Summary of What This Blog Covers
- Why forming an LLC or S-Corp can reduce taxes and protect assets.
- The importance of making timely, accurate quarterly tax payments.
- How tracking expenses helps freelancers claim valuable deductions.
- The benefits of retirement planning and year-round CPA support.
Let’s get right into it.
You’ve made the leap. You’re running your own show, juggling clients, scaling your services, and building the kind of business most people only dream about. But here’s something that doesn’t come up in entrepreneurial highlight reels: tax mistakes can quietly chip away at everything you’re building.
Freelancers and consultants often wear every hat: CEO, marketer, project manager, and yes, sometimes accidental CFO. But when it comes to taxes, that DIY mindset can cost you. Big time.
So, let’s walk through five of the most common tax missteps we see independent professionals make and how to fix them with the help of a knowledgeable CPA in Austin, Texas who understands the self-employed grind from all sides.
This isn’t just about filing your taxes on time. It’s about making sure your entire financial structure is working for you not against you.
Mistake 1: Operating Without an LLC or S-Corp
Many freelancers start out as sole proprietors. It’s simple, low-cost, and doesn’t require much paperwork. But here’s the issue: staying a sole prop for too long can be a silent tax killer and a legal risk.
When your business is just you, your personal and business assets are legally indistinguishable. That means if something goes wrong—an unhappy client, a liability claim—your personal savings, home, and assets could be exposed.
Now let’s talk about taxes. As a sole proprietor, all your net profit is subject to self-employment tax (Social Security and Medicare), currently at 15.3%. That adds up fast.
Setting up an LLC creates legal separation. But if you take it a step further and elect to have that LLC taxed as an S-Corp, you can start reducing that tax liability significantly. By paying yourself a reasonable salary and taking the rest as distributions (which aren’t subject to self-employment tax), you retain more of your hard-earned income.
An experienced small business CPA in Austin will walk you through:
- The pros and cons of each structure
- Your break-even point for S-Corp savings (often around $80K–$100K in net income)
- How to set up payroll, file quarterly returns, and stay IRS-compliant
This isn’t about gaming the system. It’s about making the system work smarter for your business and your long-term goals.
Mistake 2: Skipping or Underpaying Estimated Taxes
Let’s be clear: if you’re self-employed and making money, the IRS wants a piece of it four times a year.
Unlike traditional employees, who have taxes withheld from their paychecks, freelancers and consultants must pay estimated taxes in April, June, September, and January. And these aren’t suggestions, they’re required.
Many freelancers either miss these payments or underpay, not realizing the IRS assesses penalties for underpayment even if you settle up at the end of the year.
A CPA in Austin, TX will help you:
- Calculate accurate quarterly payments based on your year-to-date income
- Adjust estimates if your revenue fluctuates significantly
- Create a plan to withhold funds from each payment (yes, even the fun ones)
And perhaps most importantly, they’ll help you avoid the gut-punch of an unexpected April tax bill. With clear, up-to-date forecasting, a certified public accountant near you ensures you’re paying exactly what you owe—no more, no less.
Mistake 3: Overlooking Deductions You Deserve
Here’s a fact: the tax code is full of deductions designed for self-employed professionals. But if you’re not tracking expenses or if you don’t know what qualifies, you’re leaving money on the table.
Let’s list just a few common deductions freelancers miss:
- Home office space (even if it’s just a portion of a room)
- Business use of your personal vehicle (mileage, maintenance)
- Software subscriptions and licenses
- Contract labor (think: virtual assistants, graphic designers)
- Office supplies, postage, and shipping
- Marketing and advertising costs
- Business meals (within limits)
- Internet and cell phone use (business-related portion)
The catch? You need documentation. Receipts, mileage logs, bank records—it all matters in the eyes of the IRS.
This is where a skilled Austin tax accountant or tax consultant near you becomes invaluable. They’ll help you identify deductions you may not be claiming, organize your records, and even automate your expense tracking with modern tools.
Better still, many Austin accounting firms offer integrated bookkeeping services—meaning you get real-time visibility into your income, expenses, and net profit, all with audit-ready compliance.
Mistake 4: Not Using a Tax-Advantaged Retirement Plan
You’re your own boss but that doesn’t mean you have to skip the retirement plan. In fact, you’ve got more options than the average employee.
A traditional W-2 worker might max out their 401(k) with a company match. But as a freelancer, you can contribute to:
- SEP IRA – Up to 25% of compensation or $69,000 (for 2025)
- Solo 401(k) – Offers both employee and employer contributions, with a combined limit of $69,000 (or $76,500 if age 50 or older, including catch-up contributions) for 2025
- SIMPLE IRA – A good option if you plan to expand and hire team members; employee deferral limit is $17,000 (plus $3,500 catch-up if age 50+) in 2025
Each plan has its own rules, contribution limits, and benefits. A sharp tax advisor in Austin helps you select the right plan for your income level and retirement timeline while helping you reduce your taxable income right now.
Remember, retirement contributions are one of the last legal tax shelters available. And the earlier you start, the more your money compounds.
A proactive Austin small business accountant will also ensure your contributions are recorded properly, integrated into your tax filings, and optimized for both current and future savings.
Mistake 5: Only Working with an Accountant During Tax Season
This might be the most dangerous mistake of all.
If your accountant disappears after April 15 and resurfaces next spring, you’re not getting a real tax partner. You’re just buying a filing service.
The best CPA firms in Austin, Texas offer year-round tax planning. That includes:
- Quarterly strategy sessions
- Year-end planning to time deductions or purchases
- Real-time updates on tax law changes
- Guidance on business decisions that affect taxes (buying equipment, hiring, launching new services)
And if you have international income or foreign bank accounts, they’ll also ensure you’re compliant with FBAR filing and other reporting requirements most freelancers don’t realize exist.
When you build an ongoing relationship with a certified CPA near you, you’re no longer reacting to tax problems, you’re preventing them.
You’re no longer playing catch-up, you’re playing offense.
Your Next Step: Build a Smarter Tax Strategy with a Real Partner
You work hard. You’re building something real, something sustainable. Your taxes shouldn’t hold you back, they should support your progress.
That’s what we do at Insogna CPA. We partner with freelancers, consultants, and independent professionals to help them:
- Select the right business structure (LLC, S-Corp, etc.)
- Pay quarterly taxes on time and with confidence
- Maximize deductions without increasing audit risk
- Plan for retirement while reducing tax liability
- Receive year-round support not just a once-a-year tax prep
We’re more than just tax preparers. We’re your CPA Austin experts, strategic advisors, and business allies. Whether you’re seeking a tax professional near you or an entire Austin accounting service, we tailor our approach to you.
Our team includes certified public accountants, enrolled agents, and experienced advisors—all aligned with your mission: grow your business, keep more of your income, and build lasting wealth.
Book Your Free Consultation Today
If you’re tired of Googling “tax services near you” or wondering if you’re doing everything right, let’s stop the guesswork.
Schedule your free consultation with Insogna CPA today. Whether you need help cleaning up past mistakes, optimizing your current setup, or planning your next move, we’re here to help.
You didn’t go into business to become a tax expert. That’s our job.
Let us handle the numbers so you can focus on doing what you do best.