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Why Tax Season Feels Like a Crisis (And How to Make Sure It Never Does Again) · Profit Points Podcast

• 0:00
  SPEAKER_00: Hey, glad you're here.
• 0:01
  SPEAKER_00: This is Profit Points, and I'm Megan Schwant, your accounting sidekick and certified Profit First Professional and Fix the Snext Advisor.
• 0:09
  SPEAKER_00: If you're a small business owner who wants to actually understand what is happening in your business financially, not just survive it, but genuinely get it, you're in the right place.
• 0:20
  SPEAKER_00: Every episode covers one concept, uses real numbers, and ends with something you can actually do.
• 0:26
  SPEAKER_00: That's the deal.
• 0:27
  SPEAKER_00: Let's talk about today's topic.
• 0:47
  SPEAKER_00: Guess what that is?
• 0:49
  SPEAKER_00: It's taxes.
• 0:51
  SPEAKER_00: And today, specifically, I want to talk about why tax season feels like a crisis every year without fail for so many business owners.
• 1:02
  SPEAKER_00: Because I promise you, it doesn't have to be that way.
• 1:06
  SPEAKER_00: And once you understand why the crisis happens, you can choose to stop it.
• 1:15
  SPEAKER_00: The thing about taxis and stress is that it's not actually about taxes per se.
• 1:21
  SPEAKER_00: It's really more about timing and planning, or more accurately, a lack of both.
• 1:28
  SPEAKER_00: The stress comes from not the taxes themselves, but from the surprise.
• 1:37
  SPEAKER_00: Surprise in the form of a bill that you weren't expecting, a number that you didn't plan for, a payment you don't have the cash to cover.
• 1:47
  SPEAKER_00: And what makes it worse is that this scenario plays out very predictable in a very predictable schedule.
• 1:54
  SPEAKER_00: Tax day doesn't move, except during COVID.
• 1:59
  SPEAKER_00: The IRS due date is the same every single year.
• 2:03
  SPEAKER_00: And yet, for millions, and I mean millions of business owners, April still feels like an ambush.
• 2:11
  SPEAKER_00: Ever feel like that?
• 2:12
  SPEAKER_00: Why does this keep happening?
• 2:14
  SPEAKER_00: There are three reasons that I have come up with.
• 2:17
  SPEAKER_00: First, business owners aren't tracking income throughout the year.
• 2:22
  SPEAKER_00: So they have no idea what their tax liability is building up to.
• 3:47
  SPEAKER_00: Tax awareness means you acknowledge that obligation proactively and you plan accordingly.
• 3:54
  SPEAKER_00: So let's walk through this concept concept as a scenario.
• 4:00
  SPEAKER_00: Let's say you're a sole proprietor and your business earns$80,000 in net profit for the year.
• 4:07
  SPEAKER_00: Net profit as a reminder is your total sales minus your expenses.
• 4:13
  SPEAKER_00: So not what you pay yourself, not the loan payment that you make, not previous year tax payments that you've made, but your income that comes in from sales and your operating, your expenses used to operate and grow your business at a combined self-federal self-employment and income tax rate.
• 4:34
  SPEAKER_00: Let's say it's around 30% to keep this simple.
• 4:38
  SPEAKER_00: You owe on that$80,000, you owe or will owe approximately$24,000 in taxes.
• 4:45
  SPEAKER_00: That's$2,000 per month.
• 4:48
  SPEAKER_00: If you earn that$80,000 relatively evenly throughout the year, you should have been setting aside that$2,000 every single month.
• 4:57
  SPEAKER_00: That's the money that belongs to the IRS, not to you.
• 5:02
  SPEAKER_00: But here's what typically happens: the$80,000 comes in throughout the year and it goes out.
• 5:08
  SPEAKER_00: It goes out into operations, into growth, into owners' draws, into expenses.
• 5:14
  SPEAKER_00: And by December, your bank account looks like any other month.
• 5:18
  SPEAKER_00: And then January arrives and you get your documents together, and your tax preparer tells you you owe$24,000.
• 5:27
  SPEAKER_00: And now you only have$6,000 in savings.
• 5:31
  SPEAKER_00: Now that's the crisis, not the taxes, but the absence of a savings habit specifically for taxes.
• 5:39
  SPEAKER_00: Now imagine with me.
• 5:42
  SPEAKER_00: Imagine instead that you had opened a separate savings account, let's call it your tax account.
• 5:50
  SPEAKER_00: And every time your revenue came in, you transferred 25 to 30% of your net profit into that account automatically.
