Frustrated With Taxes?

Hey everyone, uh, welcome to this quick topic, uh, suggestion, helpful hint on managing your taxes. So we are almost to the midpoint year for 2021, and in the US, President Biden has just announced his tax package thing. And so that just got me thinking, especially now that the deadline was extended this last— this year to last month. All these ideas with tax are going on right now. And so I just wanted to share with you, because on our list of members, our member list of frustrations, one of the things that commonly comes up is you are frustrated with managing your taxes. So on one hand, the reason I bring up President Biden— don't worry, I'm happy to bash both sides of the aisle, Republicans or Democrats. Starting with George W. Bush in my lifetime, each president since then has implemented some sort of stimulus package. And a lot of times that means they're putting a lot of cash into the economy. With this idea that their plan will have the American taxpayer cover that bill in the long run. It's like running a credit card, right? You charge it now, but you're going to pay it off over time. At least that's what the credit card companies want you to do. The government's doing the same thing. Again, Republicans, Democrats, doesn't matter. They both take this standpoint. The reason I bring this up is because You don't have control over what the government's going to impose on you from a tax standpoint. I mean, your only control is to vote for the right people. But since, you know, you don't necessarily know that what they're telling to you in their campaign slogan is they're lying, and then they're going to go back to what their party normally has done in the past, you're duped. So you can't control that aspect, and that is frustrating, and that will always be frustrating. There's nothing you can do about it. What you can do is then take control over what you're able to do. So based on what's going on, what changes, it's important to get some advice or at least have consulting with a tax professional because there may be some things you can do. As an idea, for example, Biden is currently wanting to increase the capital tax rate, the capital gains tax rate on people who make more than $1 million to the high or to the highest tax bracket possible. What's going to happen, and what many tax advisors are going to advise if that passes, is that people are just going to hold on to their stuff. They're going to stop selling it. And they're going to wait out this time period when the capital gains tax rate is really high. It's as simple as that. Um, so again, I can't give you specifics because the taxes in the US and in your country are likely going to consistently change because politicians and the people we vote for in government often use tax policy as a way to try to accomplish whatever they promised their voters. So let's talk about how you can manage cash flow because you have absolute control over this. As part of the Profit First system, we recommend you set aside a bank account specifically for the purpose of covering your income tax burden. Now, if you're in a different country like Canada, it's not always considered income tax. I think you guys call it a VAT tax. Or maybe just it's called VAT. Anyways, um, it's that type of tax that I'm talking about here. For things like sales tax or payroll tax, we look at those as operating expenses. In fact, in the US, other than managing sales tax, it should not be your cost. The consumer pays the sales tax and the government forces you to collect it. and then distribute to them. So we don't look at that as an expense. And if you are looking at it as an expense, you need to change your policy on sales tax. The consumer pays the sales tax. Payroll tax is part of operating. There might be some property tax. Those types of things are operating expenses. So it's out of that— it's out of that bucket. The income tax burden is something else, though. The reason we want your business to have a separate tax account is because when you take money home out of the business, we want you to be able to live off 100% of that money. We don't want you to have to take that money and then set aside a portion of it to cover your income tax burden. Look, the business is the one generating the tax burden. Let's have the business save for it. And so here's the tip. Set aside an account for it and sit down once a week or twice a month, whichever frequency you prefer, and take a small percentage of your revenue and sock it away into the tax bucket. Depending on your tax rate, we have clients who range anywhere from 2% of their revenue to 15% at the most of their revenue goes into this tax bucket. By doing it that way, you don't feel the burden that is going to happen if you don't do this, because we see this all the time. We prepare thousands of tax returns a year, so I know this is a thing. The client gets their tax bill, they're like, I didn't even make this much money, or how am I going to even pay this? One, I didn't make this much money, and two, I don't have the money to pay for it. Well, it's because of Parkinson's Law, and I won't go into the details here on this video. I can talk about it later. I've talked about it in the past, but without boundaries around that cash, we're always going to spend it, period. So we're going to put— we're going to set aside the money into a tax bucket so that I don't feel the hurt of setting aside $200 or $500 a month so that I get it at the end of the year. And I get the tax bill, it's like, oh cool, I actually have more than that set aside. Now I can use the excess for other things. It's simple, it's straightforward. That is the easiest way to manage your tax cash outflow. Set aside the money once a week or twice a month into a separate bucket that is designated to cover your income tax burden. Now obviously on the other side, as tax rules change Make sure you have good, healthy tax strategies in place so that you minimize that tax burden. Things as simple as having the right entity selection. Are you an LLC? Are you an S corp? Do you have partners? Are you a C corp? I mean, all of these things affect how much you pay in taxes. Are you taking advantage of some of the strategies? We call it corporate rent. A lot of the world calls it the Augusta Rule. Again, we have resources on our insighttax.com website. I've probably done some videos on in the past as well. We talk about all the time. If you're not familiar with the strategy, look it up. It's very simple for any business owner to implement. It'll save you taxes. $3,000 to $6,000 in taxes is the average that we find with our clients. Are you thinking about is the dollar you're spending related to your business? So are you writing off everything that you possibly can? So make sure you're doing those things too. Yeah, we want to lower your income tax burden, but as far as managing the cash, setting aside the money once a week or twice a month is the easiest possible way. Anyways, hope these help. Remember, profit is a choice. Have the courage and wisdom to choose it.