Accounting

Maximize Your Deductions: Top Tax-Saving Strategies for Home-Based Businesses

Are self-employment taxes eating into your profits? If you’re running a growing business and filing taxes as a sole proprietor using Schedule C, you might be paying more than your fair share. While this approach works for newer or smaller businesses, it can quickly become inefficient as your revenue increases.

Fortunately, there’s a solution: restructuring your business and electing S-Corp status. By making the switch, you can reduce your tax burden, take advantage of optimized payroll strategies, and set your business up for growth. Partnering with an experienced Austin accounting firm like Insogna CPA can help you every step of the way.

💡 The Problem: Why Schedule C Stops Working as You Grow

Filing as a sole proprietor has its advantages—it’s simple, requires minimal setup, and allows you to report income and expenses directly on your personal tax return (Schedule C). But as your profits increase, so do your tax obligations.

Here’s why:

💡 High Self-Employment Taxes: Sole proprietors pay 15.3% in self-employment taxes (Social Security and Medicare) on all net profits, even if you don’t withdraw them for personal use.
💡 No Separation of Income: Your business income is taxed entirely as personal income, limiting your ability to optimize how you pay yourself.
💡 Missed Opportunities for Tax Efficiency: You may lose out on key deductions and benefits available to business owners with a more strategic structure.

If you’re earning $40,000–$50,000 or more in net profits, these inefficiencies could be costing you thousands every year. A local Austin small business accountant can help identify these pain points and propose tailored solutions.

The Solution: Electing S-Corp Status

Switching to an S-Corp allows you to retain the pass-through taxation of a sole proprietorship but introduces important tax-saving benefits. Here’s how it works:

1. Split Income into Salary and Distributions

With an S-Corp, your income is divided into:

Salary: Subject to Social Security and Medicare taxes.
Distributions: Exempt from self-employment taxes.

This simple adjustment can significantly lower your tax liability.

Example:

Schedule C filer with $120,000 in net profits pays $18,360 in self-employment taxes.
As an S-Corp, you take a $60,000 salary and $60,000 as distributions. Taxes apply only to the salary portion, saving $9,180 annually.

Partnering with a tax accountant in Austin ensures your salary and distributions comply with IRS rules.

2. Optimize Payroll Management

S-Corp owners must pay themselves a “reasonable salary,” which is subject to payroll taxes. This creates a clear distinction between personal and business income while ensuring compliance with IRS regulations. Austin’s accounting services, like those offered by Insogna CPA, can simplify payroll management.

3. Unlock Additional Tax Benefits

Electing S-Corp status opens the door to deductions for:

📌 Health insurance premiums.
📌 Retirement contributions (e.g., SEP-IRA or Solo 401(k)).

These savings can add up over time, further reducing your tax burden and supporting long-term financial goals. Contact a trusted CPA in Austin, Texas, for guidance.

Is It Time to Make the Switch?

Not every business is ready to transition from Schedule C to S-Corp. Here’s how to determine if the timing is right for you:

1. Profitability

Are your net profits consistently exceeding $40,000–$50,000 annually? If so, the potential tax savings can outweigh the additional administrative costs. An accounting firm in Austin can analyze your financials to confirm your readiness.

2. Ability to Pay a Reasonable Salary

Can your business comfortably support a fair, market-rate salary for yourself while maintaining profitability? This is essential for compliance with IRS rules.

3. Growth Goals

If you’re planning to scale, hire employees, or seek investors, transitioning to an S-Corp can enhance your business’s professional image and operational structure. Work with an Austin TX CPA firm to align your tax strategy with growth objectives.

Step-by-Step: How to Transition to an S-Corp

Ready to make the switch? Here’s how:

1️⃣ Form a Legal Entity:
If you’re currently a sole proprietor, you’ll need to form an LLC or corporation before electing S-Corp status. Consult top accounting firms in Texas to ensure compliance.
2️⃣ File Form 2553 with the IRS:
Submit this form to elect S-Corp status. Timing is key—you must file within 75 days of forming your business or the start of a new tax year.
3️⃣ Set Up Payroll:
Establish a payroll system to pay yourself a reasonable salary. A trusted CPA South Austin professional can handle payroll taxes and compliance.
4️⃣ Separate Business Finances:
Implement accounting software like QuickBooks or Xero to track income and expenses. Work with an Austin accounting service to ensure accuracy.
5️⃣ Consult a Tax Advisor:
Partner with a knowledgeable tax advisor in Austin to optimize your tax strategy and avoid IRS penalties.

