Understanding Guest Tax Laws for Small Hotels and B&Bs in NJ

Hospitality

If you run a small hotel or bed and breakfast in New Jersey, here’s a question: Are you charging the correct taxes on every stay?
If your answer was, “I think so…” you’re not alone—and that uncertainty could cost you.

Guest tax laws for small hotels in New Jersey can be confusing, especially when state, local, and platform-specific rules overlap. But getting them wrong could mean stiff penalties, back taxes, or even a damaged reputation with your guests.

In this guide, we break down everything you need to know about guest tax compliance in NJ—from what taxes apply to how to track and remit them. Whether you’re managing a charming inn in Pitman, a seasonal guest house in Cape May, or a boutique hotel in Woodbury, this article is your roadmap to confident compliance.

What Are Guest Taxes in New Jersey?

Guest taxes—also known as occupancy taxes, lodging taxes, or transient accommodation taxes—are charges collected by lodging operators and paid to the state (and sometimes local municipalities) for each guest stay.

These taxes help fund tourism, local services, and state infrastructure. If your property offers short-term accommodations (less than 90 days), you’re likely required to collect and remit these taxes.

Who Needs to Comply?

  • Small hotels and motels

  • Bed and breakfasts (B&Bs)

  • Short-term rentals (Airbnb, Vrbo, direct booking)

  • Inns, vacation homes, cabins

The 3 Types of Lodging Taxes You Might Owe

Let’s break it down. Here are the three common taxes your guests might be paying:

1. NJ State Sales Tax (6.625%)

This applies to all short-term lodging stays under 90 days. It’s calculated on the total room rate (including cleaning and amenity fees if charged separately).

2. NJ State Occupancy Fee (5%)

An additional fee for hotel-like accommodations. The fee is automatically owed unless your municipality is exempt (more on that next).

3. Local Municipal Occupancy Tax (up to 3%)

Some towns in NJ also impose a local occupancy tax—up to 3%. The rate and requirements vary by town, and not all municipalities participate.

Tax Type Rate Applies To
NJ Sales Tax 6.625% All short-term lodging
State Occupancy Fee 5% Hotels, B&Bs, motels
Municipal Occupancy Tax 0–3% Depends on the town (e.g., Sewell = 3%)

Exemptions and Exceptions

There are a few important situations where guest tax laws may not apply:

  • Long-Term Stays: Guests staying 90 days or more continuously are considered residents—not subject to tax.

  • Government Agencies: Lodging billed directly to federal, state, or municipal agencies may be tax-exempt.

  • Certain Airbnb Bookings: Airbnb often collects and remits NJ lodging taxes on your behalf—but not always. Check your account settings and payout summaries.

💬 Local Tip: Gloucester County municipalities may have different rules than shore towns like Atlantic City. Always verify exemptions with your municipal tax office.

How to Register and Remit Lodging Taxes in NJ

Step 1: Register Your Business

Visit the NJ Division of Revenue and Enterprise Services to register as a lodging provider.

Step 2: Set Up Sales & Use Tax Accounts

This allows you to collect sales tax and occupancy fees correctly.

Step 3: File Regular Returns

  • Frequency: Monthly or quarterly, depending on your revenue.

  • Method: Online through NJ Sales & Use Tax filing portal.

TMD Accounting’s Sales Tax Services for NJ Businesses

🛑 Common Mistake: Forgetting to remit municipal occupancy fees separately if your town requires it.

What to Track to Stay Compliant

Keeping detailed records isn’t just good practice—it protects you in case of an audit.

📋 Track the Following:

  • Guest name, check-in/check-out dates

  • Rate charged and total tax collected

  • Exemptions with documentation

  • Amounts remitted and filing dates

 

Stay Compliant, Stay Confident

Tracking guest taxes in New Jersey can be overwhelming—but it doesn’t have to be. Our free checklist, “What NJ Lodging Operators Must Track for Guest Taxes,” simplifies everything you need to stay audit-ready and compliant with state and local tax laws.

Whether you’re running a cozy B&B in Cape May or a boutique inn in Gloucester County, this printable tool will help you:


✅ Stay organized
✅ Avoid costly filing mistakes
✅ Keep accurate, audit-proof records

Download your copy now and take the guesswork out of guest taxes.


Perfect for small hotel owners, B&B managers, and short-term rental hosts across NJ.

📌 Brought to you by TMD Accounting – trusted by New Jersey lodging businesses for expert tax guidance.

 

 

What NJ Lodging Operators Must Track for Guest Taxes

Best Software to Help Automate Compliance

Manual tracking is time-consuming and error-prone. Consider tools that integrate with your booking system:

Recommended Tools:

  • Lodgify – Booking engine + tax calculations

  • Cloudbeds – PMS with automated local tax tracking

  • QuickBooks Online – Connects to most hospitality software for automated sales tax accounting

🧩 Bonus: Use integrations or calendar reminders to never miss filing deadlines again.

Why Work With a Local NJ Accountant?

Even the best platforms won’t catch every nuance. Municipal codes, NJ tax updates, and audit defense all benefit from local insight.

A South Jersey-based accounting firm like TMD Accounting can help you:

  • Understand your exact filing obligations

  • Avoid penalties or late fees

  • Prepare accurate, audit-proof records

  • Make sure you’re not overpaying or undercharging

Contact TMD Accounting for NJ Lodging Tax Help

Conclusion: Master Guest Tax Laws with Confidence

Running a B&B or boutique hotel in New Jersey is hard enough without having to worry about tax fines or legal letters. By understanding which guest tax laws apply, keeping excellent records, and getting the right help, you can turn a confusing topic into a well-oiled part of your business.

🎯 Want help simplifying your lodging tax setup?
Schedule a call with TMD Accounting today and let us help you stay compliant, profitable, and stress-free.

Simplifying Financial Reporting for Small Healthcare Businesses in NJ

Accounting, Small Business

Running a medical practice is a full-time job—and then some.
Between patient care, staff management, and billing headaches, there’s rarely time left to analyze balance sheets or review profit margins. And let’s be honest—most financial reports look like they’re written in a foreign language.

But here’s the truth: simplifying financial reporting for small healthcare businesses is one of the smartest, most empowering moves you can make. It doesn’t require an MBA or hours of number-crunching—just the right approach, tools, and a bit of expert guidance.

If you’re a healthcare provider in South Jersey trying to make sense of your finances (and stay compliant with NJ tax laws), this guide is for you.

Why Financial Reporting Matters in Healthcare

Financial reporting is more than just bookkeeping—it’s the heartbeat of your business operations.

Here’s why it’s crucial:

  • Track what you’re really earning: Patient payments, insurance reimbursements, and co-pays add complexity. A clear report shows you actual profitability.

