Being your own boss creates big opportunities for tax savings — but only if financial advisors and their clients understand all of the complex rules surrounding self-employment, experts said.
Financial Planning compiled the below list of two dozen tax tips for self-employed clients by speaking with five advisors and tax professionals about retirement plans, company structures and deductions available to business owners and independent contractors. Since they're not having their taxes withheld automatically, they should be aware that they will usually need to begin
"Overall the takeaway is your taxes will get a little more complex once you do become self-employed," Bjorkman said in
Besides the rising number of independent contractors working for Uber, DoorDash or other mobile-application technology firms, the ranks of self-employed clients can include lawyers, consultants, athletes collecting endorsement deals or even social media influencers, according to Chelsea Ransom-Cooper, head of wealth management and financial planning at Philadelphia-based
Brand ambassadorships, public appearances or merchandise sales from athletes or entertainers starting their own clothing line could also qualify a client as self-employed, said Brandon Williams, a director and wealth advisor with the
"It is important to consider estate planning, retirement planning, proper insurance planning and residency planning," Williams said in an email. "All of these areas lead to tax strategies that a tax professional can model out for you."
The group of self-employed clients extend to physicians and other high-earning medical professionals — a niche served by Alexis Gallati, the founder of Knoxville, Tennessee-based
"While their wealth can grow, business owners often feel pinched because they don't want to draw on their assets fearing adverse tax consequences," Altfest said in an email. "Tax strategies to reduce tax liability include Roth conversions, particularly in low-income years such as just after retirement, qualified charitable distributions, 1031 exchanges, step-in basis planning for their estates, loans and, when it comes to selling a business, proactively allocating for goodwill vs equipment/materials which will produce better and worse tax treatment."
Each of the five experts recommended speaking with an advisor or a tax professional to gain a full understanding of the below strategies and questions facing self-employed clients.
Scroll down the slideshow to see two dozen tax tips for self-employed clients, their financial advisors and their tax professionals. For a breakdown of the key tax-related questions relating to paying off student loans,