Real-World Example: How an S-Corp Transformed a Business

The Challenge:
A freelance graphic designer earning $90,000 annually was struggling with high self-employment taxes and limited options for reinvestment.

The Solution:
Insogna CPA recommends forming an LLC and electing S-Corp status. By designating $45,000 as salary and $45,000 as distributions, the designer can reduce their self-employment taxes by $6,885 in the first year.

The Outcome:

📌 Significant tax savings.
📌Simplified payroll and accounting systems.
📌Funds reinvested into software and marketing, boosting annual revenue by 25%.

Why Choose Insogna CPA?

Transitioning to an S-Corp is a strategic move—but it requires expert guidance to get it right. Insogna CPA, one of the best CPA firms in Austin, specializes in helping small business owners make tax-efficient decisions that support growth.

Our services include:

✅ Personalized evaluations to determine if S-Corp status is right for you.
✅ Seamless filing and compliance assistance.
✅ Ongoing support for payroll, tax planning, and financial management.

Let our team of experienced professionals, backed by top-notch Austin accounting services, guide you every step of the way.

Take the Next Step 👣

Switching from Schedule C to S-Corp can deliver significant financial benefits, but timing and execution are critical. With expert help from Insogna CPA, you can reduce your tax burden, streamline payroll, and position your business for long-term success.

Contact us today to schedule a consultation and learn how to make your business work smarter, not harder.

How Can Accounting Firms Assist Startups & Small Business in 2024?

Accounting for small businesses can feel overwhelming, but with the right help, it doesn’t have to be. A certified public accounting (CPA) team can play a critical role in helping startups and small businesses through the dreaded tax season and beyond, making day-to-day operations smoother. If you’re a small business owner, take the time to understand how a CPA team can benefit a company like yours.

💡 Accounting for Small Businesses: The Benefits of Using a CPA Accounting Team

Accounting Can Be Time-consuming
Some of the most time-consuming tasks for a business owner can be your accounting responsibilities, especially if you don’t have experience in the field. If you aren’t comfortable handling the aspects of your company’s accounting, consider outsourcing to a CPA team. They can provide expert services in small business bookkeeping, tax planning, data management, and more. They can even take on chief financial officer (CFO) duties, which is a position in the company that you may not currently have filled. Instead of going it alone, why not let a team of professionals lighten your load?

Keeping Up-to-date on Accounting Trends
An integrated CPA team will keep your company up to date on new accounting trends and policies and will take the time to find solutions and tools to make your financials easy to manage.

Establish a Proactive Tax Strategy
You would be smart to establish tax strategies early—something that a CPA team can help you with—in order to get the most out of your profits. Although hiring a CPA team will initially cost more than doing it yourself or keeping an in-house accountant, you’re going to benefit in the long run in terms of money saved thanks to their expert advice.

Let’s Talk About Tax Deductions

What are Tax Deductions?
Tax deductions are expenses that you can claim against your tax payments in order to reduce the amount you pay.

As a small business, there are certain tax deductions that you might benefit from even if you don’t know it yet. Here are a few examples:

📌 Work-Related Travel Expenses: Any travel you might do for work—whether it’s a train ticket, gas for your car, or a hotel stay—could be deductible. The trip itself must be necessary for business, take you away from your home, and be longer than a working day.
📌 Home Office Expenses: If your small business operates from a home office, expenses like office supplies, equipment, and even a portion of your rent or mortgage may be deductible. You can even claim $5 per square foot of space used by your office.

A CPA team can walk you through all the deductions you might be able to claim and ensure that you’re saving as much money as possible.

💡 Getting Audited

Audits Happen
Audits happen regularly, and it’s mandatory to comply with the IRS when they decide to audit you. The main reasons for an audit include ensuring your financial statements as a business are accurate and free from errors that might otherwise point to suspicious activity.