  • Spot problems early: Delayed reimbursements or high overhead can be caught quickly.

  • Stay compliant: Accurate financial reporting helps you avoid IRS penalties or misfilings with the NJ Division of Revenue.

  • Plan for growth: Want to open a second location or invest in new equipment? You’ll need clean financials to secure a loan or investor confidence.

🧠 Pro Tip: Financial clarity isn’t about perfection—it’s about visibility and consistency.

What Your Accountant Should Show You Monthly

What Your Accountant Should Show You Monthly

Key Financial Reports Your Practice Should Use

You don’t need a thousand spreadsheets. Just a few targeted reports can give you a powerful snapshot of your practice’s health.

1. Profit & Loss Statement (P&L)

  • Shows income vs. expenses over a period (monthly, quarterly, annually)

  • Helps identify where you’re making—or losing—money

  • Tracks trends in patient revenue, insurance reimbursements, and operational costs

2. Balance Sheet

  • Lists assets, liabilities, and equity

  • Great for determining your net worth and preparing for expansion or financing

  • Especially helpful if you own your medical office building or have medical equipment loans

3. Cash Flow Statement

  • Shows how cash is entering and leaving your practice

  • Identifies cash shortages due to insurance delays or high overhead

  • Essential for covering payroll and monthly bills without stress\

 

Common Financial Reporting Pitfalls in Healthcare

Many practices don’t realize they’re struggling until it’s too late. Here are the top mistakes we see:

  • Using generic accounting software that doesn’t align with healthcare coding or billing

  • Confusing revenue with collections (just because you billed $10,000 doesn’t mean you’ve been paid)

  • No separation of patient payments vs. insurance reimbursements

  • Not tracking service-line profitability (e.g., is physical therapy really bringing in profit?)

  • Missing reports for co-pays, aging accounts receivable, or write-offs

💬 Real Example: One Washington Township family practice thought they were breaking even until a custom report showed their insurance collections were 60 days behind—and they were actually operating at a loss.

How to Simplify Financial Reporting in Your Practice

Step 1: Use Healthcare-Specific Software

Generic tools like Excel or basic QuickBooks versions don’t cut it. Instead, look for:

  • Kareo

  • AdvancedMD

  • DrChrono

  • Or QuickBooks integrated with medical billing software

These platforms can track patient billing, insurance reimbursements, and create healthcare-friendly reports.

Step 2: Automate and Sync Your Systems

  • Integrate your EHR or practice management system with your accounting platform

  • Automate payroll, expense categorization, and vendor payments

  • Tag income by payer source (insurance vs. self-pay)

Step 3: Customize Reports to Match Your Goals

You don’t need a flood of data—you need actionable insights. Work with your accountant to track:

  • Revenue by provider or service line

  • Overhead percentage (ideal range: 50–65%)

  • Monthly collections vs. charges

  • Patient retention and average visit revenue

Explore Our Healthcare Accounting Services in South Jersey

Why Work With a Local NJ Healthcare Accountant?

A general accountant might miss things like insurance coding issues, HIPAA-compliant tracking, or NJ-specific tax rules. At TMD Accounting, we specialize in working with medical practices throughout Gloucester County and surrounding areas.

Here’s what we offer:

  • Customized reports you’ll actually understand

  • Real-time dashboards and monthly check-ins

  • Tax planning aligned with NJ healthcare business rules

  • Support during audits or Medicare reconciliations

💬 Case Study: After partnering with us, a Sewell-based podiatry clinic increased net profit by 18% in one year—just by fixing their AR tracking and insurance follow-ups.

Conclusion: Clarity Is Power

Financial reporting doesn’t need to be a burden. In fact, with the right systems and support, it becomes one of your strongest tools for decision-making, compliance, and growth.

🎯 Want help simplifying your reports and seeing your true financial health—without drowning in spreadsheets?
Schedule a free consultation with TMD Accounting today and let’s bring clarity to your practice’s bottom line.

The Importance of Accurate Billing in Small Healthcare Practices

Medical Practices

Are you losing revenue due to billing errors or delayed reimbursements?

For small healthcare practices, accurate medical billing services aren’t just helpful—they’re essential. Whether you’re managing a family clinic in Glassboro or a specialty practice in Washington Township, mistakes in medical billing can lead to denied claims, compliance risks, and unhappy patients.

In this guide, we’ll walk you through why billing accuracy is critical, common challenges practices face, and proven solutions to help you improve your bottom line—starting today.

Most Common Medical Billing Errors

Most Common Medical Billing Errors

Why Accurate Medical Billing Services Matter

Keep Revenue Flowing Smoothly

Accurate medical billing ensures you’re paid correctly and on time. Delays caused by errors can choke your cash flow, which is especially dangerous for small, privately run healthcare offices.

Example:
According to the Medical Group Management Association (MGMA), practices that adopt accurate billing systems see up to 10% revenue growth annually by reducing claim denials and improving collections.

Avoid Compliance Pitfalls

Medical billing errors can expose your practice to serious compliance risks. HIPAA violations, incorrect coding, and mismanagement of patient data can lead to audits, fines, and legal trouble.

Quick Tip: Regular coding updates and software that flags compliance issues can keep your practice safe.

Common Billing Challenges in Small Practices

1. Inadequate Coding Knowledge

ICD-10, CPT, HCPCS… billing codes are complex. Without proper training or tools, errors are easy to make and hard to spot.

2. Limited Staff & Overload

Many small offices rely on one or two employees for billing. When those individuals are overworked or out sick, the entire system suffers.

3. Manual Billing Systems

Still using spreadsheets or outdated systems? Manual entry increases the risk of human error and slows reimbursement timelines.

Job Cost Drift- The Hidden Risk Of No Real-Time Tracking

Job Cost Drift- The Hidden Risk Of No Real-Time Tracking

How to Improve Billing Accuracy in Small Practices

Use the Right Medical Billing Software

Switching to cloud-based, healthcare-specific platforms like Kareo, DrChrono, or AdvancedMD streamlines claim submissions, reduces data entry errors, and allows easy tracking of payment statuses.

Key Features to Look For:

  • Real-time eligibility checks

  • EHR integration

  • Auto-coding suggestions

  • Alerts for missing information

Conduct Routine Billing Audits

Implement monthly internal reviews to catch discrepancies early. Auditing claims before submission helps ensure accuracy, improves cash flow, and lowers denial rates.

🛠️ Pro Tip: Use checklist templates to standardize your audits and assign staff accountability.

Should You Outsource Your Medical Billing?

Outsourcing your billing can be a cost-effective way to access expertise without expanding your staff. It also frees your internal team to focus on patient care.

