4 Tips to Get Tax Season Ready… Now and Every Day!

get ready for taxes
  1. Get Organized – No co-mingling!

As a new business owner, you have to realize how VERY important it is to separate yourself from your business. You took the steps to start your new business and you went about it the right way and created a SEPARATE entity, apart from yourself.

As a separate entity, your business can now enter into contracts and do transactions on it’s own… That’s right! Your business can now sue and be sued! So imagine what can happen if your business gets sued?

Co-mingling is when you are treating money made in the business as is you made the money personally and vice versa, you are paying for everything from your own bank accounts.

What does this mean if you are sued? Now you have opened up your personal assets to the litigation because by not separating yourself from the business you were saying that there was no separation…. So do you think the government or the judge will see a separation?

Remember that you are now separate from the business and you need to keep your funds separate.

2. Know Your Numbers!

This follows the premise behind getting organized, you need to have a system in place to know what is coming into the business and what is going out. If you do not know your numbers, then do you really even know your business?

You need a good cloud-based accounting system that will help you keep track of what you make and spend. You should always be able to answer the question, what did you make this month?

There are a few programs out there but I typically recommend these 2, QBO and Xero. I recommend them for different reasons. QBO is much more Accountant friendly, if you are comfortable with accounting terms and can navigate the world of debits and credits, QBO has a solution for you. If you are more DIY and prefer a program that will ask you, what did you spend vs what did you make, Xero is very user friendly.

3. Magical Rule of 30%

So I always tell my Savvy Family that so many people are afraid of tax time because they are not prepared! Being PROACTIVE is the cure for that…. How can you be proactive when it comes to your tax bill? Save 30% of all income that comes in!

That’s right, every time you get paid, put 30% in a separate savings account so that you are ready for your tax payment. I recommend an online savings account that offers you a higher saving yield, such as Goldman Sachs at Marcus.com or Ally bank.

Set the account up and transfer automatically or manually, but the important thing is to make the transfer.

Tax time always comes around, but most people are not ready with their payments.

4. Work with a Trusted Professional

So I know that some people think this goes without saying, but that is not true. So often people are working with people they only speak to when they are handing over their documents at tax time. They never ask them questions because they think they are too busy to get back to them… that does NOT sound like a trusting relationship to me.

You need to be able to openly communicate with your tax pro, are they keeping you up to date on any changes that are impacting you?

Do they tell you what you are doing well vs what you should change?

These are just examples but you definitely need to be able to talk to your tax pro about anything that is concerning to you.

I try to always try to be here for my Savvy Family and I strive that this openness builds the trust that they should have with me.

As a rule of thumb, I tend to always tell people, regardless if you work with me or not, you should NOT work with someone who tells you “Leave all your numbers to me, I will handle it all for you” this should be a red flag… because guess what, YOU are on the hook for ANYTHING that goes on with your numbers.

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