Tax considerations for the Self-Employed

by Beth Cortez

Are you self-employed?  If so, you may be thinking about ways to reduce your self-employment taxes.  As I ‘m sure you know, when you were self-employed in 2022, you paid 15.3% of your net earnings.  12.4% went to social security and 2.9% went to Medicare. Why was the percentage so high?  Employers are responsible to pay half of the payroll tax, while self-employed individuals are responsible for the whole amount. Knowing this, you are probably wondering what deductions you are entitled to so you don’t pay more than you have to. Here is a list of some items you will want to start thinking about so you can start gathering the appropriate documentation in time for the upcoming deadline next year.

Do you have a home office?  Do you use it regularly and exclusively for your business?  If so, you can either use a simple deduction of $5 per square feet of office space you use (up to 300 square feet for a total of $1,500), or you can use the regular method of deduction which considers your home office square footage, as a percentage of your home’s total square footage, and the expenses related to it (such as the rent, mortgage, mortgage interest, insurance, taxes and utilities related to the home it is in).

Another great deduction is the business mileage deduction.  If you use your personal car for work as a self-employed person, you can deduct your mileage on your tax return.  You can use the standard mileage deduction (which is currently 65.5 cents per mile) or you can take the actual method for your deduction.  If you use the actual method, you will need to keep track of the business miles you used (by reading your odometer at the beginning and end of each trip), gas, oil, licensing, registrations fees, any repairs, tires, insurance, lease payments and vehicle depreciation. We can help you calculate which option would be best for you to use to maximize your deductions. We can also help determine the advantages and disadvantages of purchasing a business-use vehicle.

In addition, you can deduct costs of education and training you purchased to further your business knowledge, and any books, supplies, fees, transportation costs, etc. for that as well.  You could deduct health care insurance premiums you paid if you netted a profit for your business this year, a percentage of any phone services you paid for in relation to the business, travel expenses, advertising, retirement plan contributions, and up to $5000 of your business start-up costs and more.

“Keeping good records will help you to get the most out of your tax deductions and keep you from overpaying on your taxes.”

Keeping good records will help you to get the most out of your tax deductions and keep you from overpaying on your taxes.  If you can keep track of these items monthly, it will help it to be less burdensome to calculate.  MPK Advisors offers assistance with bookkeeping as well as tax planning, so please inquire within if you would like us to help you with some of these things.  We are always happy to help make sense of your financial future.

Never Quite Done?

Remodeled Remodel

Is it just me, or do you guys do it as well?  It appears my remodels always end up getting remodeled.  Everything from color schemes to room textures, and plant locations.  At first glance, to most people, the room or rooms look comfortable, well lit, and very stylish, but all I think about is what needs to be changed or repainted.  With all this remodeling comes the finances or lack of to cover the endless ideas. 

I will literally walk into Lowes or Home Depot days after a remodel and notice a better color scheme or decorative idea, and the process of remodeling my remodel begins all over again.  I end up with closets full of things I once cared for but no longer appeal to me.  I refuse to throw anything away though because what I have learned with décor, designers are always recycling and incorporating new ideas with old items.  I have always enjoyed decorating as a child but this passion and hobby of mine can leave me a little stressed for time. 

For example, I have 3 incomplete walls at this moment that await new wooden designs and paint, and with December around the corner here I am stuck with very little time to complete these projects yet again. With all that said remodeling my remodels has been both challenging and therapeutic and I look forward to whatever my brain has planned next.

Let's Take a Break

Coffee Break

Let’s pause from our usual accounting talk and sit back for a minute to discuss something that 74% of us do EVERY DAY – drink coffee!

It’s summertime, so maybe your go-to cup is a cold brew or iced latte. Or maybe you’re the type that, no matter the weather, prefers a hot, black cup of joe in your ceramic mug with the cute saying… and maybe a little cream and sugar if you’re feeling fancy.

When traveling the world and experiencing different cultures, you will find that they all have something in common: people everywhere take time to sit in the company of their family, friends, guests, or coworkers to enjoy a cup of coffee (or tea if you’re not feeling those jitters). 

