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Eating Cake

June 13, 2013 by Leave a Comment

downloadI love cake. You probably do too. Who doesn’t love cake? The trouble is, everyone wants to have their cake and eat it, too. But you can’t.

In my world, it goes something like this:

Well, I want to pay less tax, but I don’t want to spend any money saving the tax.

I want to decrease my tax liability, but I want to keep all my money.

I want a higher return, but I want to be able to get to my money at a moment’s notice, too.

I want my money to grow, but I don’t want to it to go down or be at risk.

I want to have the best investment and financial advice around, but I hate fees.

Everything is a trade-off. Every decision you make, every dollar you spend, every minute that goes by is a resource being used one way, which means it cannot be used in any other way.

That isn’t bad, though. Adam Smith and the growth in standard of living since the industrial revolution have taught us that specialization has increased wealth all around. Those people that allocate their time, talent, and treasure in specific and purposeful ways are achieving better overall results. Those who don’t are trying to ride the middle of the road by paying for some advice, but only a little bit. Or by trying to save money on taxes but only doing the cheap or easy tactics. Or taking some middling risk and ending up disappointed that you get middling returns.

Sure, the investment account of the people who specialize might take a big dip sometimes, but that is offset by very safe money should they need emergency money. They might not be experts in taxation, but they hired someone they trust to give them advice, and they are getting better results from it. They might not have spent time in lots of different jobs getting life experience and having different adventures, but they are probably noticeably ahead of their peers in both pay and seniority at whatever career they have decided to stick to.

Life is trade-offs. You want to have adventures and live it up after college? That is awesome, more power to you. But don’t get to 35 and get mad because you can’t afford to buy a house or do the other things that people your same age (who worked all through their 20s) are doing. You want to pay less tax? We all do! But don’t whine about taxes, then get mad at yourself a year later when you pay the same amount of taxes you did last year because you put no money or time into new tax strategies.

Don’t let life just happen to you. Don’t look back and wish you had made other choices. It really isn’t that hard to figure out where you want to be and what it takes to get there.

Pick your goals, get realistic information on what it takes to get there, decide if the cost is worth the benefit and go.

You can either have the cake or you can eat it. If you eat it, you won’t have it anymore. But you know what you will have? A belly full of cake.

Filed Under: Entrepreneur Skills, Individual Wealth

Management

May 9, 2013 by Leave a Comment

Managing. It’s a funny word. It can mean lots of things. You manage your schedule. You manage your finances (at least, you should). You manage a to-do list, you manage relationships, you manage to juggle your job, social life, and personal goals. You might even be the boss or supervisor of someone and have to manage them. And while all these things use the same word to describe the activity, there is very little correlation between the actual tasks.

Some of these types of management involve decisions about people. Some of them are about resources. Some are specifically the most valuable resource of all, time. Other types of managing involve making decisions about hard resources like money or material. The only thing that they all have in common, really, is decisions. All management involves making decisions.

I manage for a living. It’s weird to think about that sometimes. Can you imagine asking a little kid what he wants to be when he grows up and instead of “astronaut” or “firefighter” he says “manager?” How bizarre would that be? Even in college, few people say they want to be professional managers. We all have a job that is linked to a skill or a knowledge set or an industry. “I’m going to be an accountant,” I’d say.

Yet being a manager is one of the most critical jobs that exists in business. We relish in the standard of living that a free market brings. But what makes the free market work? The free market works because it allocates resources much more effectively than any central planning system ever could. But despite talk of invisible hands, there is no magic to the free market. It happens because of people making decisions. Billions and billions of decisions a day. And who makes those decisions for a business? The manager.

When to hire, when to fire. Where to allocate resources. When to spend, when not to spend. Who should work on which project. Who should get their project pulled to help support another project. Which clients take priority. Which projects are the most important. How to protect the downside or how to maximize the upside. When to encourage, when to admonish and when to support. What kind of support. Who needs to be introduced to whom. Where the next deal is going to come from. Where the cash for payroll is going to come from. For rent.