The Pain of Audit Compliance for Small Businesses
An audit can be a real pain, requiring you to pull information from all your accounts and source any information that auditors might request. That means you’re at their beck and call, which can be a serious disadvantage when trying to handle accounting for small businesses.

Minimizing Your Risk of Being Audited
Audits can be avoided by following the advice of a CPA team. It’s less likely that you’ll be audited if your financials are handled by a professional. Although it’s not guaranteed that you won’t be audited if you hire a CPA team, they can take preventative measures to make the auditing process as smooth as possible.

💡Strategizing & Planning With A CPA Team

A CPA Team Will Help You Understand the Financial Effects of Business Decisions

Whenever you make a business decision, there will always be financial implications—good or bad. A CPA team will be able to help guide you to make the right choices and avoid the wrong ones. They can help you understand what your money is best used for and how you can increase your profits.

For example, if you want to hire a new staff member or invest in training, your CPA team can advise you on what’s best for your budget.

With a CPA team, you can easily look at the bigger picture and create a detailed strategy for the future of your company. They can help you explore the opportunities you have as a small business and how to leverage your resources to grow. Together with your CPA team, you can make the right decisions to ensure your business is on a positive financial route.

Take Advantage of Your CPA Team

When it comes to your accounts, take advantage of what an integrated CPA team can offer. Weigh the pros and cons of outsourcing your accounting duties, and consider how a whole team can make accounting for small businesses a breeze.

Feel like you’re juggling too many numbers?

? Let’s make it easier. Contact us at Insogna CPA, and we’ll show you how we can take the weight off your shoulders. Whether it’s tax season or day-to-day operations, we’re here to help your startup or small business thrive in 2024 and beyond. Let’s chat and get your financials in tip-top shape!Top of Form

Best CPA in Austin Texas

Taxes can be more complicated when you have a business, property, and family. Plus, the tax codes keep changing. Hiring the best CPA in Austin, Texas, can make life a lot easier. Experienced CPAs not only ensure you prepare and file your taxes properly and on time, but they can also help you with your bookkeeping and accounting.

If you’re searching for personalized, expert accounting services, look no further than us. At Insogna CPA, we offer a range of services for individuals and businesses. We have the best CPA in Austin Texas committed to offering the highest quality tax and accounting services.

What Makes Our Firm The Best Choice For CPA

According to many of our clients, here’s what makes us the number one choice for CPA.

Taxes Are Our Forte

We know that taxes can be really confusing. But taxes are all about numbers, and we love numbers. As the best Austin accountants, we have plenty of experience dealing with taxes. We’re always up-to-date with the changing tax regulations and rules happening often. This means that by hiring us, you can ensure compliance with all the tax laws.

We’ll Save You Time And Money

While it could take you very many hours or even days to do your own taxes, we’ll only need a fraction of that time to put your taxes in order. Our CPA firm in Austin has done this thousands of times, and each time, we make sure our clients’ taxes are filed correctly.

Plus, we’ll save you money. We have all the latest tax-saving opportunities right at our fingertips because, after all, it’s one of our main areas of focus throughout the year. And it doesn’t matter if you have multiple income streams. You might still qualify for additional tax savings.

Trusted Financial Advisors

As a reliable CPA firm, we’re here to make money matters easy for you. Whether you’re dealing with debt, taxes, or planning for the future, we’ve got your back. Our friendly experts help you figure out how to pay off debts, understand taxes without the headache, and plan for retirement without stress. We also help you choose the right insurance and make budgets that work for you. If you need down-to-earth advice and support to handle your finances, just give us a call!

Better Work-Life Balance

Tasks like recording receipts, setting financial targets, tax returns, and bookkeeping are essential for the success of your business. However, they consume a lot of time. By delegating such duties to our team, you can have more time on your hands to dedicate to your business and family.

Cost Management

Cost management is everything when running a business. And it’s one of the reasons why you need the best Austin accountants. Our CPAs will assess the financial health of your business to determine areas where funds are being spent unnecessarily and recommend cost-saving alternatives. Our goal is to optimize your revenue and help put more money in your pocket.