Where does coffee come from anyway? Like the cacao bean, coffee beans come from trees and are the pit of a fruit referred to as a “cherry”. The beans are picked, separated from the fruit, and dried before being sent to ports around the world to later be roasted and sold. Arabica and Robusta are the two types of coffee beans.  Arabica beans produce a better tasting, higher quality coffee, while Robusta beans are easier to grow and cheaper to buy. Most of your local coffee shops will use Arabica beans. The flavor tasted in different coffees depends on the region and elevation where the beans were grown and even the way they’re roasted. It’s very similar to wine tasting! A coffee of Ethiopian origin is grown at a higher altitude making it a denser bean and full of berry notes, whereas a coffee of Brazilian grown at a lower elevation, will bring out some chocolate and spice flavors. And it gets way more in depth than that!  

We all like to believe that the coffee we purchase is directly helping the farmer who produced it. Unfortunately, that’s not always the case. Especially in today’s market, many coffee farmers have had to give up their farms because they weren’t sustainable. One way to help this is to buy from your local coffee roaster and ask them about the source of their beans. Most likely they are working with someone who has a direct relationship with farmers from all over the world.  

Hopefully, reading this post has enriched your coffee drinking experience by causing you to ponder the journey that coffee has traveled from a farm to your cup. And now let’s try and bring this back to the world of taxes as you are quickly approaching the end of summer and thinking through all those goals you’ve set for yourself and your business. If it feels like you’re falling behind or not where you hoped you’d be at this point, take a deep breath, grab your favorite cup of coffee, and consider reaching out to MPK – we’d love to work with you to find ways to make more progress towards reaching your goals.  

Mid Year Tax Planning

Now's the time - part 2

Here we are in July already! We hope everyone had a safe and happy 4th of July, and that you are enjoying your summer. Summer may not remind you of tax planning, but for us at MPK summer is the best time to plan tax savings strategies and estimated payments for the current year. Don’t get us wrong, we also love those warm days, swimming, enjoying the outdoors, BBQ’s , time with family and friends and so much more. Last month we covered a few business tax planning ideas. This month we are going to go over some ideas for individuals to plan and make changes that can be made mid-year to reduce your 2023 tax liability.

Individual Planning

Below are just a few tax planning strategies you can employ almost immediately and with little cost:

Retirement Plans:

Contribute to an individual retirement plan (Traditional IRA or Roth IRA) or a company plan (401k, SIMPLE IRA, SEP IRA, among others). If you are eligible to participate in a company plan, you should consider contributing to that first. Often an employer will match your contributions up to a certain percentage, and this becomes “money left on the table” if you aren’t contributing at least the maximum amount your employer will match. If you have an employer-sponsored retirement plan, you might not be able to contribute to a traditional or Roth IRA; however, even if you aren’t able to contribute, your spouse may qualify if he or she is not covered by an employer-sponsored retirement plan. The maximum IRA contribution for 2023 is $6,500 or $7,500 if you are 50 or older. You may also be eligible for a Retirement Savings Contributions Credit (Saver’s Credit) further reducing your tax liability if you are below certain income thresholds.

Health Savings Account or Flexible Spending Account:

A Health Savings Account (H.S.A.) is a savings account that individuals with a high deductible health plan can set up for themselves and their families. An employer could also contribute to an employee’s H.S.A. and exclude the value of the benefit from their taxable wages. Contributions to this account are tax deductible and grow tax free within the account until they are withdrawn for qualifying medical expenses.

A Flexible Spending Account is an account established by an employer in which an employee can participate. Funds can be contributed each year and are either deductible on your personal tax return, or if the employer contributes, it would not be included in your W-2 wages as it is a tax-free fringe benefit.

The funds from either account can be used to pay for qualified medical expenses which otherwise may not be deductible due to the 7.5% AGI limitation, or the taxpayer may not itemize.