Feature In-House Billing Outsourced Billing
Control Over Process ✅ ⚠️ (depends on provider)
Coding Accuracy ⚠️ (staff dependent) ✅ (certified experts)
Time Savings ⚠️ ✅
Cost Efficiency ⚠️ (hiring/training costs) ✅ (flat rate or % model)

Learn how TMD Accounting supports healthcare billing in South Jersey

Real-Life Results: A Case Study from Gloucester County

A pediatric clinic in Sewell was experiencing delayed reimbursements and patient billing complaints. After switching to a cloud-based billing service and partnering with a local accountant, they:

  • Reduced claim rejections by 37%

  • Improved monthly cash flow by 21%

  • Received patient praise for clearer bills

Quote from Office Manager:
“We didn’t realize how much revenue we were leaving on the table until we audited our billing practices. Partnering with a local expert made all the difference.”

Conclusion: Get Paid. Stay Compliant. Grow Stronger.

Billing may be back-office work, but its impact is front-and-center in your practice’s success. From revenue to reputation, accurate medical billing services support every part of your business.

Want to improve billing accuracy and protect your bottom line?
Contact TMD Accounting today for expert, healthcare-specific billing support right here in South Jersey.

How Contractors Can Prevent Job Cost Overruns with Better Accounting Practices

How Contractors Can Prevent Job Cost Overruns with Better Accounting Practices

Contractors

Introduction

You wrapped up the project. The customer is thrilled. But when you review the numbers, something doesn’t add up. Despite what looked like a profitable job on paper, your margins have vanished—or worse, you’ve dipped into the red.

If this has happened to you, you’re not alone. Job cost overruns are one of the biggest threats to profitability for small contractors. From surprise material hikes to labor inefficiencies and untracked change orders, the culprits are often preventable.

In this article, we’ll explore how better accounting practices can help contractors prevent job cost overruns, with practical tips tailored to construction businesses right here in South Jersey. Whether you’re a general contractor in Glassboro or a specialty trade in Deptford, it’s time to protect your profits.

Understanding Job Cost Overruns in Construction

What Is a Job Cost Overrun?

Simply put, a job cost overrun happens when the actual cost of a project exceeds the estimated or budgeted cost. It’s the gap between what you planned to spend and what you actually spent.

Here’s how it often shows up:

  • You estimated $50,000 for materials, labor, and overhead.
  • At completion, the final tally is $58,000.
  • That $8,000 difference? That’s your overrun—and your profit just took the hit.

The High Cost of Not Knowing

The real danger isn’t just the overrun—it’s not knowing it’s happening until the job is over. Without real-time tracking, you might not spot small problems (like a labor cost creep or extra material orders) until they snowball.

Job Cost Drift- The Hidden Risk Of No Real-Time Tracking

Job Cost Drift- The Hidden Risk Of No Real-Time Tracking

Common Causes of Job Cost Overruns

Inaccurate Bidding or Estimating

It all starts at the bid. If you’re using outdated pricing or “gut feelings” to create quotes, you’re building on shaky ground.

Fix it:

  • Use historical job data to refine estimates.
  • Update your labor and material rates regularly.

Poor Change Order Management

How many times have you done extra work without an approved change order? If it’s more than once, you’re leaking revenue.

Fix it:

  • Require written approvals for all scope changes.
  • Tie change orders to updated budgets and invoicing.

Inefficient Labor Tracking

Labor is often your biggest expense—and your biggest variable. Without proper tracking, it’s easy to underestimate costs.

Fix it:

  • Use time-tracking tools like ClockShark or TSheets.
  • Compare planned hours vs. actual hours weekly.

Material Overages and Waste

Whether due to overordering, theft, or breakage, untracked material costs add up quickly.

Fix it:

  • Assign a material budget per project phase.
  • Require sign-off for unplanned material purchases.
Pie chart showing a breakdown of typical cost overrun contributors (e.g., labor 40%, materials 30%, change orders 20%, other 10%)

Pie chart showing a breakdown of typical cost overrun contributors (e.g., labor 40%, materials 30%, change orders 20%, other 10%)

How Better Accounting Practices Help

Implementing Project-Based Job Costing

Job costing means assigning every dollar spent to a specific project or job. But it’s not enough to just track it at a high level—you need to break it down.

Track by:

  • Labor (hours, crew rates)
  • Materials (by phase)
  • Subcontractors
  • Equipment usage
  • Overhead allocation

Using Real-Time Financial Reporting

You can’t fix what you don’t see. Monthly reports are too late—issues need to be caught mid-project.

Tools to help:

  • QuickBooks Online with construction add-ons
  • Knowify or Buildertrend for integrated job costing dashboards

📍 Explore our Bookkeeping and Accounting Services for Contractors

 

Managing Change Orders with Accounting Software

Modern construction software lets you:

  • Generate change orders from the field
  • Get digital approvals
  • Update project budgets automatically

Bonus: Apps like Procore and Joist offer mobile tools for real-time updates.

Tools That Improve Job Cost Accuracy

Construction-Focused Accounting Software

Recommended platforms:

  • QuickBooks + Knowify: Great for small to mid-sized contractors
  • Buildertrend: Full project management suite
  • CoConstruct: Designed for custom builders

Integration with Payroll and Invoicing

One of the best ways to prevent overruns is syncing your:

  • Time tracking
  • Payroll
  • Job budgets
  • Client billing

This ensures you’re billing for all labor and materials accurately—and paying your team accordingly.

 

Top Accounting Tools for Small Contractors
Tool Job Costing Payroll Integration Mobile Access Change Order Automation
QuickBooks + Knowify ✓ ✓ ✓ ✓
Buildertrend ✓ ✓ ✓ ✓
CoConstruct ✓ ✓ ✓ ✓

Setting Up Internal Controls and Reviews

Weekly Job Cost Reviews

Get your team together once a week to compare:

  • Estimated vs. actual labor hours
  • Materials used vs. budget
  • Any pending or approved change orders

Why it matters: Catching a $500 variance in Week 2 is better than finding a $5,000 overrun at project close.

Approval Processes for Expenses and Changes

Put guardrails in place:

  • Require supervisor approval for any off-budget spending
  • Track change orders in writing and attach to project budgets

✅ Pro tip: Digitize these processes to keep records clean and accessible.

Partnering with an Expert Construction Accountant

Why Industry-Specific Knowledge Matters

A general accountant might miss things like:

  • Job phase costing
  • Tax deductions for contractor equipment
  • NJ-specific labor compliance

Work with someone who understands:

  • Seasonality of construction in South Jersey
  • Subcontractor payment regulations
  • How to prevent cost overruns before they happen

How TMD Accounting Supports NJ Contractors

At TMD, we help contractors:

📍 Contact TMD Accounting for Contractor Accounting Help

Conclusion: Protect Your Projects—and Your Profits

Job cost overruns can eat your profits and put your business at risk. But with the right tools, processes, and support, you can catch issues early and make smarter decisions.

