Got this interesting question from someone who subscribes to my newsletter.
“Justin, What is the one financial thing that you would do right now if you were a business owner?”
Me: Oh Jeez. THE One thing? It’s so hard to come up with THE one thing to do right now, in mid December.
But…
For those of you who read about my Billie Jean singing debacle, I try to be as transparent as possible with you guys…
So… here I go…
THE one thing that I am dealing with right now – both for myself and with my one on one clients – and that’s … Ahem…tax planning.
I totally get that tax planning = pulling teeth = doing laundry = taking the trash out = standing in a long line!
But think about what goes into this stuff! It’s really all about how much money you are making! The key is to find out how much money you are making in your business. Then you have to pay some taxes on that. That’s really it. Capish?
If you don’t know how much money you are making in your biz, then… can I be real with you for a sec…? It’s going to be very hard for you to plan anything – like…
Can you take a vacation and afford it?
Are you on track for retirement?
Can you hire another employee?
Do you have the money to redo your website?
Should you raise your prices?
Yes, tax planning stinks. But it can stink up the joint even worse when your CPA tells you that you owe a shiz-ton of taxes in April. Like for example when you need to come up with $10,000 that you don’t have.
As a business owner, you need to have NINJA CLARITY to do this tax planning stuff.
Don’t worry. I am going to give you the paint by numbers action plan to become a NINJA TAX PLANNER.
Step 1: Get a bookkeeper. Don’t try to do this yourself. People that became million dollar entrepreneurs learned to delegate early in their careers. Go to elance.com. Poke around. Or call one of your friends and get a few referrals.
Step 2: Call your bookkeeper and get your profit loss (P&L) statement. Make sure the P&L is up to date, through November. Don’t have a bookkeeper? I can’t stress how important it is to be able to click a button and know how much money you are making (that’s a profit/loss statement).
Step 3: Find out what type of entity you are. Most business owners are either an S Corp or a Sole Proprietor. So let’s discuss those…
Step 4: If you’re an S Corp….
You need to make sure you are paying yourself a salary. Don’t worry – if you haven’t done this yet you can still do it before the end of the year. When you pay yourself a salary, there will be tax withholding which is what you are trying to do in the first place.
Ask your CPA to do a tax projection for you.
So… ask your CPA: Have I paid myself enough of a salary? Is my current tax withholding enough so that I wont owe more money in April? If it isn’t enough, you may need to make an estimated tax payment now.
Step 5: If you are a single member LLC or Sole Proprietor…
Get your profit/loss statement (from your amazing bookkeeper!) Make sure it is current through November. Give it to your CPA.
Have your CPA do a tax projection for you.
If you are going to owe money in April – ask your CPA if you can pay the state taxes now – you may be able to deduct this on your federal tax return. Make sure you get on an estimated tax payment plan for 2014.
Step 6: Still not sure what to do? Email me. I will personally answer every one of your questions, and try to get you on the right track. I just want to help you. No strings attached. Seriously. No upsell.
Disclaimer: This is not individual tax advice. Review your individual financial situation with your tax professional.
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