And on, and on …

Multi-variable equations with multiple unknowns and conflicting critical paths are standard operating procedure. Why am I telling you this? Maybe it’s because I had a busy day managing and almost no one even knows what I did all day. But mostly because I want people, in particular business owners, to not underestimate the value of this operation.

Most of life and business are made up of shades of gray. If it was all black and white, we wouldn’t need managers. But gray is tough. Gray requires one person to make a judgment call. Someone who is willing to be wrong and take their lumps. Gray requires someone to make a decision. The manager.

Here’s to the ones where the buck stops.

Filed Under: Entrepreneur Skills, Individual Wealth

Hurting to Help

May 3, 2013 by Leave a Comment

Another tax season has come and gone.

Well, for most of us. I am still getting incomplete returns randomly mailed to me. People stare at me, dumbfounded, when I tell them that I don’t really do taxes outside of tax season.

“Wait, but you’re a CPA!”

Somehow our profession, and our love of our clients, has built an entire system of enablers. A system of professionals, just like myself, who allow our clients to wander in late, unorganized, in drips and drabs, and we will bend over backwards to help them. What kind of business is that?

I advise my business owners that systematizing is how you grow and stabilize a business. You want to sell your business for a bunch of money? That’s great! But no one will buy a business that isn’t repeatable. No one wants the business that will only function if you are there to do things just so. And even if they do, it isn’t worth much.

Any business that has any amount of success operates under systems that have been refined over time, making the business more efficient and more profitable.

The same is true for a CPA firm, yet while we tell business owners about how to make their business more valuable, we allow and enable them to behave in ways that will actually damage their business. The fact is, you have a business, and that requires some maintenance. You have to keep track of your income and expenses. Would you go to a doctor’s office and tell him that you don’t know any of your symptoms, but that he should diagnose your problem anyway?

You have to report and pay taxes. Every year. Every stinking year. And you know what? It’s the same time every year! Are you shocked when you wake up and have to be at work at 9 am every morning? Of course not! You know the schedule and you plan for it.

Maybe you don’t even have a business. Maybe you are a regular W-2 person. Even you have to pay taxes. Anyone who goes an entire year without paying any sort of taxes and then complains about a tax bill is just behaving like a spoiled child.

Yet I see these people every year, hear the same stories every year, the same shock, the same disbelief.

We are now in that time of year where I piss off the most clients. Why? Because I say no.

No, I won’t come in on Saturday in June because you couldn’t get things together in January, February or March when I WAS here on Saturday. Would you go to a furniture store at midnight and be angry that they weren’t open?

No, I won’t get your disaster of a return turned around in 12 hours because my office isn’t geared up like it was in first quarter. Would you be upset if you showed up to a football stadium in May and there was no game? Of course not!

And no, I won’t make an exception for you because you were too busy. I have other clients who waited patiently through the season for my help on other matters and now I am working with them. When was the last time you walked to the front of the line at the movies, completely ignoring the line of people waiting to buy tickets?

I do whatever I can to help my clients, but sometimes you have to hurt them to help them. Sometimes they have to have a problem you won’t bail them out of before they can develop the good habits that ALL successful business owners have.

Filed Under: Cool Stuff, Entrepreneur Skills

Luck is Made – Over and Over Again

March 26, 2013 by Leave a Comment

As we begin to come out the recession, I am noticing a disconnect again. You heard me: End of the recession.

Yes, we are nearing the end of the recession. This does not mean that government policy will not put us back into a quarter of decreasing GDP. This does not mean that anyone who wants a job can get one or that everyone will be getting raises and living the high life.

But we are getting to the point where labor productivity is at very high levels (to get more productivity you have to hire more people). We are getting to the point where the expectation of higher inflation is driving people to seek to earn more than the, well, nothing on their savings in the bank.

But there is another number I have seen that I find interesting. The amount of time that employers are holding a job open is still relatively long. There is something like 5 million job openings and 12 million people looking for jobs. Now, we all know it takes time to interview and hire people, but in some cases the job is being held open for an average of 30 days.

