If tax season was a particularly uncomfortable (or excruciating) time for you, now is the moment to make some changes. Because if you wait until next year, you’ll be in the same place as you were this year.
Taxes don’t have to hurt, but all too often, they do.
So what’s a small biz owner to do?
The short and sweet answer is to plan ahead. It doesn’t require a ton of time and effort, but if you follow my suggestions, you’ll have an easy breezy tax time come 2018 (and beyond).
First, Shift Your Mindset:
Most tax advice centers around paying as little as possible, and while I’m all in favor of saving on taxes, they’re a reality of being successful in business.
Planning to pay them and doing so with a gratitude mindset (because you’re making money!) will reduce your suffering.
Second, Visit The Quarterly Tax Fairy:
You can adjust the amounts throughout the year if you’re working closely with a professional who can guide you on your projections and payments, but you definitely want to be making payments.
Staying on top of your estimates does two things.
One, it saves you from a whopper of a tax bill come April.
Two, it saves you from paying a penalty because you didn’t pay enough during the year.
Long story short, quarterly payments save you.
Third, Fully Fund Your Tax Account
Here’s how to ensure you have enough money set aside so you never have to sweat writing that check.
- Understand your tax rate. Look at your most recent tax return, what percent of revenue did you pay in taxes?
- Open a savings account and put that percent of revenue into the account each month, or week. Consistency is key here. (If you don’t know what percentage to use, Profit First recommends a standard tax reserve of 15% of gross profit to cover all business and personal taxes owed due to business profits/income.)
- Maintain your cashflow. If putting these funds into a savings account hurts your cash flow that means that you’re spending too much on other expenses. Look for opportunities to cut back on expenses so that you can fully fund your tax account.
- Build tax payments into all of your projections for your business— your cash flow, profit and loss, and balance sheet will all be affected by taxes.
But wait, there’s a silver lining.
If the amount in your tax account is MORE than you need to pay at the end of the year, those funds are part of your company’s year end profit and can be a bonus dividend for a savvy owner. It often happens when business’ prepare.
Fourth, Be Organized:
If you’re well organized and can easily pull the numbers together your bookkeeper, tax preparer, or accountant can do her work much more quickly and easily—which will save you time, money and stress!
However, I know not everyone gets along with numbers, and that’s okay. If these suggestions are sounding like a whirling dervish, I can help!
I’ll provide a painless check-up of your financials and bookkeeping (along with my personal recommendations for how to do/mange better and plan better). Just schedule a conversation with me to get started on your personal/business tax improvement plan.
In the meanwhile, prepare well and prosper, my friend.