Don’t wait until the end of a project to discover you’ve lost money. A construction-savvy accountant can help you set up systems that track your true costs in real time.

🎯 Ready to eliminate cost overruns and maximize your job profits?
 Schedule a free consultation with TMD Accounting and let’s protect your bottom line—one project at a time.

Inventory Management 101- Avoiding Common Mistakes for Retailers 2

Inventory Management 101: Avoiding Common Mistakes for Retailers

Bookkeeping, Small Business, Uncategorized

Introduction

Have you ever been in the middle of a busy sales day only to realize you’re out of a best-selling product? Or maybe you’ve walked into your storage room and wondered why half the shelves are stocked with items that haven’t moved in months.

If you’re a small retailer, these moments aren’t just frustrating—they’re expensive. Poor inventory practices can choke your cash flow, upset loyal customers, and quietly chip away at your profits. But here’s the good news: most inventory management mistakes are fixable with the right approach.

In this article, we’ll walk you through the most common errors retailers make with inventory—and show you how to avoid them with smarter systems and practical strategies that work for real stores here in South Jersey and beyond.

Inventory Management 101: Avoiding Common Mistakes for Retailers

Inventory Management 101: Avoiding Common Mistakes for Retailers

Why Inventory Management Is Critical for Retailers

The Link Between Inventory and Profitability

Inventory isn’t just stock—it’s money on your shelves. When you buy too much, you tie up cash in unsold products. When you stock too little, you miss out on sales.

According to the National Retail Federation, inventory inaccuracies cost retailers nearly $1.1 trillion globally each year, with shrinkage, overstocking, and stockouts all playing a role.

Key risks of poor inventory:

  • Overstocking: Excess inventory increases storage costs and the risk of obsolescence
  • Understocking: Leads to lost sales and unhappy customers
  • Shrinkage: Theft, damage, or miscounting erodes profits

The Role of Inventory in Customer Experience

Today’s shoppers expect a seamless experience. If your shelves—or online catalog—don’t match real-time availability, customers may walk out or click elsewhere.

Maintaining accurate stock levels helps:

  • Build trust with customers
  • Deliver consistent service
  • Keep your sales floor (or website) lean and efficient
A bar graph comparing average profit margins with and without inventory errors.png

A bar graph comparing average profit margins with and without inventory errors.png

Common Inventory Management Mistakes Retailers Make

No Real-Time Tracking System

Many small retailers still use spreadsheets or even pen and paper to track inventory. While that might work when you’re starting out, it quickly becomes unsustainable.

Why it hurts:

  • Inventory isn’t updated as sales happen
  • Discrepancies build up unnoticed
  • Reordering becomes guesswork

Solution: Use a POS-integrated inventory management system like Square for Retail, Shopify POS, or Lightspeed.

Poor Forecasting

Guessing how much inventory you need—especially during busy seasons—can be a recipe for disaster.

Mistakes include:

  • Not using sales data to inform buying
  • Ignoring trends or local seasonality (think: beach gear in summer, coats in winter)

Fix it:

  • Review sales history regularly
  • Track seasonal buying patterns specific to your area (like holiday shopping trends in Gloucester County)

Ignoring Dead Stock

Dead stock = inventory that doesn’t sell. It just sits there, gathering dust and draining your working capital.

What to do:

  • Identify items that haven’t sold in 90+ days
  • Mark them down or bundle with faster-moving items
  • Avoid restocking similar slow movers

Lack of Inventory Audits

No matter how advanced your software, errors happen. Without regular audits, those small errors snowball.

Recommendation:

  • Conduct cycle counts weekly (a few SKUs at a time)
  • Do a full physical inventory at least once a year
A pie chart illustrating common causes of inventory shrinkage in retail-

A pie chart illustrating common causes of inventory shrinkage in retail-

Best Practices to Improve Inventory Management

Use an Inventory Management System (IMS)

A solid IMS can save you time and money. Look for features like:

  • Real-time syncing with your sales system
  • Low-stock alerts
  • Barcode scanning
  • Automated reorder points
  • Top tools for small retailers:
  • Square for Retail
  • Shopify POS
  • Zoho Inventory

Implement ABC Analysis

ABC analysis is a method of categorizing products based on their value and importance:

  • A-items: High-value, fast-moving
  • B-items: Moderate value and turnover
  • C-items: Low value or infrequent sales

How it helps:

  • Focus audits and resources on high-impact products
  • Optimize ordering for each category
A retail ABC inventory matrix showing three quadrants

A retail ABC inventory matrix showing three quadrants

Analyze Sales and Seasonal Trends

Local trends matter. A store in Sewell, NJ might see different buying patterns than one in Cherry Hill.

Tips:

  • Look at 12-month rolling sales data
  • Prepare for seasonal shifts (e.g., prom season, back-to-school)
  • Monitor regional events (e.g., local festivals, sports playoffs)

Conduct Regular Inventory Audits

Create a routine for:

  • Weekly cycle counts
  • Quarterly audit of top-selling items
  • Annual full-store inventory

📌 Retail Accounting Services from TMD Accounting

How Accounting Supports Better Inventory Control

Tying Inventory to Your Financials

Good inventory records support accurate:

  • Cost of Goods Sold (COGS) calculations
  • Profit margins
  • Cash flow forecasts

Poor records = wrong tax filings, budgeting errors, and lost insight into what’s working.

Tax and Compliance Benefits

Tracking inventory helps you:

How TMD Accounting Helps Retailers

We help businesses:

  • Set up and track inventory costs in your accounting system
  • Monitor margins by product or category
  • Connect sales, stock, and cash flow for better decision-making

📍Contact TMD Accounting for Inventory Help

Conclusion: Take Control of Your Inventory—and Your Profits

Inventory management isn’t just about what’s on your shelves—it’s about controlling your cash, delighting your customers, and growing your business with confidence.

By avoiding common mistakes and putting better systems in place, you can transform inventory from a headache into a strategic advantage.

🎯 Want help aligning your inventory with your financials?
 Schedule a consultation with TMD Accounting and let’s clean up your inventory—and boost your bottom line.

Why Medical Practices Struggle with Cash Flow and How to Fix It

Why Medical Practices Struggle with Cash Flow and How to Fix It

Medical Practices

Introduction

You’ve got a fully booked calendar, dedicated staff, and a waiting room filled with patients. So why does your practice’s bank account still feel… empty?

If you’re running a medical practice in South Jersey or anywhere across New Jersey, chances are you’ve felt this disconnect: working hard without seeing consistent financial results. You’re not alone. Many providers deliver excellent care but face ongoing challenges when it comes to managing their medical practice cash flow.

