We've all heard of the phrase "Death and Taxes." Ben Franklin gave this timeless small business advice when he proclaimed that they are the only two things in life that are certain. But you don't have to let your tax responsibilities drive you and your business to an early grave.
As a business coach, the one problem I see many entrepreneurs running into is failing to budget enough money to set aside for their taxes. Then, when it comes time to file their taxes, they don't have the cash so they avoid the situation altogether. Unfortunately, not filing taxes is NOT the solution to the problem!
The following business mentoring tips are among some of the best pieces of bookkeeping business advice that I have shared with busy entrepreneurs over the years. If you find yourself coming up short on cash by the time taxes roll around, here are some things you can do to alleviate the stress:
Business Mentoring Tip #1: Gather your records and file all your tax forms immediately, even if you can't pay a cent.
Business Mentoring Tip #2: Write a letter to the IRS explaining your financial situation and attach it to your forms. More than likely, the IRS will work with you to find a payment option with which you can live. One of those options could be setting up a payment plan so that taxes can be paid in installments.
Business Mentoring Tip #3: Have in place a solid business plan that makes accommodations for both federal and state taxes, and stick to that plan. The last thing a new business needs is to lose its profits by paying penalties to the IRS.
Business Mentoring Tip #4: Open a second bank account (like a tax savings account) to be used exclusively for saving money to pay taxes. As a business coach, I've seen many clients successfully use this strategy.
Business Mentoring Tip #5: Each time your write yourself a check or make a cash withdrawal from the ATM, take 20% of that money and deposit it into your tax savings account. For example, for every $100, set $20 aside for taxes. You will be pleasantly surprised how quickly your tax savings will add up come tax time!
Business Mentoring Tip #6: Each quarter, on January 15th, April 15th, June 15th and September 15th make estimated tax payments to the Federal and State governments.
Business Mentoring Tip #7: Each October meet with your tax preparer for preliminary tax planning. You can evaluate where you are for the year and leave yourself ample time to reduce your tax liability or make additional payments.
By using this proven bookkeeping business advice and implementing these seven tips into your business's bookkeeping practices, you will be able to survive paying your taxes.
Author Resource:-
Linda Hunt and Laurie O'Neil are the co-founders of The Bookkeeper's Referral
Network Inc., the place where business meets great bookkeepers. To get your
copy of The 9 Disastrous Mistakes Most Freelance Bookkeeper's Make in
Business (and How You Can Avoid Them!) visit http://www.bkpr-network.com>http://www.bkpr-network.com
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