This tells me that the people who are looking for work often don’t have the skills hiring companies are looking for. Remember when I said that people need to be real about the value they add?

The disconnect I am noticing is this. Two years ago, if you said, “Well, with how the economy is …” people would nod knowingly.

But today if you say that, to me it rings false. Why? Because I know lots of hard working people who are having banner years. Making money, starting businesses, and generally kicking butt.

Remember when I said luck is made?

The economy can kick anyone in the ass, it’s true. But the “lucky” ones have gotten it together and are making things happen. So, are you waiting to get lucky? Or are you making it happen?

Filed Under: Cool Stuff, Entrepreneur Skills

Against the Gods – Book Review

February 27, 2013 by Leave a Comment

Risk.

 

Lots of people think they know what it means, but almost no one does. The idea pervades everything that you do. It lives in the background of your life. Every time you pay your car insurance, change your investment allocation, select a mortgage, or leave early for a date because of traffic, you are mitigating risk.

 

I spend most of my time as a financial planner trying to help people understand what risks they are exposed to and how to mitigate them. Lots of people think that my job is to grow their money as much as possible, so they can become wealthy and retire. But the reality is, “Risk eats profit for Lunch.” Which is a fun way of saying: risk adjusted return is the only relevant form of measuring return. It doesn’t matter what you earned on an investment or a business, it only matters if you were adequately compensated for the risk you took. Yes, a US Treasury bond is going to earn you less than a small cap stock. But it is very unlikely that you will lose the bond money, while you could lose everything with the stock. That doesn’t make the stock a “bad” investment. Just a different one.

 

So I spend most of my time explaining risks that people don’t fully understand, exposing them to risks that they never even considered, and adjusting their perception of risk to reality.

 

Why am I talking about risk all of a sudden? Because I just finished a great book called: Against the Gods – The Remarkable Story of Risk by Peter Bernstein. It is an excellent book and a thoroughly academic review of this major concept. Usually, a book like this would not make it onto my “business guru” reading list. But risk is so commonly misunderstood and so difficult to understand well, that I am going to include it.

 

In the 21st century, all people intuitively understand that there are risks and there are ways to mitigate those risks. Some of us make a living helping people do just that. But we take as gospel that risk exists and how it works.

 

That was not always the case. Ancient peoples didn’t have an understanding of the ideas of probability and risk that we take for granted now. The “gods” caused things to happen, that were either in your favor or against it, and you had to accept what happened. The idea of buying insurance in case the “gods” frowned on you would have been a ludicrous idea not that long ago.

 

From the ancients to French gamblers, English financiers, and German mathematicians, Bernstein walks us through the development of the ideas that we know of today as probability and risk. As someone who deals with major aspects of risk management in the modern world on a daily basis, I thought this book would just be a nice walk through some fun facts.

 

I could not have been more wrong.

 

I never realized how many underlying assumptions I take for granted on a daily basis. It never occurred to me that ideas and thoughts I have all the time and understand intuitively had to be developed, proven, and disseminated by long-dead scholars. I always love a good history book, but I had no idea that I would be reading the history of my profession.

 

Against the Gods will be one of the more challenging reads you will find on my list, but I do not doubt that you will consider it time well spent.

 

 

 

 

 

 

 

 

Filed Under: Entrepreneur Skills

Platform By Michael Hyatt – Book Review

February 13, 2013 by Leave a Comment
I recently finished reading Platform: Get Noticed In a Noisy World by Michael Hyatt. Most of the time, when I do a review of a book, I like to go more in depth and describe the major concepts and ideas. There is no way I can do that here. The sheer volume of information in this book is amazing.

The book is broken into five parts:

Part 1 – Start With Wow
This section is all about how to get started. Hint: It has to do with wowing people.

Part 2 – Prepare to Launch
This section is all about getting your product ready to launch online. It goes through so many details that never even occurred to you.

Part 3 – Build Your Home Base
Another section with all the details you never knew you were missing about making your home online excellent.

Part 4 – Expand Your Reach
This section teaches you about online advertising. But not in THAT way. In a real, down-to-earth way that is useful for us professionals.