In this guide, we’ll unpack why cash flow issues are so common in healthcare—and more importantly, how to fix them. With the right systems, insights, and support, your practice can become financially healthy without sacrificing patient care.

The Unique Cash Flow Challenges of Medical Practices

The Unique Cash Flow Challenges of Medical Practices

The Unique Cash Flow Challenges of Medical Practices

Delay Between Service and Payment

Unlike most industries, medical practices don’t get paid at the point of sale. Insurance claims can take 30, 60, or even 90 days to process—and that’s if everything is coded and submitted correctly. Add in patient co-pays, high-deductible plans, or uncollected balances, and cash flow becomes a waiting game.

High Overhead and Fixed Costs

Every day your doors are open, you’re incurring costs: salaries, rent, utilities, equipment leases, and malpractice insurance. These costs don’t pause when reimbursements are delayed or appointments cancel.

The challenge? Your expenses are immediate, but your income is delayed.

Inefficient Billing and Collections

Many small practices rely on outdated or manual billing systems. Denied claims may go unnoticed. Patient balances may fall through the cracks. Without strong follow-up processes, you’re leaving money on the table.

Common Cash Flow Mistakes in Healthcare

Poor Revenue Cycle Management (RCM)

Revenue cycle management isn’t just about billing—it’s everything from insurance verification to collections. And when any link in that chain breaks, so does your cash flow.

Common RCM pitfalls:

  • Staff not verifying coverage at check-in
  • Coding errors that delay claim approvals
  • No system for following up on denied claims

Not Tracking KPIs Like Days in A/R

Days in accounts receivable (A/R) is a crucial cash flow metric. It tells you how long it takes, on average, to get paid. If your number is over 40–50 days, you’re likely experiencing cash flow stress.

Other key KPIs to monitor:

  • Net collection rate
  • First-pass resolution rate
  • Patient no-show rate
Dashboard mock-up with KPI metrics

Dashboard mock-up with KPI metrics

Lack of Budgeting and Forecasting

If you’re not projecting your income and expenses quarterly, you’re flying blind. Without forecasting, it’s hard to prepare for:

  • Slow seasons (e.g., holidays)
  • Large purchases (e.g., equipment upgrades)
  • Staffing needs or unexpected changes

How to Improve Cash Flow in Your Medical Practice

Streamline the Billing Process

Automate wherever possible. Integrated billing tools within your Electronic Health Record (EHR) system can help ensure accuracy and speed.

Steps to improve billing:

  • Use eligibility verification tools before appointments
  • Automate charge capture and coding
  • Implement real-time claim edits to reduce denials

Offer Clear and Flexible Patient Payment Options

Patients today expect convenience. Offering flexible payment options increases the likelihood you’ll collect balances sooner.

Ideas to try:

  • Secure card-on-file systems
  • Online payment portals
  • Payment plans for high deductibles

Monitor Financial KPIs Monthly

Create a dashboard or spreadsheet to track cash flow-related KPIs, such as:

  • Days in A/R
  • Net collections
  • Unpaid patient balances
  • Average revenue per visit

Bonus: Share insights with your staff—especially front desk and billing teams—to build accountability and improvement.

Forecast Cash Flow Quarterly

Use simple cash flow models to estimate:

  • Incoming reimbursements
  • Outgoing expenses
  • Gaps where you may need financing or payment adjustments

Accounting for Small Healthcare Practices

Partnering with Financial Experts Who Understand Healthcare

Why a Healthcare-Focused Accountant Matters

General accountants may not understand CPT codes, denial trends, or Medicare compliance—but a specialized healthcare accountant does. They can:

  • Set up cash flow-friendly systems
  • Advise on tax deductions for medical equipment
  • Identify profit leaks in operations
How TMD Accounting Supports Medical Practices in South Jersey

How TMD Accounting Supports Medical Practices in South Jersey

How TMD Accounting Supports Medical Practices in South Jersey

We help practices across Gloucester County and beyond:

  • Forecast and stabilize cash flow
  • Track patient revenue vs. insurance collections
  • Align bookkeeping with compliance and growth goals

📍 Internal Link: Contact TMD Accounting for Healthcare Cash Flow Help

Conclusion: Turn the Financial Health of Your Practice Around

Cash flow challenges can feel overwhelming—but they’re fixable. With the right technology, consistent tracking, and the guidance of a healthcare-savvy accountant, your practice can finally enjoy financial peace of mind.

Imagine being able to pay staff, invest in new equipment, and grow your patient base—without constantly watching your bank account. That future is possible.

🎯 Ready to boost the financial health of your practice?
 Schedule a consultation with TMD Accounting and discover how we can help your New Jersey healthcare business thrive.

A business accountant calculating payroll taxes for a small business in New Jersey.

Payroll Taxes in New Jersey: What Small Businesses Need to Know

Payroll

New Jersey’s payroll tax system is multifaceted, requiring employers to manage both state and federal obligations. Missing deadlines or incorrect filings can result in hefty fines.

New Jersey State Payroll Taxes

Small business owners in New Jersey are responsible for several state-specific payroll taxes, including:

  • Unemployment Insurance (UI): A mandatory tax that funds unemployment benefits for workers.
  • Temporary Disability Insurance (TDI): Provides income for employees unable to work due to non-work-related injuries or illnesses.
  • Family Leave Insurance (FLI): Covers employees taking leave to care for a family member.

These taxes are calculated as a percentage of employees’ wages, and the rates can vary depending on your business size and industry.

  • Real-Life Example: One of our longtime clients, Gugel Painting LLC, relies on TMD Accounting to ensure payroll taxes are accurate and submitted on time. They’ve shared how much time and stress our support saves them.

Visit the New Jersey Department of Labor’s Employer Handbook for additional payroll tax details.

 

Comparison Table of Payroll Requirements in New Jersey

Category
Requirement in New Jersey
Special Considerations
Minimum Wage (2025)
 $15 per hour for most workers Small businesses with <6 employees may have slightly lower rates
Tipped Employees Minimum Wage
 Employers must ensure tips + base pay meet $15/hour Employers may need to top up wages if tips don’t meet the minimum
Overtime Pay
 Time-and-a-half for hours worked over 40 in a workweek Certain salaried workers are exempt (e.g., executive roles)
Unemployment Insurance (UI)
 Mandatory for all employers; rate varies based on industry and size Rates and reporting schedules vary based on business type
Temporary Disability Insurance (TDI)
 Covers employee income during non-work-related injuries/illnesses Employers and employees both contribute to TDI taxes
Family Leave Insurance (FLI)
 Covers leave for employees caring for a family member Employers are required to withhold contributions from employees

 

Federal Payroll Taxes and Compliance

Federal payroll taxes include Social Security, Medicare, and federal unemployment taxes (FUTA). Ensuring accurate coordination between federal and state taxes is crucial for avoiding discrepancies.