Premier CPA Firm

If you’re on the hunt for the finest CPA in Austin, Texas, look no further! We’re proud to be a top-rated CPA accounting firm, dedicated to providing unparalleled solutions for all your tax and accounting needs. What sets us apart? We never take a one-size-fits-all approach. Instead, our expert team customizes our tax and accounting services to perfectly fit your unique requirements. Whether you’re an individual or a business, we’ve got you covered. Ready to experience the difference? Contact us today to schedule a consultation and discover why we’re the go-to choice for CPAs in Austin, Texas. Reach out now at 210-942-3962.

Insogna CPA

+1 210-942-3962
3355 Bee Caves Road Suite 503
Austin TX 78746

Unlicensed vs Licensed CPA – What does that mean for you?

Almost anyone can call themselves an accountant. This isn’t true of CPAs (Certified Public Accountants), which is a designation requiring specialized training towards becoming a licensed CPA.

The American Institute of Certified Public Accountants (AICPA) states, “All CPAs are accountants, but not all accountants are Certified Public Accountants (CPAs). Receiving your CPA certification distinguishes you from other business professionals – the benefits are increased trust, opportunity, and financial reward.”

What are the main differences between licensed CPAs and accountants?

Training – CPAs have passed rigorous testing and strict requirements for licensing in the state in which they intend to practice. After becoming licensed, CPAs must take continuing education classes throughout their career in order to maintain up-to-date information on issues and changes in the accounting world.
Fiduciary Responsibility – Many businesses that are required to have a financial statement audit or review will need a CPA to perform these services and issue the required reports. CPAs are also considered fiduciaries with a legal duty and power to act on behalf of, and in the best interest of their clients. Non-CPA accountants are not considered to be fiduciaries to their clients.
Taxes and Regulations – Accountants without a CPA certification may prepare a proper tax return, but a CPA offers distinct advantages to clients that non-CPAs cannot provide. Many licensed CPAs are more knowledgeable in tax codes as a result of the rigorous CPA licensing examination and continuing education requirements. Licensed CPAs are also eligible to represent clients before the IRS if audit support is required, while a non-CPA accountant is not.
State Requirements and Codes of Ethics – The license is not the only requirement to be a CPA. CPAs are also expected to follow a strict code of ethics and meet the high standards of the profession.

Pitfalls of working with an unlicensed accountant?

An unlicensed accountant can disappear with your data at any time. While a licensed CPA is professionally responsible by the State Board of Accountancy to make sure your data is protected.

Having a licensed CPA provides you recourse with the State Board of Accountancy in you ever need to report them. If you work with an unlicensed person and they disappear, there is no one to call or complain.

Licensed CPA vs Unlicensed Accountant Snapshot

According to Merchant Maverick, “An accountant is a finance professional who offers business advice and can perform bookkeeping tasks like reconciliation and record-keeping. But only a CPA can represent your company legally before the IRS and create audit reports and review reports.”

Certified Public Accountant (CPA)

Must have a Bachelor’s and have successfully passed the CPA certification exam
Offers advice and insight about the big picture finances of a business, and can often offer deeper knowledge of tax codes
Can create audit reports and review reports
Can legally represent a client

Unlicensed Accountant

Generally, has a bachelor’s degree, preferably in accounting
Offers advice and insight about the big picture finances of a business
Can only create compilation reports
Cannot legally represent a client

What do I need?

Do you need help managing the day-to-day bookkeeping processes of your business? Hand the reigns to a professional bookkeeper to free up your time.
Do you need financial advice regarding your business? A professional accountant or CPA will be able to analyze your business finances and offer business advice.
Do you need to prepare your taxes? A bookkeeper can help you manage your payroll taxes, sales taxes, and compile 1099s, but only an accountant, CPA, or EA can file your tax returns for you.
Are you worried an employee is stealing from you? A forensic accountant will be able to get to the bottom of the issue and spot any potential fraud.
Are you a private or public corporation?If you are a public corporation, it must provide audit reports to investors and only CPAs are qualified to create those reports.

Analyzing your businesses needs is the best way to determine which type of accounting professional you need. We would we happy to discuss your needs to determine what type of services you might require.