Like Kind Exchanges, Sec 1031 Exchange:

If you have investment property (real property), and if the property were sold, it could create a significant capital gain. A 1031 exchange may be a tax savings strategy that would be very beneficial to you. In general, if you make a like-kind exchange you can defer the gain or most of the gain to a time when the property is later sold, or you exchange it in the future for another property.  You can also exchange 1 property for 2 or more properties. You must meet certain criteria to qualify for a 1031 exchange, and instead of a real estate agent an accommodator is used to facilitate the transactions. For more information specific to your situation please contact our office.

Charitable donations-QCD (Qualified Charitable Distribution):

The taxpayer and / or spouse must be over 70 ½ to qualify for QCD. The taxpayer and / or spouse can directly contribute up to $100,000 per year from their IRAs directly to as many qualified charities (Typically 501c3 organizations) as they like. The direct contributions will reduce total taxable income regardless of whether you itemize.  By reducing your adjusted gross income, it could possibly reduce your Medicare premiums as well as your tax liability.

Record Keeping:

Documentation, documentation, documentation! This is one of the most important tax plans you can implement. Quite often, when it is time to have your tax returns prepared you don’t remember deductions or can’t locate the information to use to have the returns prepared. If you set up a file at the beginning of each year and keep all the records and documents in one place throughout the year, it will make tax preparation much easier and smoother and possibly reduce your taxable income. If you use a vehicle for business purposes, including rental property, be sure to keep a good mileage record or log. The 2023 mileage reimbursement rate of 65.5 cents per mile can be a significant deduction that you might be missing. Also, don’t forget about charitable and medical mileage which can also provide additional tax deductions.

Itemized Deductions:

The Federal standard deduction for married filing jointly filers is $27,700; however, the state of California standard deduction is only $10,404 – keep track of your deductible expenses. You may think you only qualify for a standard deduction, but the difference between the standard deduction for federal and state is significant enough that you may be able to take the standard deduction for federal and itemize for the state. Keep good records of your possible deductions and at the time we prepare your tax returns we will be able to calculate what is most beneficial for your tax situation.

MPK Advisors & CPAs is now offering advisory services, ranging from basic business startup and operations topics to buying and selling a business, or even planning for rental properties and retirement. Please ask us how we can help you proactively set up good business practices from the very beginning, and plan for any significant financial decisions! This is all consistent with our mission to help our clients make more confident financial decisions.

Mid Year Planning

Now's The Time - Part 1

I can’t believe it is June already and almost half the year is nearly gone! I’m sure you’re not even thinking about taxes at this time, as you may have just completed your 2022 taxes or maybe haven’t even started them. To quote Benjamin Franklin, “If you fail to plan, you plan to fail”. Planning is the key to tax reduction and savings, now is the time to take action to reduce your 2023 taxes, not April 2024.

Business Planning

Below are some of the most important and accessible tax planning strategies that you can employ relatively immediately for business planning purposes:


Start a retirement plan for your business: A retirement plan can not only reduce your taxable income as an owner/shareholder, but can also reduce the taxable income of your employees. There are also tax credits available to the employer for the initial cost of setting up and administering the plan. Depending on the plan: 401K, SEP, Simple, etc., the employer can contribute also through profit sharing, which can further reduce business taxable income. Profit sharing contributions often can be made after the prior year end, and designated as a prior year expense, making it an attractive strategy if you need to reduce taxable income after the applicable year ends.

Plan for inventory at year end: Many companies that have inventory don’t do a physical inventory count at the end of the year, this could be a disadvantage when the company is “estimating” their inventory, Often, the inventory is under or over-estimated, which could affect the profitability and taxable income of the business. There could also be obsolete inventory on the books that should be written off, which would increase the company’s cost of goods sold and decrease the taxable income.