Part 5 – Engage Your Tribe
The final section talks about how to engage with people online and what that means.

I would also say there is one final section to the book: the appendices, which are just chock full of good resources and information.

I wish I’d had this book a year and half ago when I started my blog. I will just say this: This book is absolutely on the Guru Reading List. I personally will be working through this book to improve my site and my online presence.

If you want to do any sort of online business, information business, or service business, you need to have a web presence. This book is basically everything you need to know about creating a stellar web presence. Not just how to build a great site, but how to really understand how to use this awesome tool we know as the Internet.

So, go check it out, buy it, and read it. Then read it again.

Filed Under: Entrepreneur Skills

Media Adding to Confusion

January 20, 2013 by Leave a Comment
I say “Business is Simple” often. Because I honestly believe it is. Taxes can be a really tough topic to fit onto the “business is simple” bandwagon though, because some stuff having to do with taxes really is complex. But most of the things that are really complex don’t apply to 95% of people, so it doesn’t matter.
Despite this fact, many professionals like to make up things for people to be worried about. Estate tax is the biggest and best example of this. Something like 1% of the US population has enough net worth to worry about the estate tax. So let it be. Seriously.
The Wall Street Journal published an article recently about how to get organized for tax year 2013. I read this and thought “no wonder people are so overwhelmed by taxes”. I thought, just for fun, I would respond to this article with my two cents and try to reality check this. Hopefully someone will notice and start giving practical, actionable advice?
My comments are in Blue.

January to-do list for taxes 

How to get organized for tax year 2013. Plus, five tax resolutions 

January 07, 2013|Eva Rosenberg, MarketWatch

We start the year off with tax legislation that finally makes it possible to do some definitive tax planning. Some of the measures affect your 2012 taxes; the rest cover 2013-17, with permanent changes.

The single most helpful tool for keeping your tax resolutions is a checklist. Every successful self-improvement course, study program — and even job — benefits from one. Have you ever noticed how many checklists you use on a daily basis?

Consider consolidating them, so you can see your daily, weekly and monthly responsibilities at a glance. Let’s build your tax checklist for January 2013:

Set up your 2013 tax file. Pull out your labelmaker and put new labels on file folders, expanding files, or drawers, so you have a place to drop your 2013 records and receipts. Now you can consistently file all relevant documents for the year in one place. Instead of a set of file folders, consider using an expandable file. While you’re at it, do the same for last year — and get a head start on locating and organizing your 2012 papers.

 Let me understand this. The BEST advice the Wall Street Journal came up with for tracking expenses is to add up the numbers on pieces of paper. Manually. Better idea, why don’t you put DOWN the labelmaker and spend that time getting your Mint.com account set up?

 

Set up your 2013 tax calendar. Individuals can use IRS Publication 509 (www.irs.gov ) to locate deadlines for the year. Small businesses can use the IRS’s colorful “Important Tax Dates for Small Business” calendar (www.tax.gov ) to set reminders for 2013 due dates. Not only is it available online, but there’s also a desktop version and a tool to integrate it with a variety of personal electronic calendars. The Spanish print version is sold out and won’t be reprinted again this year due to budget limitations. But the calendar is still available in English.

Any piece of advice that starts with “Read IRS Publication…” is likely going to be overkill. If you need to worry about more than just the year-end tax deadlines, you should have someone helping you who knows them. Simple.

 

Update your address. If you moved in 2012, be sure to update your address with everyone who is expected to send you tax-related documents: Former employers (W-2s), banks (1099-Int), lenders (1098), brokerages (1099-DIV, 1099-B), the IRS, your state tax agency, clients (1099-MISC), investments (K-1s) and trusts (K-1s).

 Reasonable advice. But if you move, and leave a forwarding address, then the USPS will forward those forms as well. And what address is on most of those forms is not relevant. So focus on just changing your address with people you currently work with.

 

Update your name. New brides generally remember to change their names on driver’s licenses and paychecks, but often forget to notify the Social Security Administration. You won’t be able to e-file your tax return with your new name if it doesn’t match the Social Security Record.

