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Monday Money Myth: I'll Worry About Taxes When Tax Season Gets Here · Sell Well: Helping Agencies Close More Deals and Grow Revenue

• 0:02
  SPEAKER_01: Hey everyone, and welcome back to another Monday Money Myth.
• 0:05
  SPEAKER_01: I'm here with Jason.
• 0:06
  SPEAKER_01: I'm super excited to dive into this one.
• 0:09
  SPEAKER_01: Everybody loves talking about taxes.
• 0:10
  SPEAKER_01: I feel like we're far enough away from tax day that we can actually talk about it without shuddering.
• 0:16
  SPEAKER_01: So excited to bring up today's myth.
• 0:20
  SPEAKER_01: It is especially relevant right now that I feel like everybody's paid their taxes and they're feeling like, oh, I just never want to look at it again.
• 0:27
  SPEAKER_01: I'll worry about it next year.
• 0:29
  SPEAKER_01: That's 2027, Susie's problem.
• 0:31
  SPEAKER_01: Um, and she'll deal with it when it gets here.
• 0:34
  SPEAKER_01: So today's myth is I'll worry about taxes when tax season gets here.
• 0:39
  SPEAKER_01: Jason, tell us uh about this and if you hear this all the time.
• 0:44
  SPEAKER_00: Oh my goodness.
• 0:45
  SPEAKER_00: Uh this is probably the the biggest topic that I get, particularly when I take over new clients.
• 0:51
  SPEAKER_00: Um and and I think it's a I think it's a paradigm.
• 0:55
  SPEAKER_00: I think uh a lot of uh you know a lot of small businesses don't view tax, a tax liability like they view payroll liability, right?
• 1:07
  SPEAKER_00: Or they view other liabilities within the business.
• 1:12
  SPEAKER_01: Break that down for us.
• 1:13
  SPEAKER_01: What do you mean by that?
• 1:14
  SPEAKER_00: I I'm I you know it's it's been kind of interesting for me.
• 1:17
  SPEAKER_00: Uh, and and I think it's probably part of it's just a function of timing, right?
• 1:23
  SPEAKER_00: So, you know, it comes once a year versus payroll you got to run every week or or every two weeks.
• 1:29
  SPEAKER_00: So it's not necessarily staring you in the face.
• 1:32
  SPEAKER_00: And so it's easier to kind of put off, essentially, uh and kind of kick to the to the side.
• 1:40
  SPEAKER_00: Um, but you'd just be amazed at how many uh you know small businesses uh when I tell them their total tax liability come tax time, they're just shocked, you know.
• 1:50
  SPEAKER_00: And I said, Well, you you know, your business made$450,000.
• 1:54
  SPEAKER_00: The RS is going to get a chunk of that.
• 1:57
  SPEAKER_00: You can either, you know, pay it in one lump sum or plan for it, right?
• 2:02
  SPEAKER_00: And it sort of it sort of dovetails into kind of the cash flow modeling.
• 2:06
  SPEAKER_00: So part of that cash flow modeling is also modeling estimated taxes and understanding kind of what you're gonna, you know, need to set aside on a on a every month basis so that you don't run into this, run into this trap.
• 2:21
  SPEAKER_00: But uh it's a very interesting mindset that I that I find out there.
• 2:25
  SPEAKER_00: And I think it's just I think there's just this intimidation factor around you know the tax code and and not having a clue as to how much you're gonna owe, right?
• 2:36
  SPEAKER_00: Um, and there's probably some fear sort of baked into that too, without, you know, without without knowing.
• 2:43
  SPEAKER_00: Uh and you know, I think folks just some folks would just rather be like really shocked and surprised at how much they owe.
• 2:52
  SPEAKER_00: Um, but you know, once I start working with them over time, uh, they really begin to see the value in understanding what that tax liability is gonna be now for next April, right?
• 3:04
  SPEAKER_00: It's just it takes such a load off.
