Intro by Skip Cohen
There’s an incredible amount of helpful information hanging out there in cyberspace, and it’s waiting for you. Sarah Petty’s “Joy of Marketing” blog is one of the best, and if you know Sarah, she never does anything halfway!
She and I once got into a small argument, (during lunch, so no blood was spilled – LOL) over whether 90% or 98% of the photographers in the market knew whether or not they were making money. I don’t remember who was arguing on which side, but you get my point.
Understanding what your profit is and in turn being ready for tax season is all about playing offense instead of defense. For most of you, after the challenges through the pandemic and the loss in business over the last two years, you’re going to be looking at an increased profit for 2022. You just need to be ready for the new year.
With tax season just ending or many of you still in IRS hell having filed extensions, her recent blog post is so appropriate. It won’t help you a lot this year, but read her seven tips and start planning for 2023.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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. For example:
- 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 if you’re feeling overwhelmed, sad, or 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.