For a lot of business owners, one of the few times over the course of a year where they really plan for tax time is the middle of March, aka. the last possible moment.
Unfortunately, that’s pretty much the worst time to start thinking about taxes.
Well, it’s that time of year again! Is your business ready for tax season or are you about to drop off a box of receipts with your accountant and hope for the best?
When you do that, you’re making your tax professional more of a historian. Someone who looks back at what happened, but like a historian, there’s not much they can do other than show you what mistakes were made.
If you want to be proactive for 2022, you need to start thinking about tax planning now.
So, let’s take a step back for a moment.
As a contractor, no matter how many jobs you do or how much you make, you are a business.
This means that money flows in and out of your business in three basic ways:
- Gross income
These are the variables you need to be aware of when you’re planning your next 12 months.
Tax planning gives service business owners, like you, two powerful benefits you can’t get just anywhere.
First, it’s the key to your financial defense.
And for most of you reading this blog, taxes are your biggest expense. So it makes sense to focus your financial defense where you spend the most, which is the check you cut to Uncle Sam every year.
Second, tax planning guarantees results.
You can spend all sorts of time, effort, and money promoting your business – and have nothing to show for it.
Or you can set up a medical expense reimbursement plan, deduct the cost of your teenage daughter’s braces, and guarantee savings.
Guaranteed results start with planning. Tax planning.
My favorite strategy for tax planning is the Profit First paradigm. It’s one of the simplest ways for service business owners to prepare for tax time, while also ensuring the other financial aspects of their business are healthy.
By setting up the right bank accounts and using the Profit First system of allocating revenue, you can guarantee that you’ll have the right amount of money set aside for taxes at the end of the year, as well as payroll, cost of material, and the all-important profit margin.
It’s one of the most effective tax planning strategies you can implement in your business, and it makes the job of your tax professional so much easier! A certified Profit First tax professional can help you set the systems up in your business as well as understand the allocation process and put together a plan for every future tax season.
If you don’t want to be surprised by your taxes next year, let’s talk about setting your service business up with the Profit First system now! Connect with us here and we’ll set you up with one of our trained Profit First professionals to get you started.