It’s tax day here in the US, which means millions of you are scrambling to file and pay taxes.
If you didn’t get your taxes done, you can file for an extension, but that doesn’t mean you don’t have to pay.
You still do. You estimate what you owe, send that in and hope you didn’t underestimate (penalties and interest will be due when you do pay).
For that matter, you don’t want to overestimate either. You will get a refund, but who wants the IRS holding your money when you could be using it in your business now?
If you are paying taxes today, you may not have your business set up right.
And if you are stressing out because its tax time, you definitely need to change things for next year.
Tax time does not need to be stressful.
First, tax time isn’t the time to scramble. If you are scrambling, you are probably leaving money on the table. Money that’s going to the IRS instead of into your pocket.
Start strategizing for next year now.
Meet with your tax advisor twice a year for strategy meetings. Once in the late Spring/Summer and again before the end of the year.
Then, tax time becomes easy. And you’ll keep a lot more of your money.
Second, set your business up so that you don’t pay anything at all at tax time, but instead get a tax refund.
Here’s how you do it.
- Establish your business as an S Corporation (or an LLC taxed as an S Corporation).
- Pay yourself a small, but reasonable salary through payroll, making you a W-2 employee of your company and have taxes taken out.
- Structure your lifestyle and the expenses of your company so that you are living the entrepreneurial life and taking max advantage of tax deductions for things you would have otherwise paid for personally if you weren’t living the entrepreneurial lifestyle.
(As an example of this, my business will pay for me to attend all the summer festivals I’ll be at this summer – and deduct the associated expenses – because I’ve turned them into business events by speaking at them. How can you incorporate this idea into your business?)
When you set your business up like this, tax time is easy and can even be fun when you get a big fat check back from the IRS in the form of a tax refund instead of scrambling to pay your taxes.