  • Client Highlight: Phil, one of TMD Accounting’s team members, frequently helps small business owners reconcile their federal and state filings, ensuring every dollar is accounted for.

 

Complying with New Jersey’s Wage Theft Prevention Laws

New Jersey has stringent wage theft laws that protect employees from unpaid wages and improper deductions. The Wage Theft Act also increases penalties for non-compliance, making it essential for employers to maintain accurate records and pay employees correctly.

Required Pay Stub Information

New Jersey employers are required to provide detailed pay stubs that include:

  • Gross and net wages
  • Hours worked
  • Pay rate
  • Deductions
  • Example: At TMD Accounting, we’ve helped several South Jersey businesses implement payroll software that automates pay stub generation, ensuring compliance and saving time.
How to Avoid Payroll Mistakes

How to Avoid Payroll Mistakes

Avoiding Common Payroll Mistakes in New Jersey

Even small errors in payroll can result in costly consequences for businesses. Here are two frequent issues we’ve seen in our years of service:

Misclassifying Employees

Misclassifying employees as independent contractors is one of the most common payroll mistakes. The New Jersey Department of Labor has strict guidelines on employee classification, and violations can lead to back taxes and penalties.

  • Client Case Study: One local business owner came to TMD after facing fines for improperly classifying employees. With our guidance, they corrected their classifications and set up proper payroll processes to avoid future issues.

Missing Payroll Tax Deadlines

Late payroll tax payments can lead to significant fines. TMD Accounting works with clients to implement automated systems that ensure timely submissions.

External Link Opportunity: The IRS Payroll Tax Calendar is a helpful tool for tracking federal deadlines.

Simplifying Payroll Compliance: TMD Accounting’s Approach

At TMD Accounting, we know how overwhelming payroll compliance can be for small business owners. Here’s how we help make the process easier:

Leverage Technology

We recommend payroll software like QuickBooks, Gusto, or ADP to automate calculations, generate pay stubs, and ensure tax compliance.

Partner with a Local Accounting Expert

Having an experienced accountant by your side can make all the difference. At TMD Accounting, we’ve spent over 20 years helping businesses in Gloucester County and beyond streamline their payroll processes.

  • From Our Clients: “Phil is great. He has been taking care of my business since day one. Very professional and prompt,” says Tim Mater, a satisfied small business owner.

FAQs About Payroll Laws in New Jersey

  • What is the minimum wage for tipped employees in New Jersey? Employers must ensure that combined tips and base wages meet the state’s minimum wage requirement.
  • Do small businesses need to pay Family Leave Insurance? Yes, all New Jersey employers are required to contribute to FLI.
  • What happens if I file payroll taxes late? Late filings can result in fines and interest on unpaid amounts. Automated systems can help you avoid missing deadlines.

Conclusion: Let TMD Accounting Help You Navigate Payroll Laws

Staying compliant with New Jersey’s payroll laws is a critical part of running a successful business. From understanding wage requirements to managing taxes and avoiding common mistakes, having the right tools and expert guidance can make all the difference. At TMD Accounting, we pride ourselves on making payroll easy and stress-free for South Jersey businesses.

Contact TMD Accounting today for a free consultation and discover how we can help simplify your payroll and accounting needs.

The Ultimate Guide to Bookkeeping for South Jersey Contractors: Save Time and Avoid Costly Mistakes

The Ultimate Guide to Bookkeeping for South Jersey Contractors: Save Time and Avoid Costly Mistakes

Accounting, Bookkeeping, Small Business

Independent Contractor Bookkeeping: Save Time, Reduce Stress, and Maximize Profits

Introduction

Are you an independent contractor struggling to manage your finances? You’re not alone. Many independent contractors face the same challenge of balancing their work with the demands of bookkeeping. When you’re managing your projects, the last thing you want to worry about is the headache of taxes, receipts, and expense tracking.

At TMD Accounting, we specialize in bookkeeping for independent contractors, offering solutions that help you save time, reduce stress, and most importantly, maximize your profits. By streamlining your financial processes and avoiding costly mistakes, you can focus on what you do best—running your business.

The Importance of Bookkeeping for Independent Contractors

The Importance of Bookkeeping for Independent Contractors

 

  1. The Importance of Bookkeeping for Independent Contractors

Effective bookkeeping is crucial for independent contractors. Not only does it help keep your finances in order, but it also ensures that you’re making the most of your tax deductions and staying compliant with tax laws.

Why is it essential?

  • Track income and expenses easily: Proper bookkeeping helps you keep an accurate record of what you’re earning and spending, ensuring that you never lose track of billable hours, expenses, or tax-deductible purchases.
  • Maximize your tax deductions: Contractors have a variety of deductible expenses, such as home office costs, vehicle expenses, tools, and more. Organized bookkeeping ensures you don’t miss these deductions and lose money.
  • Stay compliant with tax laws: Avoid late fees and penalties by keeping your financial records up to date and ready for tax season.

Pro Tip: Set aside time each week to review your finances, categorize expenses, and keep track of your income. Consider using bookkeeping software designed specifically for contractors to streamline this process.

  1. Common Bookkeeping Mistakes Independent Contractors Should Avoid

Many independent contractors make costly mistakes in their bookkeeping that can lead to financial trouble down the road. The good news? These mistakes are entirely preventable with the right strategies in place.

Here are the most common mistakes:

  • Mixing personal and business finances: This is one of the most common errors independent contractors make. Always keep your personal and business expenses separate by opening a dedicated business account and using it for all work-related transactions.
  • Not tracking mileage and travel expenses: Contractors often forget to track the miles they travel for work, losing out on valuable deductions. Use a mileage tracker app to record all travel for business purposes.
  • Failing to set aside money for taxes: It can be tempting to spend all of your earnings, but independent contractors must pay self-employment taxes. Set aside 25-30% of your income each month to cover your tax obligations.

Case Study: One independent contractor we worked with was able to save over $5,000 in taxes simply by tracking mileage and separating business expenses from personal ones.

  1. How Bookkeeping Can Save You Time and Money

Good bookkeeping doesn’t just help you avoid mistakes—it can also save you significant time and money. By staying organized and using the right tools, independent contractors can reduce the hours spent managing finances and increase their profitability.

Here’s how it helps:

  • Automated invoicing and payment tracking: Using bookkeeping software can automate invoicing, track payments, and even send reminders to clients, ensuring you’re paid on time without chasing down unpaid invoices.
  • Organized expense tracking: Keeping digital records of your receipts and expenses means you’ll always have the documentation you need for tax season. This can save hours of sorting through paperwork at the end of the year.
  • Accurate profit and loss reports: Knowing exactly how much you’re earning and spending helps you make better financial decisions, whether it’s investing in new tools, hiring help, or saving for taxes.

