If you’re running a business, this is true.
Taxes are an expense of your business, and must be accounted for.
If you make, for example, $70,000 gross this year, keep $50,000 of it, and forget you owe taxes on it you know what?
You’re in for a rude shock next April.
When I started this company several years ago, and pretty much ever since then…
…I couldn’t, and still can’t, help but marvel over the number of people that do just that.
Forget about taxes.
Until it’s too late.
Then, the reality of thousands of dollars of tax liability coming crashing in all at once occurs.
The sphincter slams shut; the stomach drops like an elevator with a broken cable.
Oh, shit. Now what?
Am I really going to have to wipe out my entire savings account for this?
If you’ve come this far with me, perhaps you’re one of our regular readers.
If you are, you know I have my perennial favorite topics.
Estimated Tax payments, and saving thousands of dollars on unnecessary Self-Employment taxes.
This is on purpose. My evangelistic mission is to spread the gospel of tax savings to the business-people of America.
You don’t have to overpay Social Security and Medicare.
The real biggie here though is, you DON’T HAVE TO WORRY ABOUT TAXES.
In fact, to go off on an esoteric tangent for a second, you should really never worry about anything, anyway.
It drains your energy, and pretty much amounts to praying for things you don’t want anyway.
So, knock that off!
To be clear though, even if you are the worry-wart type, you can just eliminate tax season stress and agitation from your life, forever.
How?
Pay-as-you-go.
First thing: the IRS actually says this in their code. Income taxes are a pay-as-you-go system.
Wage earners pay with every single pay event. The Fed makes your boss do it for you. All you have to do is keep an eye on your withholding, which you should do every quarter anyway. But most don’t, I get why.
Entrepreneurs, like me, like most of you that read this, have to find the self-discipline to pay 4 times a year.
On the 15th of April, June, September, and the following January. Every year.
Estimated Taxes, is what that’s called, and THAT’S why I jokingly (kind of) say that it’s always tax season for business people.
The joke came because I bop around town in performance polo shirts I buy in quantity with the company logo on them, and my GI doctor asked me this past Monday if I was an accountant.
When I admitted it (of course) he said, “You’ve got a deadline this week, don’t you?”
My reply, which bubbled up from some hidden place inside me, was, “It’s always tax season.”
Even though you have the confusing reality of having to make Estimated Tax payments as a personal expense, they do arise because you’re making non-wage money.
So, they’re a phenomenon of your business.
In fact, a lot of my people just pay them from business checking, and we book them as shareholder or owner draw.
Even though that’s not technically correct, it is a little bit easier to track in the long run.
Are you in your first year of business, and just starting to scale enough money to eat on?
Now is the best time of your life to address your bottom line, and plan for a good ES payment in January.
But, whether you’re a rookie or a seasoned veteran of a small business one thing is clear.
If you pay attention to your tax obligation year-round?
You’ll pay less, worry less and be happier AND freer next April.
It’s good common mathematical sense, but it’s also emotionally satisfying.
You budget for your house. For your business expenses.
Just never forget: taxes are inevitable, and they belong in your budget, too.
We make this easy for people all year, and it really is one of the top five things I love most about what I do.
Curious? Ask us how!