Let’s dive right in and get to the point. I know that your time is valuable and chances are if you are like many of my clients, and students, you are in the throws of production and the last thing on your mind right now might be this – tax planning! Yes, I said the ‘t’ word – taxes. If you are not getting organized around tax planning right now then you are making a critical mistake.
Whether you own a business, are self-employed, or simply work for someone, failing to plan before the end of the year can cost you thousands of dollars and sadly many people just don’t bother.
STOP! You might be thinking, ‘I don’t have time to read this,’ however if that is you then here are a few stats I want to share:
- Only 32% of sole proprietors took their home office tax deduction in 2011 according to the IRS.
- The IRS can hit you with a 20% penalty if you are late, or negligent, in filing your taxes.
- According to the Global Entrepreneurship Monitor, 50% of small businesses fail by their 5th birthday and that comes from the fact only 30% make it to year 10.
One of the biggest challenges with business is lack of capital and insufficient tax planning.
Now, I know you may be thinking that this boring and it doesn’t matter however if you started a business, or are thinking of starting one, tax planning should be as critical as your product or service.
In this week’s 3, I am going to challenge you to get your head on straight and get your taxes organized before the end of the year.
Carve Out Time to Organize Receipts
In small business, this is tedious however you very likely are missing deductions and these can add up to a significant amount. Carve out time to get your receipts, mileage, and any other tax documentation organized.
Yes, I know – boring! I hire my kids to do it, so I won’t have to. My accountant does not want to see paper and nor do I.
Book Time With an Accountant
When we lived in Canada, I was very familiar with TFSA (Tax Free Savings Accounts) and RRSP’s – Registered Retirement Savings Plans. Living here in the US, as a tax payer, is a whole new experience and there is much to learn. With the end of the year coming fast and furious, it may slip your mind to make contributions to a retirement savings plan however with the stock market being what it is, forget buying a new Louis and instead stick that money in a registered retirement savings account!
I am not an accountant however I am married to one and I do read up on the IRS site and schedule regular check-ins with my accountant. I have one at the end of this month because that will leave me, and my companies, over 30 days to capitalize on any deductions, disperse correctly, and clean things up.
If you have a business, your accountant isn’t an expense and very likely, by being proactive, that person will pay for themselves.
Start Using and Organization System
Lack of organization costs people, and companies, money. If you have a business consider Quick Books or Zero. Self-employed people can use an APP like Tax Bot – www.taxplan.taxbot.com (affiliate link) . I personally use this for mileage and any expenses I might accrue that I must bill back to the company! So good!
Okay, I hope you didn’t fall asleep. Being organized with your taxes may not sound like fun however after it is all done, that glass of champagne, or sparkling water, will taste even better because you aren’t panicking next April.
PS – Do Not Buy My OYL Fundamentals Class!!! Yes, yes, yes – it is really good. 6 weeks of intensive organization for your money, health, relationships, and life in general…however I do not want you to buy it! On Tuesday, November 21, we are having a one-day sale for this class and that is when I want you to buy it! I love it when you save money and get great value.