• 3:06
  SPEAKER_01: That's really interesting.
• 3:08
  SPEAKER_01: I think um I I fall in in every camp.
• 3:10
  SPEAKER_01: At one point I called a CPA and I said, here's what I want to do with taxes this year.
• 3:14
  SPEAKER_01: I think this is gonna be a really good strategy.
• 3:16
  SPEAKER_01: Here's like you just described tax evasion.
• 3:18
  SPEAKER_01: There's this kind of feeling like I I can weasel my way out of this or I can do it smarter.
• 3:24
  SPEAKER_01: And then on the other side, kind of what you're saying, like I just want to bury my head in the sand and I don't want to look at this until I have to.
• 3:31
  SPEAKER_01: Um, and then there's kind of this shock and disappointment later and just feeling like, did my business even do that well?
• 3:37
  SPEAKER_01: And just this kind of emotional roller coaster.
• 3:40
  SPEAKER_01: What would you recommend if somebody's sitting here today, a month post tax season, um, that they can do to make next year less painful?
• 3:50
  SPEAKER_00: Get get your books in order is is probably the the biggest, you know, most foundational thing you can do in in your business.
• 3:59
  SPEAKER_00: And whether you're managing your books yourself or you've outsourced that component, you know, um, you know, that's foundational to my business is bookkeeping, you know.
• 4:10
  SPEAKER_00: Um, and if you don't have sort of that necessary layer in place, you you're just flying blind, essentially.
• 4:17
  SPEAKER_00: So you, you know, you don't even know kind of you know if your business is profitable in a in a given month.
• 4:23
  SPEAKER_00: Um, but that that allows you to really begin to see profitability by month and see it grow over the course of the year.
• 4:34
  SPEAKER_00: Uh and really you can, you know, once you have that number, right, and depending on what else you have going on, you know, maybe you have rental properties, maybe your spouse works outside the home and collects W-2, I mean, all those elements sort of factor in.
• 4:48
  SPEAKER_00: But uh it really comes down to a very you know, fairly straightforward formula.
• 4:54
  SPEAKER_00: Uh and it's not gonna be perfect, but you know, if you're setting aside from a profit perspective on your business, if you're setting aside anywhere from 20 to 25 cents on the dollar every single month for taxes, then you're gonna be just fine, right?
• 5:11
  SPEAKER_00: Uh again, there may be some outliers around that, but having folks you know start to plan for that, understand what their profit margin is, understand that 20 to 25% is going to go to the IRS, right?
• 5:25
  SPEAKER_00: Uh, and then you know, also figuring out how to pay yourself relative to that.
• 5:31
  SPEAKER_00: So I just think it's it's critical to kind of establish that foundation.
• 5:37
  SPEAKER_00: Um, and I would say, you know, the other thing that I find a lot and I feel the lot of questions uh is sort of the latest social media IRS tax savings craze uh that's that's out there that 90 90% of them are garbage.
• 5:53
  SPEAKER_00: Uh, you know, and so and so you you really need someone who's in your corner, who understands the tax code, because it changes from from year to year, right?
• 6:05
  SPEAKER_00: And there are some subjective elements in the in the tax code where you can, you know, potentially push the limits in in certain areas, um, but it just has to kind of pass this reasonableness test, right?
• 6:18
  SPEAKER_00: And that's kind of how the IRS views everything.
• 6:21
  SPEAKER_00: You know, uh, was that trip to Tahiti, you know, reasonable in the course of your business?
• 6:29
  SPEAKER_00: Uh, you know, because you wrapped your vehicle in your business logo, uh, is that a reasonable, you know, justification for depreciating your entire vehicle?
• 6:41
  SPEAKER_00: You know, I mean, it's so if you just have someone in your corner who who understands those elements, right?
• 6:48
  SPEAKER_00: And I, you know, I would say I probably tend to fall more on the conservative side of kind of the interpretation um there, because I mean the last thing you want to do is push the envelope and and get audited, and that just creates a lot of headache and hassle and stress.
