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Tax Tips For Plumbers

January 30th, 2020 by gtowsley Leave a reply »

This Monday was the official start to the tax season. Tax season is a busy time for most businesses. You have to gather all of your financial documents, decipher profit and loss statements and balance sheets, calculate expenses, and process 1099’s. It’s a lot for a small business owner. Even if you are a one man plumbing operation, there are some things you need to consider when it comes time to file your taxes. Here are some important tax tips for plumbers you should consider.

tax tips for plumbers

Image Credit: Tannery and Company

Claim All Of Your Deductions

Deductions are a taxpayer’s best friend. If you own your own business, you will incur ongoing business expenses that can be used to lower your taxable income. Tax deductions or tax write offs are deductible expenses that are deemed ordinary and necessary to your business. These expenses subtracted from your gross income, to provide a lower taxable income. This can help lower your tax bill significantly. 


Expense Tracking

In order to claim deductions it is important to have a good expense tracking process. This involves having a good accounting system in place. Many accounting apps like Quickbooks have expense tracking that allows you to snap pictures of receipts and categorize it while you’re out. This helps streamline the process. You would be surprised how much your deductions can add up at the end of the year.


Deductions Available To Plumbers

As a plumber you will have certain expenses that you can deduct. Some of these you may be aware of, others you maybe didn’t know you could claim. Some examples of common tax deductions for plumbers include:


  • Bad Debts – Do you have any outstanding customer bills? You can write these off as well as any costs associated with trying to collect the debt. 

  • Depreciation – If you made a large purchase, for example new tools or new work truck, the deduction can be spread out over the course of the useful life of the asset. For vehicles the useful life is usually 5 years. This can help reduce your tax burden on future income vs. taking the entire deduction at once. Talk to your tax advisor about what makes sense for your business.

  • Insurance – Business insurance like liability insurance is tax deductible.

  • Maintenance and Repair Costs – If you pay for a cleaning service to clean your office, or you had to make repairs to your office space, these costs are deductible expenses.

  • Marketing Expenses – It takes money to make money, so the saying goes, and if you spent money on growing your business last year, you can also take that deduction. Some marketing expenses that qualify include: business cards, flyers, postcards, social media marketing, SEO, content marketing, and paid ads. Even the cost of creating, running, and maintaining your website are deductible. 

  • Office Expenses – The cost of operating your office can be tax deductible. This includes expenses like office supplies, utilities, internet, and even your office rent.

  • Professional Fees – If you worked with another professional, for example a lawyer or accountant, the fees they charge are considered tax deductible. 

  • Safety Equipment – This includes things like steel toe boots, protective eye-wear, gloves, and knee pads.

  • Subscriptions and Dues – Do you pay union dues? Do you have monthly subscription costs? If its related to your business is tax deductible.

  • Vehicle Operation Costs – This is a big one for plumbers, as you typically spend a lot of time in the car driving to and from plumbing jobs. You can claim your vehicle expenses in several ways; claim them all individually or take the standard mileage deduction of 58 cents per mile. The standard mileage deduction takes into account maintenance costs, repairs, and fuel. You should consult your tax advisor which method is the best for your situation. Just remember, if you choose to take the standard mileage deduction, you cannot deduct the individual costs, its one way or the other but not both. 

tax tips for plumbers

Image Credit: American Payroll

Other Things To Think About

If you are self employed there are a couple of things you need to think about. For starters if you expect to owe more than $1,000 in taxes you may need to pay estimated taxes. Estimated taxes are quarterly tax payments you pay to the IRS. This is because an employer is not withholding and remitting taxes from you income. The IRS doesn’t want to wait to collect so they require estimated tax payments. Failure to pay estimated taxes can result in penalties from the IRS.


Another thing you need to think about is self-employed tax. Self-employed tax makes up your portion and the employer portion of social security and medicare taxes. Half of your self-employed tax or the employer portion is tax deductible.


You also need to think about 1099’s. Did you receive any 1099’s? If so these need to be accurately reported to the IRS, as they also receive a copy of it. Do you owe anyone a 1099? The deadline to issue 1099’s is January 31. You may owe a 1099 is you paid an independent contractor more than $600. For example, if you paid a freelance web designer to design a new website, and you paid them $800, you would owe them a 1099. Accounting software programs like Quickbooks can help you with issuing 1099’s. You can also order the forms from the IRS.


The Early Bird Catches The Worm

Now is as good a time as any to start thinking about your taxes. The earlier you start planning for your taxes the better. It is always a good idea to work with a tax advisor about. We are not tax advisors, but we can help you with your marketing efforts. For questions contact Grow Plumbing Today. 

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