There’s no way around paying taxes if you run a profitable business and if you live in the United States of America.
As my businesses have grown over the years, and my income has gone up, I’ve come to dread this week.
It’s the week where I can expect a call from the accountant telling me what I owe.
Cue tears, panic, and disappointment.
In the early years of Sarah Petty Photography, I often owed money that I didn’t have.
Whether you’ve been there or not, you likely will be in the future now that you’re growing your photography business.
I want to give you a new perspective to not only help you survive this week, but to get through it, feeling good about yourself and where your business is going.
When you’re running a business, you can’t let that checking account get down to zero because there are bills that need to be paid.
And as I’ve added payroll, there are people that need to be paid.
I remember years ago I got a call from our accountant on April 14th telling us that Joe and I owed $90,000 the next day.
Most of it was from that year from the growth in my business.
My business was growing so much and I hadn’t prepared for it and that money was not in the bank account.
I was mad that my accountant hadn’t told me that this was coming.
I was freaking out and panicking and just couldn’t understand it.
We got through it and figured out a way to get a quick loan.
We hunkered out for about 18 months until we just paid every single penny we could to get that paid off.
Over the years, I’ve had to do some mental work so that every April, I don’t have to go into a depression, especially after I just celebrated having a good year.
In business, I want to grow.
It’s like playing a sporting event and realizing that you have more points on the board this year than last year.
And then you turn the corner to April and you get a big tax bill.
It just doesn’t seem fair. I’m going to share with you what I’ve done so that I survive this and change how I look at it.
And I hope that this helps you.
1. Take the Emotion Out of Giving This Hard-Earned Money Away
I choose to believe that it’s going to make the world a better place.
Emotions come from not having the money when you need it, so I want to make sure that I have the money when I need it, because it’s part of what we do.
It’s being a good citizen.
2. Understand Where the Profit Comes From
If you understand where the profit comes from, it’s easier to understand how much more profit you made than last year.
I need to put aside 30-50% of it because that’s not really my money.
3. Pay Attention to Your Growth
Let’s just say for easy math, you made $100,000 last year.
This would be your net, your take home pay.
Then, this year you’re going to make $150,000 in net income.
How it works is that you’re required to pay quarterly taxes based on what you made last year, so you’ll be paying tax based on making $100,000, but you are making $150,000.
So at the end of the year, while you paid everything you were supposed to pay, you still are going to owe taxes on $50,000.
4. Make A Separate Bank Account
Make a separate bank account where you put a percentage of your extra profit, so that money’s there when you need it.
It’s important to make sure that it’s there when you need it, because if you’re spending it like it’s your money, it’s not going to be there when you need it.
5. Look Closely At Your Numbers of What You Made Last Year Versus This Year
This is especially important when you’re in fast growth mode.
If you’re not paying attention to that and putting that extra money into a bank account, that’s when you get into a pickle.
You really have to look at not just your gross sales, but you have to look at your net.
Looking at the profit is how you know what you owe.
6. Get a Good Tax Advisor
Get a good tax advisor and make sure they’re educating you on what you owe.
They get this so that you don’t have to get this.
7. Consider How Much Profit You Want to Make
I’m a big believer in this.
And as I plan my year, I put education in my budget because I know it’s a tax free expense.
I know that I can buy books and courses.
I can pay my coach and my mentor for the programs that I’m in because that’s tax deductible.
That’s a legitimate business expense.
I’m looking at what I need for my business and what’s going to help me grow my business.
How can I invest in myself and write it off?
If I’m going to buy it anyway, why not write it off?
It’s normal if this month you’re feeling overwhelmed, sad, depressed.
But, it’s better to know this is coming.
If you’re a little baby business and you haven’t experienced this tax headache yet, know that it’s coming and learn it so that you’re not blindsided.
Learn from the mistakes of those who have gone before you.
I paid the price.
So, I want you to learn from that.
Now, I know what I owe and I plan for it.
I’m able to write off cool things because I can.
I’m not happy about the taxes, but I don’t focus on it.
And I don’t let it jeopardize my company or my family, because I never want that to happen again.
I definitely get some big tax bills, but the worst part is not knowing that it’s coming.
If you know that it’s coming, you can plan for it.
You can do it, but you don’t have to do it alone.
I am right here with you.
Let’s make it.