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10 Tips To Help Your Insurance Business During Tax Season


Tax season is in full swing. Is your business ready? Here are 10 tips for insurance agents that can help optimize your finances. Remember, always consult with your tax advisor regarding tax consequences and your specific situation. Let’s get started.

1. Track Business Expenses: Keep detailed records of all your business-related expenses, including mileage, office supplies, marketing costs, and professional dues and licenses. Visiting a client in their home or at their business, write down the mileage. Or use a mapping website to get precise distances. Remember to include computers, internet access, and any software needed to do your job. These expenses are often deductible and can help lower your taxable income.

2. Understand Deductions: Familiarize yourself with tax deductions available to insurance agents. Common deductions include a home office expenses used exclusively for business, insurance premiums, licensing fees, continuing education costs, and travel expenses related to business. There are a set of rules specifically for using your home or part of it for business. Review this IRS publication for details.

3. Separate Personal and Business Expenses: Maintain separate bank accounts and credit cards for your personal and business use. This separation makes it easier to track deductible expenses and ensures you don’t mix personal and business finances, which can complicate your tax filings.

4. Maximize Retirement Contributions: Contribute to retirement accounts such as an IRA or a SEP-IRA (Simplified Employee Pension Individual Retirement Account). Contributions to these accounts may be tax-deductible and can help lower your taxable income while saving for retirement. We can help. We offer Traditional IRA, Roth IRA, and a SEP IRA accounts to help you secure your future.* 

5. Quarterly Estimated Taxes: Since insurance agents often receive income through commissions and may not have taxes withheld from their paychecks, it’s essential to make quarterly estimated tax payments to avoid penalties for underpayment at the end of the year. This can help you avoid interest or penalties from the IRS for paying too little tax during the year. Plus, it prevents you from having to scramble to find funds to pay for your taxes or put them on high-interest credit cards.

6. Keep up With Tax Law Changes: In 2022, the IRS announced tax inflation adjustments for 2023 that impacted more than 60 tax provisions. Do you know what these changes are? If, you’re doing your own taxes, now’s the time to do a little research before you start doing your taxes. Tax laws are subject to change, so staying informed about updates and changes relevant to your profession can help you make informed decisions and take advantage of any new deductions or credits.

7. Consult With a Tax Professional: Given the complexity of tax laws and the unique financial situations of insurance agents, consulting with a tax professional or accountant specializing in small business taxes can ensure you’re maximizing deductions and complying with all regulations. If you are self-employed or a sole proprietor, you may be eligible to deduct your tax preparation fees, including tax software or fees from a professional accounting firm. Remember, you may only deduct these fees for the part of your tax return related to your business. 

8. Use Tax Software: Consider using tax preparation software specifically designed for self-employed individuals or small businesses. These tools can help streamline the tax filing process and ensure accuracy in your returns.

9. Document Client Gift and Entertainment Expenses: If you give gifts to clients or incur expenses entertaining them, keep thorough records. While these expenses may be deductible, there are limitations and requirements for documentation. For a breakdown of travel, meal, and entertainment expenses, review this IRS publication.

10. Plan for Tax Efficiency: Work with a financial advisor to develop tax-efficient strategies for managing your income, investments, and retirement savings. Strategies such as income averaging, tax-loss harvesting, and structuring commissions can help minimize your tax liability over time.

Final Thoughts
By implementing these 10 tax tips for insurance agents, you can better manage your finances, reduce your tax burden, and stay compliant with tax laws. A bit of research before you do your taxes can help ensure your optimizing any potential tax return.

*Consult your tax advisor regarding tax consequences and your specific situation.

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