This actually is good advice. If you change your name, notify SSA.

 

Get a special IRS PIN. Were you the victim of identity theft last year? Make sure to contact the IRS and have them issue you a special Identity Protection Personal ID Number (www.irs.gov ). Notifying the IRS about the identity theft will flag your account. By getting the IP PIN issued to you, no one will be able to file a tax return under your Social Security Number without it. Your refund will be safe.

This is good advice too. Just make sure to write it down somewhere you won’t lose it! Not having it, once it is issued, can be a huge pain.

 

File a new W-4 with your employer now — and again in March. The legislature did not extend the 2% reduction of Social Security payments from paychecks. Your paycheck will be a little lower this year. Consider increasing your withholding if you have refinanced your mortgage and your mortgage interest has been reduced, or if your child or children are no longer dependents. You can reduce your withholding if you are making a payment for private mortgage insurance (PMI). The deduction has been restored, retroactive to Jan. 1, 2012. Also, reduce your deductions if you have bought a home, gotten married, have a new child or expect large, deductible losses in 2013. Use the IRS withholding calculator to help (www.irs.gov ).

You do not need to make a new W-4 every year. You might consider changing it if something happens that might cause you to pay less tax. My advice? Leave it alone. Why? Getting a large refund you can bank won’t hurt anyone (we can all afford to save more!). Trying to figure out how to re-do a W-4 might.

 

Send out W-2s this month. Have you been paying household employees? Although the IRS has sort of a short-cut — Schedule H (www.irs.gov ) — for reporting and paying taxes for those workers, you’re still responsible for sending them a W-2 in January. Your state will require full, year-end payroll tax returns.

So, this only applies to business owners. Also, if you cannot afford the 50 bucks a month to pay a payroll company to do all the payroll for you, then you cannot afford to have employees. If you have the time to run your own payroll, you don’t need employees to help you!

 

Send out 1098s this month. Folks collecting payments on private mortgages or loans must send out Form 1098 (www.irs.gov ) showing the amount of interest paid by their borrowers. Even if you don’t send out the form, be aware that your borrower will be reporting the interest on their Schedule A. There’s an area on Schedule A to list your name, address and taxpayer ID number. So remember to report the private mortgage interest income you receive.

How many people are paying their mortgage to a private party?! Listen, if you are required to issue a 1098, you already know all about it. Including every conceivable contingency in articles like this is is exactly why people think this stuff is so complicated!

 

Send out a 1099-MISC this month. Although owners of rental properties don’t need to send 1099s to folks who worked for them, all other business owners must still comply. Send Form 1099-MISC (www.irs.gov ) to anyone who was paid $600 or more during the year for services. There’s no need to send it to vendors who supplied merchandise or supplies — just service providers. There’s no need to send 1099s to corporations, except attorneys and medical care providers. When a company operates as an LLC, you don’t know whether or not they are filing as a corporation. So get a Form W-9 (www.irs.gov ) from each vendor and have them tell you. In fact, it’s a good idea to send a new Form W-9 to each vendor in January, so you can have the most up-to-date information before paying them.

This is something you need to do. But I want to reiterate something I said earlier. If you need to be issuing 1099s, then you should have an electronic records keeping system that makes this pretty easy. A new W-9 is every year is overkill though. Why create more work for you, and your vendors, if nothing has changed?

 

Use up your medical Flexible Spending Account (FSA). If you haven’t spent enough money on medical care to get all your FSA deductions back, you might still have some time. Turn in your receipts from your doctors, dentists, clinics, therapists and pharmacies immediately. If you don’t have enough receipts to get all your money back, contact your FSA administrator or payroll department to find out if your plan gives you extra time. Some plans are set up to give you until March 31 to get the medical care and the related receipts. Naturally, if you get reimbursed by your FSA plan for these costs, you may not list them as itemized deductions.

If you just realized that you have an FSA and you are trying to use it up, you are a little late to the game. Better advice? Spend an hour figuring out what benefits your company offers and how they work so you can have all of 2013 to make sure you don’t leave money on the table.

