Surprised by large tax bill and think now what?!

ToddLay

April 10, 2018

Next week taxes are to be paid in full by April 17th, are you prepared to pay them?

I’ll share a couple things you can do right now and steps how we help our small business clients AVOID getting into this situation to start with. It can be very expensive if you are not prepared.

DO THIS FIRST…

Get your taxes return filed ASAP.  If you are behind with your bookkeeping and need help, reply to this email to talk further.  I will talk with you personally and help figure out a plan for you.  If you are already filed your tax return and just don’t have the funds to pay what you owe, then I really want to encourage you to get an installment plan in place with the IRS.  Don’t try to hide, it only makes it worse and costs you more money.

Here the link to setup an installment plan

Taxes are to be paid by April 17th this year, otherwise a failure to pay penalty starts to accrue and interest on that balance owed.

You might be thinking, “I’ll just filed an extension and then pay it then”. While that will let you extend the time to file your taxes by 6 months, any amount that would have been owed is still due April 17th 2018.

Did you know this?

A couple of things about having a payment plan in place is that it stops any further actions for collecting taxes owed.  For instance getting a surprise bank levy and more fees from your bank on top of it.

Are you trying to get approved for a mortgage?

If you are trying to get approved for a mortgage, and you owe back taxes, you can still be approved for the loan provided you have a payment plan in good standing.

This will help you sleep better having this next process in place…

I show you exactly how to avoid this stressful and expensive situation I shared above.

My team and I use this proactive strategy and keep you on track when we work with our small business bookkeeping clients to stay on top of any taxes you might incur throughout the year.

I’ll share the basics for the sake of simplicity of this post for right now.  If you would like to talk more about your specific situation, email me directly at todd@simplebackoffice.com

  1. You will need to setup a couple checking accounts and a couple of savings account.
  2. In your operating account run all of your deposits and expense through this account only.
  3. If you have a payroll service, you want to have all of your payroll and payroll taxes isolated to this account only.
  4. Dedicate a savings account that is to be used ONLY for taxes

Essentially it works like this, once you have all of the bank accounts setup correctly (I walk you thru all of it), there is a method to cash management we work with monthly ‘together’.

Every month we meet with you for about 20-30 minutes going over your financials via by GoToMeeting.

We share where all your cash went and areas we see that look like they are heading the wrong direction from what you want to have happen for the year.

We go over the profit and loss and share with you what your net profit was, and depending on the amount, we then will do a quick calculation for state and federal income tax brackets and then give you the amount to transfer from that month from your operating account over to your tax savings account.

For example, let’s say you had a net profit of $11,683 (after cost of goods sold, expenses, and payroll).

We might round to 10% for State* and 35% for Federal* for a total of 45% ($11,683 * 45%) = $5,257.35 to transfer to tax savings account.

*(tax bracket % will vary based on your state and income levels)

Are you following me here?

I can hear you now….”Todd, that’s a TON!”  It sure can be, but I would rather be conservative and you have the money set aside from your operating account and not trying to run your business on cash that is for paying taxes. It’s a
lot easier to plan this stuff out month bymonth as we go through the year.

Our clients have cash set aside to pay their taxes quarterly, or can pay annually and not stress financially because we have a plan that works.

In any event, depending on your situation and entity the percentages will vary and you will want to discuss that with your tax preparer. Our jobI feel is to be there to help and advise with the week to week and month to month cash management of your business to help you achieve your financial while budgeting for taxes and other big purchases.

Let me know where I can help, thanks!

 TODD LAY
Chief Experience Officer
SimpleBackOffice

“Know Your Numbers, Know Your Business”