but you can keep your payments low.
What You Need to Do Taxes For Your Marketing Agency
There are two things that you need to do taxes for your marketing agency: you need an incorporation or a business agreement, and you need receipts.
You should be keeping your books somewhere, even if you’re just using a Google Spreadsheet. When tax time comes around, you’ll need to know exactly what got spent and where. You’ll also need to know who paid you, and how much they paid your agency. Remember that you have to do your own personal taxes, as well – the two are only the same if you’re a sole proprietorship.
This bookkeeping will also come in handy later, as it will help with deductions. Generally, it’s best to keep track of anything that might be business related. If you’re taking long road trips to meet clients, get a receipt from the gas station. You might be able to write off things that are even tangentially business related.
It’s also important to remember throughout the year that you have to pay taxes for employees. Some places will provide relief for companies with a certain amount of W-2 employees, but that’s the kind of information you’ll want an accountant for. This means that you should be keeping pay stubs, because you’ll need to know who you were paying throughout the year. Employee payments are especially important to keep track of because they’re going to report, too, and there might be trouble if things don’t add up.
Being incorporated is also important because it will set the precedent for how you’re going to pay your taxes, and who’s on the line for them. I covered this when I talked about What’s Needed to Set Up a Marketing Agency, so I won’t repeat myself too much here. Generally, at the stage where you’re going through my free training your agency will be a sole proprietorship or a partnership, which doesn’t require incorporation (although a partnership does require an agreement). These types of business leave you entirely on the line for taxes.
How to Save On Taxes for Your Agency
Saving on your taxes is easy when you understand the factors that decide it. Obviously the best way to keep your taxes low would simply be to make no money at all, but that’s not reasonable, so you’ll have to look elsewhere. One option that I highly recommend is keeping your agency virtual.
Being a virtual agency lets you spread out the money that your spending across the country and or globe, which is especially helpful if you hire from states with low or no income tax like Florida. You’ll have to pay taxes in more places, but these smaller payments will often be less than what you would pay if it was one large sum. An accountant can give great advice here, as they can with most aspects of your taxes.
Similarly, hiring freelancers before hiring employees can go a long way towards keeping your taxes low. Freelance workers pay their own employer tax, which can quickly add up on your end. It’s important that your freelancers aren’t actually employees, though. Many businesses hire “freelancers” who are really just tax-free employees, which is very illegal. Understand that this is a trade off – freelancers have to be contracted, able to work elsewhere, and in control of their work.
Finally, knowing what you can deduct or write off is possibly the biggest thing you can do to keep your taxes low. While deductions will vary, you can generally deduct any operating expenses, with the general rule being that they have to be “ordinary and necessary.” What this essentially means is that if you can prove that it’s relevant to your business, you can probably deduct it or write it off.
One of the more common expenses is rent – whether it’s office space, or a section of your apartment or house, it can be written off. You can also write off business insurance and any start up costs, as well as vehicle expenses like the aforementioned gas. If you’ve taken out a small business loan, you can write off the interest on payments, as well.
More relevant to marketing agencies, you can also write off advertising and marketing costs. That’s money spent towards growing your business, and therefore an operating cost. If you’re doing a lot of advertising – like most marketing agencies will be – this can be a significant deduction at the end of the year.
How Marketing Agencies Do Taxes with Accountants and Accounting Software
The best way to do taxes for your marketing agency, hands down, is to use accounting software or an accounting professional. A human being is always ideal, because they’ll be able to think and act on your behalf. They can help you find deductions and keep on top of your books throughout the year to keep everything straight. Accountants will almost always save you money, but they aren’t the right answer for everyone.
In the early days of business, you should be able to keep on top of things by yourself with a little software. PayPal is great for bookkeeping because a lot of payment gets handled there anyway, but otherwise there are plenty of options for financial bookkeeping. On the tax side, there are also a lot of options, but QuickBooks is a great one.
QuickBooks can help you at all levels, even after you’ve hired a professional, and can automatically find deductions for you. It’s a great software that will help save your money on your taxes, guaranteed.