 

Retirees: Make contributions from your IRA in January. Congress has restored the special provision for those age 70.5 or over to transfer up to $100,000 from their IRA (www.irs.gov ) to a charity for 2012. You have until Jan. 31, 2013, to make this donation. You will not get a deduction for the charitable contribution. But you will avoid all taxes on this withdrawal. It will count as your required minimum distribution.

I don’t know about you, but if I was going to transfer $100,000 to a charity, I wouldn’t have forgotten about it and been glad this article reminded me. Yes, you can transfer money directly from your IRA, to a charity, to satisfy your RMD requirement. But this is not something that should be done last minute. It should be part of a considered strategy.

 

Make your fourth estimated tax payment. Jan. 15 is the due date for the fourth quarter estimated tax payment for 2012. This is important for folks who have investment income, unemployment income or any freelance income. If your business profits were over $400, you will owe self-employment taxes, even if you don’t owe income taxes.

Yes, you should probably do this.

 

Make 5 tax resolutions for 2013.

Resolve to pay not more than your fair share of taxes.

 OK, but none of this advice helps with this.

Resolve to pay no penalties and interest this year. 

Actually, you might want to pay interest. Currently the IRS charges 4% on underpayment. If you make more than that, keep your cash, make the higher return, pay the penalty, and bank the difference.

Resolve to take advantage of every tax credit and deduction legally available to you.

Because last year I didn’t care about this? Thank God I made tax resolutions for 2013!

Resolve to make your tax return audit-proof. 

This does not exist. Trust me.

Resolve to read MarketWatch’s tax columns year-round.

Not likely.

 

Eva Rosenberg is the publisher of TaxMama.com, where your tax questions are answered for free. She is the author of several books and ebooks, including Small Business Taxes Made Easy. And she teaches tax courses at IRSExams.com and CPELINK.

Filed Under: Entrepreneur Skills

What To Look for In a CPA

January 16, 2013 by Leave a Comment

I had a very nice reader email me my thoughts about what to look for in a CPA. They were looking for someone local to their area. Offered without comment is my response to her:

 

As for finding someone my advice would be to make sure that you pick someone you get along with, first and foremost. If you have different work styles, generational gap, cultural issues, or just a funky vibe keep looking.

 

The next most important thing is to make sure that your interests and the interests of the person you are hiring are aligned. What I mean by this is, how do they bill? What other services do they offer? If they bill by the hour, then you might hesitate to call, for fear of getting a bill you can’t/don’t want to afford. This can cause you to not seek out advice when you need it! This is why I bill, and advise you to find someone who does also, on a flat fee basis. When I quote a price for a tax return, it includes tax projections throughout the year, unlimited tax questions, etc. I find it easier for everyone to just have one price to “be your guy”. It also makes sure that I do things right the first time and explain everything clearly and well. Because if I don’t, it makes more work for me, which I do not get paid for!

 

Find someone who takes the time to understand your business, and who works with people like you. I do not mean someone who is in the “widget” business like you are. CPA work is, for the most part, industry agnostic. What I mean is, if you work on a paper system, make sure he/she understands that. If you like face to face meetings, he/she should too. If you live most of your life online, your adviser should understand the ins and outs of how that works. In addition, when you interview them (and you should) they should be asking insightful questions that demonstrate they have a grasp of what you do to make money.

 

Lastly, look for professional education and designation. I would suggest a CPA, I think they are the best equipped to handle these things. I might be biased in making the recommendation though :-) Additional education and designations are great as well. Not because of what they mean, per se, but it shows a drive to go above and beyond that can be very positive.

 

What to avoid:

If you don’t understand what they are advising you to do, stop and ask them to clarify. If they struggle to explain it in a way you understand it stay away. This is a dead giveaway they don’t know it very well either.

 

Avoid people that seem to just be agreeing to fill in forms for you. Someone in your position needs so much more than forms prepped. Make sure they understand this and will offer suggestions, ideas, and insights into your business. A good adviser knows the problems you will face better than you do and will take steps to help protect you before you even know you need it. If they are reactive, not proactive, stay away.