Pro Tip: Invest in contractor-friendly bookkeeping software that automates time-consuming tasks like invoicing, payment tracking, and expense categorization.

  1. Top Bookkeeping Tools for Independent Contractors

The right bookkeeping tools can make all the difference. While you can manage bookkeeping manually, investing in the right software can save you time, reduce errors, and streamline your financial processes.

Here are the top tools we recommend:

  • QuickBooks Self-Employed: Ideal for independent contractors, this tool helps you track mileage, manage receipts, and calculate quarterly tax estimates.
  • FreshBooks: Great for invoicing, FreshBooks allows you to send professional invoices, accept payments, and track expenses effortlessly.
  • Wave Accounting: A free solution that offers powerful bookkeeping features, including receipt scanning, invoicing, and accounting reports.

Pro Tip: Choose a bookkeeping tool that integrates with your bank accounts to automatically import transactions and keep your books up to date with minimal effort.

  1. The Benefits of Professional Bookkeeping Services

While many independent contractors handle their bookkeeping themselves, there are significant advantages to outsourcing to a professional bookkeeper.

Why hire a professional?

  • Save time and reduce stress: Instead of spending hours managing your books, let a professional handle the financial side while you focus on growing your business.
  • Avoid costly mistakes: Professional bookkeepers know the ins and outs of tax regulations and can help you avoid the common pitfalls that lead to audits, penalties, and lost deductions.
  • Tailored advice for contractors: A bookkeeper who understands the specific needs of independent contractors can provide personalized advice to help you maximize your deductions and minimize your tax burden.

Case Study: One South Jersey contractor who hired TMD Accounting saved over 15% in taxes and significantly reduced their stress by having a professional manage their books.

Conclusion

Bookkeeping doesn’t have to be a headache for independent contractors. By implementing smart bookkeeping strategies and using the right tools, you can save time, avoid costly mistakes, and maximize your profits. Whether you choose to manage your books yourself or hire a professional, it’s essential to stay organized and proactive.

Ready to simplify your bookkeeping and grow your business? Contact TMD Accounting today for a free consultation and learn how we can help you streamline your bookkeeping, reduce your tax burden, and take your contracting business to the next level.

Know a fellow contractor who could benefit from these tips? Share this article and help them avoid costly bookkeeping mistakes!

The Complete Guide to Accounting for Healthcare Practices in South Jersey

The Complete Guide to Accounting for Healthcare Practices in South Jersey

Accounting, Bookkeeping, Small Business

Did you know that 70% of healthcare practices lose money due to inefficient financial management? Is your practice one of them? Managing a healthcare practice is challenging enough without the added burden of complex accounting issues that pull your attention away from patient care.

At TMD Accounting, we’ve helped healthcare practices across South Jersey streamline their finances, reduce errors, and improve profitability. In this comprehensive guide, we’ll explore the unique accounting challenges faced by healthcare providers and how you can overcome them to focus on what matters most—delivering exceptional care.

Why Healthcare Accounting Is Unique

Why Healthcare Accounting Is Unique

Why Healthcare Accounting Is Unique

Healthcare accounting is more complex than typical business accounting due to the industry’s unique financial challenges. These include:

  • Complex Reimbursement Systems: Healthcare providers often deal with multiple payers—patients, insurance companies, and government programs like Medicare and Medicaid. This complexity makes billing and reimbursements more challenging to track.
  • Strict Regulatory Requirements: Healthcare practices must comply with numerous financial regulations, including HIPAA and insurance reimbursement rules. Non-compliance can result in audits, penalties, or worse, legal action.

Because of these challenges, healthcare providers need specialized accounting practices that go beyond simple bookkeeping. Efficient accounting helps practices remain compliant, improve cash flow, and avoid costly mistakes.

Common Accounting Challenges for Healthcare Practices

  1. Medical Billing and Reimbursement Errors
    Incorrect billing codes, late submissions, or missing claims can result in delayed or denied payments. In fact, up to 30% of healthcare claims are initially denied, causing significant cash flow issues for practices. Addressing these issues requires a streamlined billing system that reduces errors and speeds up payment collection.
  2. Managing Healthcare Payroll
    Payroll for healthcare providers is complicated by varying pay rates, overtime, and shift differentials. Incorrectly calculated payrolls can lead to legal issues, disgruntled employees, and high staff turnover rates. An organized payroll system ensures employees are paid correctly and on time, reducing turnover and legal risks.
  3. Tracking and Reporting Business Expenses
    Healthcare practices often struggle to manage operational expenses such as medical supplies, utilities, and rent. Without accurate tracking, it becomes difficult to control costs and plan for future financial needs. Proper expense management allows practices to cut unnecessary costs and improve their bottom line.
  4. Regulatory Compliance
    Staying compliant with healthcare regulations is a must. From HIPAA to IRS rules on medical expense deductions, practices must stay up-to-date with ever-changing regulations. Non-compliance can lead to audits and penalties, which can damage both the financial health and reputation of a practice.

Essential Financial Reports Every Healthcare Practice Needs

To stay financially healthy, healthcare practices should regularly review these key financial reports:

  1. Profit and Loss (P&L) Statement
    A P&L statement shows your practice’s revenues and expenses over a specific period, providing a clear view of your profitability. Tracking profitability helps identify where your practice is overspending and what areas are generating the most revenue.

Pro Tip: Review your P&L statement quarterly to make timely financial adjustments.

  1. Cash Flow Statement
    Cash flow is critical to ensuring that your practice can cover expenses. A cash flow statement tracks how much money is coming into your practice versus how much is going out. Consistent cash flow monitoring prevents shortfalls and helps you plan for future expenses.
  2. Balance Sheet
    The balance sheet is a snapshot of your practice’s financial position at any given moment, showing assets, liabilities, and equity. It’s a crucial tool for evaluating the financial stability of your practice.
  3. Aging Accounts Receivable (A/R) Report
    An aging A/R report tracks outstanding patient and insurance payments. Healthcare practices often struggle with overdue accounts, but regular monitoring of A/R helps ensure timely collection of payments and maintains steady cash flow.

Did you know? Healthcare practices lose an average of $125,000 annually due to uncollected A/R. Keeping a close eye on these payments is critical to minimizing revenue loss.

The Role of Technology in Healthcare Accounting

Technology is a game-changer in healthcare accounting. Practices that embrace accounting software and automation see improvements in efficiency, compliance, and financial accuracy.

