Every business expense reduces your taxable income, but only if you track it. Your truck, tools, materials, job site meals, home office space - it all adds up to real deductions. Get something simple like QuickBooks or even a spreadsheet. Take pictures of receipts with your phone. Track mileage between jobs. The IRS doesn't care about your system, just that you have one and can prove your expenses. Track it or lose it. Most contractors leave thousands on the table because they can't prove what they spent.

The IRS wants their money four times a year, not once. Miss this and you're paying penalties on top of your regular tax bill. Most people find this out when they get hit with a $2K penalty they didn't see coming. Set aside 30% of your profit every quarter and send it in. April, June, September, January. Mark it on your calendar or set up automatic payments. Either way, the government gets paid first or they'll take it with interest later. Use it or don't, but the rules don't change based on what you know.

Most contractors pick sole proprietor because it's simple. Fine, but you'll pay self-employment tax on every dollar of profit. LLC doesn't change your taxes unless you make an election. S-Corp can save thousands in self-employment tax if you're making decent money, but you need payroll setup and proper wage splits. Run the numbers first. For a contractor making $150K profit, the difference between sole prop and S-Corp is about $15K per year. Structure follows your income level, not what sounds good or what your buddy did. Do the math, then decide.

Mixing personal and business money creates problems. The IRS wants clean separation, and you can't write off expenses properly without it. Get a business checking account, use it only for business, keep personal stuff personal. Most banks will set one up for free if you ask. Your accountant will have an easier time, and audits go smoother when everything's separated. It's not complicated, just necessary. Do it or spend more time explaining transactions later. Your choice, but one path is easier than the other.

If you go the S-Corp route, you need proper payroll for yourself. Can't just take distributions - the IRS has rules about reasonable wages. Sweet spot is usually 40-60% of your profit as salary, rest as distributions. You'll need payroll software or a service to handle the filings and tax deposits. S-Corp without payroll gets IRS attention you don't want. Set it up right or pick a different structure. The savings only work when you follow the rules that come with them.

SEP-IRA or Solo 401k can reduce your tax bill while building your future. Contribute up to 25% of your income and it comes right off your taxable income. Make $100K, put away $25K, only pay taxes on $75K. Set one up through any major bank or investment company. You control the contributions and timing. Use it or don't, but it's one of the few legal ways to make income disappear for tax purposes. Most contractors ignore this and pay full freight on everything they make.

California has its own tax rules that don't always match federal. Different depreciation schedules, different deduction limits, different filing deadlines. You can't just copy your federal return. California wants their cut too, and they're not shy about collecting. File the right forms, make state estimated payments if needed, and keep up with their changing rules. Or hire someone who does. Either way, don't ignore Sacramento - they have longer reach than the IRS and collect more aggressively than most states.