Accounting for consultants who run a business, not just a practice.
High-billing consultants are among the most under-served clients in accounting. Their revenue is strong, their expenses are largely deductible, and their tax situation has clear, legitimate optimization available. But most CPAs either don’t flag it or wait until it’s too late to act.
If you’re generating $150,000 or more in net income as a sole proprietor or single-member LLC, you’re almost certainly overpaying in self-employment tax. That’s not a loophole. It’s a structural decision you haven’t been advised to make.
The consultant’s financial profile.
Independent consultants and small consulting firms have a predictable financial structure.
Variable revenue.
Project work, retainers, and advisory engagements create income that isn’t evenly distributed. A strong Q1 and slow Q3 requires quarterly estimated tax adjustments a once-a-year CPA relationship misses.
Primarily 1099 income.
Most consulting revenue comes without withholding. The entire self-employment tax obligation falls on the owner. At $200,000 in net income, this is not a small number.
Significant deductible expenses.
Home office, vehicle, professional development, software, travel, health insurance premiums, retirement contributions. Many consultants have deduction opportunities they’re not capturing.
Retirement planning underutilized.
SEP-IRA and Solo 401(k) contributions can significantly reduce taxable income. Most high-income consultants aren’t maximizing these. Some aren’t using them at all.
The S-Corp opportunity.
This is the most financially impactful advisory conversation for most consultants billing $150,000 or more in net income.
As a sole proprietor or single-member LLC, every dollar of net income is subject to self-employment tax (15.3% up to the Social Security wage base, 2.9% above it). Under an S-Corp election, the owner pays a reasonable salary subject to payroll taxes and takes remaining income as a distribution not subject to self-employment tax.
At $150,000 in net income, the difference between the two structures can be meaningful. At $300,000, it is significant.
The tradeoff: S-Corp compliance adds cost. Payroll processing, Form 1120-S filing, reasonable salary documentation. We model the break-even at onboarding. For most consultants above $80,000-$100,000, the math favors the election. Below it, the added complexity often doesn’t pay off.
We run the numbers. We give you the answer. We handle the election and the ongoing compliance if the answer is yes.
Deductions consultants frequently miss.
Being specific matters. These are the deductions that appear most often when we review a consultant’s first-year books.
Home office.
The actual expense method produces a larger deduction than the simplified $5/sq ft method for most consultants with dedicated space. Requires proper documentation.
Vehicle.
Actual expense method (depreciation, insurance, fuel) or standard mileage rate. Business use documentation is the key requirement.
Health insurance premiums.
Self-employed consultants can deduct health insurance premiums for themselves and their family as an above-the-line deduction, not an itemized one.
Retirement contributions.
SEP-IRA allows up to 25% of net self-employment income. Solo 401(k) allows both employee and employer contributions with higher limits. Among the most powerful tools available to a high-income consultant.
Professional development and subscriptions.
Conferences, courses, certifications, software, and publications related to the consulting practice. Fully deductible.
Where we go deeper for consultants.
Tax planning and S-Corp analysis.
The self-employment tax conversation most CPAs aren’t having with their consultant clients.
Entity optimization.
If the S-Corp election makes sense, we handle the filing and the ongoing compliance.
Keep more of what you bill.
That’s the starting point.
One conversation to find out how much you could be keeping.