  1. Automated Billing and Payment Systems
    By automating billing, practices can reduce human error and ensure timely payment collection. Automated systems also allow real-time tracking of insurance reimbursements and patient payments, improving cash flow and reducing administrative workloads.
  2. Payroll Management Software
    Healthcare payroll systems need to handle complex structures, including overtime and shift differentials. Payroll management software reduces the risk of errors and ensures accurate, timely payments to staff, boosting morale and minimizing the risk of payroll-related disputes.
  3. Cloud-Based Accounting Solutions
    Cloud-based accounting platforms give healthcare providers secure, HIPAA-compliant access to their financial data from any location. These systems update in real time and allow for seamless collaboration between healthcare managers and accountants, improving financial transparency and decision-making.

How Professional Accounting Services Can Improve Your Bottom Line

Outsourcing your accounting to professionals who specialize in healthcare can significantly improve your practice’s financial health. Here’s how:

  1. Cost Savings and Efficiency
    Professional accountants can help identify inefficiencies in your billing and payroll systems that may be costing your practice money. For example, TMD Accounting helped a South Jersey healthcare provider reduce overhead by 15% by streamlining their billing and payroll processes.
  2. Risk Mitigation
    Accountants specializing in healthcare stay up-to-date with changing healthcare regulations and tax laws. They ensure your practice complies with these rules, minimizing the risk of audits and penalties.
  3. Time Savings
    Managing the financial side of a healthcare practice takes valuable time away from patient care. By outsourcing accounting, you can focus on your core mission—providing excellent care—while leaving the financial details to the experts.

Case Study: One South Jersey medical clinic partnered with TMD Accounting and saw a 20% increase in operational efficiency within six months by offloading their financial management to our team.

Conclusion

Better accounting practices lead to better financial outcomes for healthcare practices. Whether you need help managing payroll, improving cash flow, or staying compliant with regulations, working with a professional accountant can free up your time and improve your bottom line.

Ready to take control of your healthcare practice’s finances? Contact TMD Accounting today for a free consultation and learn how we can help you streamline your financial operations, improve compliance, and maximize profitability. Act now before the next billing cycle—start optimizing your practice today!

Why Is Self-Employment Tax So High? Common Deductions You Might Be Missing

Why Is Self-Employment Tax So High? Common Deductions You Might Be Missing

Accounting, Small Business, Tax Planning

If you’re self-employed, you’ve probably asked yourself, “Why is my self-employment tax so high?” Did you know that most self-employed individuals overpay their taxes by 10%? Unlike traditional employees, self-employed individuals are responsible for both the employer and employee portions of Social Security and Medicare taxes, which adds up to 15.3%. While that number can seem daunting, the good news is that you have opportunities to reduce your taxable income through deductions.

But here’s the catch: many self-employed individuals miss out on common business deductions that could significantly lower their tax bill.

In this guide, we’ll cover:

  • Why self-employment tax is high.
  • Common tax deductions for the self-employed.
  • How much you should set aside for taxes.
  • Frequently missed deductions that could save you money.

Why Is Self-Employment Tax So High?

Self-employed individuals pay both the employer and employee share of Social Security and Medicare taxes, which is why the total adds up to 15.3%. This tax covers essential benefits for retirement and medical care, but it can feel like a financial burden when you’re already managing the costs of running a business.

How to reduce your tax burden:
By leveraging business deductions, you can lower your taxable income. Every deduction you claim reduces the portion of your income subject to self-employment taxes, which in turn lowers the amount you owe. So, while you can’t avoid paying Social Security and Medicare taxes, you can reduce the amount that’s taxed.

Common Business Deductions for the Self-Employed

Reducing your taxable income is the best way to lower how much tax you pay as a self-employed individual. Here are some of the most common deductions that many freelancers and independent contractors forget about:

  • Home Office Deduction: If you use a portion of your home exclusively for business, you can deduct a portion of your mortgage, rent, utilities, and maintenance. Don’t overlook this valuable deduction!
  • Vehicle Expenses: If you use your car for business, you can deduct either the standard mileage rate or your actual vehicle expenses such as gas, maintenance, and insurance. Keeping a mileage log can maximize your deduction.
  • Health Insurance Premiums: Self-employed individuals can deduct health insurance premiums for themselves, their spouse, and dependents. This deduction is a huge win for reducing your tax bill.
  • Retirement Contributions: Contributing to a retirement plan like a SEP-IRA or Solo 401(k) can reduce your taxable income and help you save for the future. This is a double benefit: lowering your taxes now and securing your retirement.
How Much Should You Set Aside for Taxes?

How Much Should You Set Aside for Taxes?

How Much Should You Set Aside for Taxes?

A general rule of thumb for self-employed individuals is to set aside 25-30% of your income for taxes. This percentage accounts for federal income tax, self-employment tax, and any applicable state and local taxes. Setting aside this percentage ensures you have enough funds to cover your tax obligations at the end of the year or during quarterly estimated tax payments.

Why 25-30%?
Self-employment taxes alone account for 15.3%, and when you add income tax and other state or local taxes, it quickly adds up. By setting aside a portion of every payment you receive, you avoid the stress and financial strain of coming up short when tax time arrives.

Common Tax Deductions You Might Be Missing

Many self-employed individuals miss valuable deductions that could reduce their overall tax liability. Here are a few commonly overlooked deductions that you should be aware of:

  • Start-Up Costs: If you’ve recently launched your business, you can deduct up to $5,000 in start-up costs, including legal fees, marketing, and office supplies. Don’t miss this deduction in your first year.
  • Continuing Education: If you take courses or attend seminars to improve your skills or advance your career, these expenses are deductible. The IRS allows deductions for educational expenses that help you maintain or improve skills in your current business.
  • Phone and Internet Expenses: If you use your phone or internet for business purposes, a portion of these bills can be deducted. Be sure to keep accurate records to prove how much of your phone or internet is for business versus personal use.

The Consequences of Missing Deductions

Did you know that self-employed individuals often miss thousands of dollars in potential deductions every year? Missing deductions doesn’t just mean you pay more in taxes—it can also increase your risk of audits if your records don’t reflect actual business expenses.

Audits: Inaccurate tax filings or overlooking key deductions can increase your chances of getting flagged by the IRS for an audit. Even if you’re not in the wrong, the stress and time associated with an audit can be overwhelming.

Financial impact: Missing out on deductions means giving more money to the IRS than necessary. Deductions like home office expenses or retirement contributions can reduce your taxable income, which ultimately lowers how much you pay in taxes.

Take Control of Your Taxes

Don’t let high self-employment taxes catch you off guard. By understanding the deductions available to you and planning ahead, you can reduce your overall tax burden and keep more of your hard-earned income.

Ready to optimize your tax strategy? Contact TMD Accounting for a free consultation today and see how we can help you maximize your deductions and reduce your tax bill before the next tax season hits. Don’t wait—start saving today!

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