If you are an independent insurance agent, chances are you write business with several different carriers during the course of any given year – and perhaps with dozens of companies.
That means a whole lot of 1099 Forms from every one of those companies that you have to keep track of, or risk running into trouble with the IRS come tax time.
Insurance Forums recently learned of a company that specializes in helping self-employed professionals in a variety of industries – including insurance agents – simplify 1099 taxes in order to maximize earnings, track expenses and minimize headaches.
Here’s a look at 5 ways that illustrate how Zen99 is doing just that:
Step 1: Do any one-time setups
First up, you’ll need to do any one-time setups. The two main items here are:
- Set up your tax estimate information – this will help better estimate how much you owe in taxes
- Connect your bank account – this way, you’ll be able to automatically update your earnings and expenses in one click (though you can skip this step and instead manually upload earnings/expenses)
Step 2: Enter earnings as you get paid
Whenever you get paid, make sure you record that payment in Zen99. This is an important distinction – you should not record earnings when you invoice someone or perform the work, but rather when you get paid to your bank account. This is because you are likely on the cash basis of accounting as an independent contractor.
Step 3: Enter expenses to reduce your taxes
Keeping track of your expenses is the best way to reduce your taxable income – which means more money in your pocket instead of the government’s.
As a contractor, you get much more leniency in what qualifies as a business expense. For example, as an employee you don’t get to write off your commuting costs. But if you’re a contractor and primarily work from a home office, any commutes to client offices are considered business mileage.
Home office expenses, split personal/business expenses (like cell phones) and a variety of other miscellaneous expenses can be written off, based on the nature of your work.
Writing off all of your business expenses is the easiest way to save money as a contractor. Not writing off all your business expenses means you’re overpaying hundreds or thousands of dollars in taxes each year.
Step 4: Make sure you’re saving for taxes
As an independent agent, the companies you write business with don’t withhold any taxes when they pay you. That means that you need to put aside money yourself for taxes. Zen99 will help you estimate this amount – you just need to put it aside and pay it when they remind you!
Step 5: Watch for reminders
Zen99 will remind you of any approaching deadlines, like:
- When quarterly taxes are due (they’ll help you file these)
- When year-end taxes are due (they don’t yet help with this, but will provide resources)
They’ve also put together the Ultimate Guide to Taxes for Insurance Professionals, which will take you through tax forms you need to know and expenses you should be keeping track of, including explanations of Schedule C and Schedule SE, what type of expenses agents can write off, and whether your need to file quarterly or annually. Get the guide here: Tax Planning Guide for Independent Insurance Agents