Mid-year accounting clean-up and projections: Have the books been kept up to date? Have the bank accounts, credit cards and loan accounts been reconciled? Are accounts receivables accounted for and collected, and have the aging reports been reviewed for old amounts outstanding? Do you know the company’s financial standing compared to the previous year? If the books aren’t kept current the company doesn’t have an accurate view of its operating results and is unable to make good financial decisions accordingly. Having the books up to date on a monthly or quarterly basis gives the owner a good understanding of the earnings and costs connected with the business. Also, by keeping the books up to date, the CPA can do a mid-year projection and adjust any estimated tax payments, if necessary, thereby reducing any possible underpayment penalties and interest and planning for the total annual tax liability.

Business Mileage and Auto Expenses:  Tracking and claiming your vehicle mileage by using logs or phone apps, can make a significant difference in reducing your taxable income. The current IRS mileage reimbursement rate is 65.5 cents per mile, which can provide a significant deduction if tracked properly. If you are using a vehicle in your business, less than 50%, the mileage method is required, and depending on the circumstances, even if the vehicle is used more than 50% in the business, the mileage method may be your best choice instead of actual expenses. Often people “estimate” their mileage and in most cases that estimate is not accurate and you could be losing a valuable deduction. Also, vehicle expenses are one of the top expense categories the IRS will look at when auditing a taxpayer.

Business use of home: You may be missing out on this valuable and often overlooked tax savings strategy without proper planning. A sole proprietorship, partnership or LLC may qualify for a home office deduction, however, an S Corporation Shareholder does not, but with proper planning the cost of maintaining a qualified home office could be deductible.

If you primarily use a home office to meet regularly with clients or conduct a significant amount of your administrative activities from this office, and use the office exclusively for business, this tax savings strategy should be considered. The treatment and strategy must be tailored depending on the legal structure of your business. We can help you set up the structure for this.

If you would like more information on any of the topics covered or any other tax topics, please contact our office and we could provide you with an electronic brochure on the topic.

MPK Advisors & CPAs is now offering advisory services as well, ranging from basic business startup and operations topics to buying and selling a business. Please ask us how we can help you proactively set up good business practices from the very beginning, and plan for any significant business decisions! This is all consistent with our mission to help our clients make more confident financial decisions.

(Look for individual tax planning in our July Blog)

Spring Has Sprung!

and it’s Time to Get Clean and Organized!

The experts are saying it’s time to start planning your spring cleaning and the best way to go about that is to make it as FUN as possible!  Although many people don’t find it exhilarating to dive into the minutia and get knee deep into dust bunnies, I think we can all agree that the end result leaves us feeling productive and with a deep sense of relief and refreshment.  Cleanliness is next to godliness, right, folks?!!

To get to that end result we are looking for, we have to motivate ourselves to get started.  What motivates you?  A good music playlist?  The relationship building you get from enlisting and doing those elbow-greasing type of tasks with your favorite people?  Think of the types of things you look forward to and help you get through it well by making sure to implement those fun aspects into your chores.  You will NOT regret taking a few minutes to put that 80’s playlist together before you get your cleaning started.

Before you can do anything, though, it’s best to make a checklist of what you plan to do and approximately how long you are willing to spend on each thing.  Having a time budget will help you to stay focused and also not get too overwhelmed when the tasks seem insurmountable.  For the time-consuming tasks, incorporate helpers, as this will make them go by faster and with more enjoyment.

Reward yourself.  If you are a person who thrives from rewards, plan those in. Take breaks.  Grab that snack or treat and get back to it.  There’s always a minute you can take to get yourself motivated by enjoying the reward of your accomplishments.  Plan the next one, then hit the checklist.

Don’t forget to wear comfortable clothing, too.  How you feel will either hinder you or help you.  Don’t let something so easily manageable to keep your from getting your Spring cleaning done or your life more organized.

While you are in the organizational mindset, consider planning in a bit of time to organize your file cabinet and plan for your taxes.  Grab some file folders and your tax planning checklist from MPK Advisors & CPAs to help you know what paperwork to keep ready for next year.  January comes fast and it doesn’t hurt to have an idea of what things you will need to set aside for your CPA. Please reach out if there is any way we can help you be ready for next year.  We offer business projections and bookkeeping services in-house if you could use some extra hands to make light work.  Please reach out at or (951) 763-7970.