• 7:05
  SPEAKER_01: Yeah.
• 7:06
  SPEAKER_01: And all of that headache and stress takes away from time that you could be growing your business.
• 7:13
  SPEAKER_01: It's a much bigger cost than just paying your taxes.
• 7:16
  SPEAKER_01: Um, and I love what you said about just not buying into the social media garbage that's out there.
• 7:22
  SPEAKER_01: I feel like we could have named today, Smith, like the 23-year-old on LinkedIn is not your tax expert to go to.
• 7:30
  SPEAKER_01: Um so I love that.
• 7:32
  SPEAKER_01: I think that's awesome.
• 7:33
  SPEAKER_01: Well, I love too that you gave people a specific number, somewhere between 20 and 25%, you're gonna be in a really good spot.
• 7:38
  SPEAKER_01: And hopefully it's less than that.
• 7:40
  SPEAKER_01: But at that point, you've got a really nice tax savings account.
• 7:43
  SPEAKER_01: Last question at what point?
• 7:46
  SPEAKER_01: So if somebody has just started a business, they just hung up their shingle, they're getting going, at what point do they have to worry about paying taxes?
• 7:55
  SPEAKER_00: Uh the the moment the business turns profitable, there will be, you know, potentially tax consequences around that, right?
• 8:04
  SPEAKER_00: And uh and you know, you also have to worry about if you're running multi-years of losses for the business because uh at some point the RS will look at that and say, that's not a business, that's a hobby, right?
• 8:18
  SPEAKER_00: And so uh and so, you know, so once once the business starts to generate, you know, some cash flow and is profitable, uh obviously the the higher the the profit, you know, the more in and more in taxes you're gonna have to pay.
• 8:34
  SPEAKER_00: But uh yeah, I mean, you know, the the moment your business gets in the gets in the black, as they say, uh, is the moment that you know the RS is going to lay claim to some of that, right?
• 8:46
  SPEAKER_00: And you may be on the lower end, right?
• 8:48
  SPEAKER_00: You may be at 10 10% on the dollar until your business sort of really ramps up from kind of a tax savings perspective.
• 8:55
  SPEAKER_00: The other thing I would say is, and then what has been an absolute game changer for a number of my clients is actually setting them up on estimated tax payments.
• 9:05
  SPEAKER_00: Um, because now we have really good forecasting in place.
• 9:10
  SPEAKER_00: We understand what that tax liability is going to be.
• 9:13
  SPEAKER_00: Uh, we can set up those estimated tax payments to come out quarterly to the IRS and it's automatic, right?
• 9:21
  SPEAKER_00: And so as long as the client is prepared for that and they have enough money in the bank and they know that you know$7,500 is going to come out on June 15th for that Q2 estimated tax payment.
• 9:34
  SPEAKER_00: Um, you talk about just a major burden lift off of them, knowing that that's kind of handled throughout the year.
• 9:41
  SPEAKER_00: So that when you get to 2027 and you're filing 2026 return, uh your tax liability is virtually zero if you've estimated appropriately and you've paid into the system.
• 9:53
  SPEAKER_01: I love that.
• 9:54
  SPEAKER_01: Jason, thank you so much for answering so many questions about taxes today.
• 9:58
  SPEAKER_01: Um, I know that it's not anything that anybody wants to sit around and think about, oh, I've got to pay all these taxes, but I think you do such a great job of making people feel better about it.
• 10:08
  SPEAKER_01: Um, and knowing that if you're paying a lot in taxes, your business is killing it.
• 10:12
  SPEAKER_01: Um, you're doing great and your business is growing.
• 10:14
  SPEAKER_01: So it's always something to just kind of see the bright side on.
• 10:18
  SPEAKER_01: Um really excited to be back with you next week.
• 10:21
  SPEAKER_01: Thank you so much for listening.
• 10:22
  SPEAKER_01: Until next time, sell well.