Insogna CPA offers bookkeeping, payroll, virtual/fractional CFO, and more services to help take your business to the next level. Give us a call.

How does my company’s accounting method impact its bottom line?

Do you know if the accounting method you’re using is the right one for your business?

The difference between cash and accrual accounting lies in the timing of when sales and purchases are recorded. Cash accounting recognizes revenue and expenses only when money changes hands, but accrual accounting recognizes revenue when it’s earned, and expenses when they’re billed (not paid).

The cash basis is easy to determine when a transaction has occurred (the money is in the bank or out of the bank) without the need to track receivables or payables. Since transactions aren’t recorded, per se, until the cash is received or paid, the business’ income isn’t taxed until it’s in the bank.

In the accrual accounting method, revenues and expenses are recorded when they are earned, regardless of when the money is actually received or paid. The upside is a more realistic idea of income and expenses during a period of time, providing a long-term picture that cash accounting doesn’t provide. The downside is it doesn’t provide any awareness of cash flow. Accrual basis accounting without careful monitoring of cash flow can have potentially devastating consequences.

Tax Impact

Let’s say you own a business that sells machinery. If you sell $5,000 worth of machinery in December, under the cash method, that amount is not recorded in the books until the customer hands you the money or you receive the check.

Under the accrual method, the \$5,000 is recorded as revenue immediately when the sale is made, even if you receive the money in January and thus pay taxes on it.

The same principle applies to expenses. If you receive an electric bill for $1,700, under the cash method, the amount is not added to the books until you pay the bill.

However, under the accrual method, the $1,700 is recorded as an expense the day you receive the bill.

Should I use cash or accrual?

If your business is a corporation (other than an S Corp) that averages more than $25 million in gross receipts over the past three years, the IRS requires you to use the accrual method. If your business doesn’t hit those criteria, you can use the cash method.

Keep in mind that the IRS requires companies to use and maintain the same accounting method to report taxable income for a year — so no changing halfway through a tax year.

Some businesses can choose the hybrid method of accounting, wherein they use accrual accounting for inventory and the cash method for their income and expenses.

If you’re unsure of which accounting method is best for your business, speak with us.

More Tax Tips

Would you like more year-end tax tips? Download our new, Year-End Tax Planning Guide.

Best Small Business Accounting: Insogna Partner Gusto Adds New HR Integrations

At Insogna, we strive to offer efficient, modern services that will set us apart as the best small business accounting in Texas. Our partner, Gusto, recently released two new HR integrations that will allow Insogna to better assist you in hiring and taking care of payroll responsibilities. In addition to their seamless payroll management, Gusto is adding the optional services from JazzHR and Greenhouse to help users improve the hiring process, from effective recruiting to simple onboarding.

JazzHR works with clients to streamline the recruitment process on a user-friendly platform. They offer solutions that include finding qualified candidates, assisting with interviews and assessments, and reporting HR metrics like compliance and recruiting. With Gusto and JazzHR’s new partnership, hired candidates are imported and employee records are created directly in Gusto.

Greenhouse is a recruiting software that assists in the hiring process. Greenhouse works hard to improve both yours and the candidate’s hiring experience. They offer apps to help both parties stay on top of the process, scalable options depending on your business needs, and regular statistical reports to help you refine your hiring process. Gusto integrates with Greenhouse to import candidates, send offers, and add new team members as employees or contractors.

These solutions are helpful to small businesses whose time and money is extremely valuable—automation is proven to be more efficient than manually carrying out repetitive processes like these. Coupled with Gusto’s offerings and Insogna’s expertise, outsourcing these responsibilities will check some major items off of your to-do list.

Insogna has partnered with the other industry experts to ensure that you remain compliant and avoid penalties that often come as a result of payroll mistakes. Teaming up with the best small business accounting for startups will help your company revolutionize the following services and more:

Easy onboarding
Automatic payroll tax automation and filing
Affordable, scalable benefit plans
Year-end W2s and 1099s

Contact Insogna CPA to get set up with the best small business accounting and full-service payroll option out there. We are well qualified in our field and can advise a strategy that meets your startup’s unique needs.