The Tax Man Is Coming: How to Be Financially Prepared as an EntrepreneurJan 03, 2022
I’m excited for you to listen to this episode of Profits + Prosecco Podcast! It’s the most stressful time of the year! Taxes are barreling down upon us all, and if you’re terrified of delving into the past year’s financials you are far from alone.
I’ve been there, and I know how petrifying it can be when you feel like your finances are out of control. But I’m going to let you in on a little secret…you got this. So:
That’s better. Now trust me when I say we are going to fix this, and we just might manage to get into some better financial habits going into 2022 while we’re at it.
Why Are You Avoiding Finances Like Trader Joe’s on a Saturday?
There you are. Unsure, doubting your worth as a business owner. But ironically, you’re impeding your own progress and potential. So stop operating from doubt, and instead try and take action from a place of self-trust. And the more control you have over finances, the more confidence and self-trust you’ll have.
If you avoid tracking your input, output, spending and overall profits, it will only exacerbate problems. Remember, it’s not personal. It’s not out to get you. It’s just data.
Do you want to be that guy in the zombie movie who gets bit but then ignores it? Did that save him in the end?
No and no.
Do you want the financial version of zombie transformation? No.
You can figure this out and make it better. You can fix this. And you need to because financial control is an act of self-care. It means being sure your business can take care of you, and it makes your job easier and less stressful.
You deserve that, and I have 9 steps that will help you get there.
That’s a Mighty Fine Line: The Bottomline
1. Have your books caught up
You can’t do anything if you don’t know what you’re working with. Your profits determine what you pay in taxes, so, ya know, it’s a good thing to know.
2. Have a system for 2022 books that you maintain at least monthly
You have options here. You can work to develop an understanding and system of your own (I have a Small Business Starter and Profit Loss Workbook that can help!) or you could hire someone (perhaps a bookkeeper) and not worry at all. Just make sure whatever you decide, you get a system in place that works for you.
3. Have a CPA engaged for tax prep or start seeking one out now
Please don’t try to go it alone. For all you know (or don’t, I suppose) you could be missing out on deductions and money! Or, God forbid you make a mistake and the IRS slams you with a hefty fine after the fact. Just find yourself a good CPA, it’s so worth it.
4. Consider if you should pay any 2022 expenses in 2021
This one is personal and dependent on your business and your needs. Again if you have a CPA at your disposal, they can help you figure out if prepaying is worth it, or help you strategize prepaying for next year.
5. Determine if you need to file any 1099s
So you may want your CPA’s help to file these bad boys. Every state has different requirements, so make sure you check that all out. If you paid anyone virtually (think Venmo) you’re going to need them to file a W9.
6. Consider opening an LLC in 2022 if you haven’t already
If you make $75,000 in profit, you should be.
7. Payroll considerations
Okay, so should you be transferring from available funds to pay yourself? No. Should you be giving yourself a fair salary with a paper trail? Yes. Payroll can be a cumbersome beast, but you can always use a solid system that makes paying yourself and others a breeze!
8. Communication is key
Your CPA can help you with 99% of the above, hence why it’s important to get someone you trust, and then make sure you don’t try to save face in front of them. You don’t have to impress your CPA, if things are a mess they’ll help you, but only if you’re upfront.
9. Don’t forget estimated tax payment
By now I’m sure your eyes are glazing over, so this is just to say, if you need to make your quarter-four estimated tax payment if it’s required by January 15th. If you know what this is, then you need to do it. CPAs are wizards in this department so get one.
I know that you (perhaps with the help of a fire CPA) can get your finances into fighting shape. Never fear tax season again!
Ready to launch a business you’ll have total financial control of? I have just the thing for you. The Small Biz Starter Kit allows you to effortlessly see, and thus increase, your profits. You’ll get access to 3 tools to help you keep track of your profits so you can continuously increase them, log your miles on the go, and never miss a tax deadline!
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Recommended Podcast Episodes:
- Episode 3: What is an S Corp and Can It Save You Money?
- Episode 27: How to Use Credit Cards to Make Money
- Episode 29: Top Tips to Increase Your Profits
- Episode 34: Why Profits Percentages are Important and What Yours Should Be
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