 

The best place to start, in my opinion, is with people you know. See who other business owners are using. Talk with your local chamber and see who is active in the community.

 

That being said, I would be happy to try and answer questions you might have that are specific to your business or financial situation in general. I love working with people who have the drive to start “side businesses” and the smarts to make them successful!

 

Don’t forget the special offer that I am doing right now. If you get in touch with me and let me prepare your taxes via dropbox or Evernote, I will give you 25% off my normal price! This won’t last forever, so give drop me a line soon!

 

Filed Under: Entrepreneur Skills, Individual Wealth

Evernote, Taxes, & A Special Offer

January 11, 2013 by Leave a Comment

Hello again friends.

As that lovely time of year sneaks up on us again, I wanted to re-post something I wrote last year at this time. A about a year ago, Brett Kelly and I wrote blog posts about how we did his tax return entirely via Evernote. It was a great post and was a really fantastic proof of concept. Brett’s post was better though.

This year, I wanted to take it one step further though. Because I love Evernote so much and I love having a digital workflow so much I want to offer you cash to let me do your taxes via Evernote.

That’s right. If you contact me, mention this blog post, and share an Evernote notebook with me where you have stored your tax documents  I will give you 25% your tax prep fee. In some cases, that can be as much as $250 (or more) in your pocket.

No, I am not kidding. You can save 25% on your tax prep if you let me do your taxes via Evernote. 

So check out my side of how it worked here and also from the client side.

And if you want to make your life easier and save some serious dough, email me at andrew@nchwealth.com  and we will get started.

 



 



		

		
Filed Under: Entrepreneur Skills, Individual Wealth  

	

		


				
Tax Time…. ARRGGHH!
 
		
		
January 5, 2013  by  Leave a Comment 
		

			
People ask me all the time “What do I need to bring you for my taxes?” or “I need to do taxes, what do I do?” or some other derivation of that. Often times with a sigh. Or profanity.


People make such a big deal out of taxes. The world has talked it up into this giant mountain when it really doesn’t need to be.


 


So, deep breaths.


 


Business is simple.


 


What do you pay taxes on? Simple: Profit. Most businesses owners know that. If you don’t, now you do. I just told you. You pay tax on your profit. Not the total sales, not the deposits, just the profit.


Ok, so what was your profit? Easy. Revenue minus expenses.


Figure out your total revenue. This can be found in lots of ways. Don’t have books? No problem; look at bank statements. Add up customers manually. Go pull up all your invoices and add them up. Easy stuff.


Now add up your expenses. Hopefully, you have books and you have been adding it up a little at a time each week, instead of causing yourself to do all the work now. But if you haven’t, it isn’t the end of the world. Again, look at bank statements. Add up receipts. Make sure you don’t forget something. Do you have an online account like Paypal? Grab the expenses from there. Check your credit card statements.


 


Subtract your expenses from your revenue. That’s your profit. Pay tax on that.


 


Now, if you want to pay even less tax, it helps to have someone that can help you. Like me. But, you do not need that. And if you are scared of using someone because you are embarrassed to show up with your shoe box, now you know how to do it like a pro.


Show up at my office with revenue and some expenses and we can make that work, no problem. The same is likely true with any decent CPA.


 


And before you get overwhelmed, think about it this way. It doesn’t take long:


 


First week of January: Add up your revenue. That’s it. Just do that little bit.


 


Second week of January: Look at your bank statements and add up expenses there.


 


Third week of January: Look at your credit card statements and online account.


 


Fourth week of January: Gather up any other miscellaneous receipts you have.


 


First week of February: Your other documents start coming in the mail (1099s, W-2s, etc). Put those in the folder with the things you pulled together in the previous weeks. You are now ready to get your taxes done


 


Second week of February: Add up what you brought in. Add up what you spent.


 


Give those to your CPA.


 


Done.


 


Business is Simple


 

		

		
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