• 5:59
  SPEAKER_00: By December, you'd have somewhere between$20,000 and$24,000 sitting there, waiting, untouched, specifically earmarked and set aside for taxes.
• 6:11
  SPEAKER_00: Now tax season goes from crisis to prepared.
• 6:16
  SPEAKER_00: You write the check, maybe you have a little bit left over, you move on with your life.
• 6:22
  SPEAKER_00: Same tax bill, but completely different experiences.
• 6:27
  SPEAKER_00: Wouldn't that be nice?
• 6:30
  SPEAKER_00: And then there are your quarterly estimated tax payments, which if you expect to owe more than$1,000 in taxes for the year and you or you owed money previous year, the IRS expects you to pay for installments throughout the year.
• 6:44
  SPEAKER_00: Those are typically due in April, June, September, and January.
• 6:49
  SPEAKER_00: Miss those payments and you will face a penalty.
• 6:52
  SPEAKER_00: Usually it's not huge, but it's real and it's entirely avoidable if you make these estimated payments.
• 6:59
  SPEAKER_00: These estimated payments are essentially prepaying your tax bill so that you're not hit all at once.
• 7:05
  SPEAKER_00: When you're self-employed, you don't have taxes taken out of your check, or at least not the full amount, right?
• 7:14
  SPEAKER_00: Even if you are on salary.
• 7:15
  SPEAKER_00: So estimated taxes are usually the equivalent of that.
• 7:19
  SPEAKER_00: They are helping you pay in throughout the year.
• 7:22
  SPEAKER_00: If you're not making them, put this on your list to talk to your accountant about immediately, especially because we are now past the first quarterly estimated tax payment date.
• 7:34
  SPEAKER_00: If you don't have an accountant, please book a call with me because I'd love it to talk to you about getting this on track for 2026.
• 7:43
  SPEAKER_00: This is the year of being proactively strategic and making those profit points in your business better.
• 7:51
  SPEAKER_00: So your action step is to open a separate savings account this week and label it taxes.
• 7:58
  SPEAKER_00: If you don't have that already, and then I want you to start taking 25 to 30% of whatever your net profit has been this last month or the last quarter so far and transfer it in.
• 8:11
  SPEAKER_00: And then do that same thing every month going forward.
• 8:15
  SPEAKER_00: If you already owe estimated taxes and miss that payment, you can talk to your accountant about catching up.
• 8:22
  SPEAKER_00: But the bigger part is getting that money put aside because it's gonna help you have that planned and set aside and put off.
• 8:32
  SPEAKER_00: And it's trust me, like we work with hundreds of business owners, and this part of it, when they put it into practice, is really life-changing because now instead of you feeling all of this pressure, you have it set aside and ready to pay taxes.
• 8:48
  SPEAKER_00: I can't tell you how many clients I've worked with using Profit First and the methodology that this is kind of coming from, and they get to tax time, and a lot of times they have even more than what they need for their tax bill set aside.
• 9:01
  SPEAKER_00: And you know what you get to do with that?
• 9:03
  SPEAKER_00: You get to either pull it out for yourself or you can leave it in there for the next year, and you already have a big start, you know, up into having that money put aside.
• 9:14
  SPEAKER_00: Okay, so this was a quick one today because it's simple, but like most things that are simple, that doesn't mean it's easy, right?
• 9:26
  SPEAKER_00: And so I know sometimes the habit of putting money aside and putting it into a different bank account, creating a different bank route, these can all feel like big steps, but in the long run, these things pay off.
• 9:40
  SPEAKER_00: Um, and when we do bookkeeping for our clients, this is something that we include with our monthly report.
• 9:45
  SPEAKER_00: So it becomes like a no-brainer thing that can happen.
• 9:48
  SPEAKER_00: Tax season can be calm, it can be sorry, uneventful.
• 9:54
  SPEAKER_00: It can be a Tuesday where you write a check and go about your business.
• 9:57
  SPEAKER_00: It just requires spreading that attention across 12 months instead of packing the panic into six weeks during tax season.
• 10:06
  SPEAKER_00: You have everything you need to make this shift.
• 10:09
  SPEAKER_00: The only thing missing is the habit.
• 10:13
  SPEAKER_00: So make it a habit, put it in your calendar.
• 10:15
  SPEAKER_00: When are you gonna transfer that money?
• 10:17
  SPEAKER_00: When are you gonna open that account?
• 10:20
  SPEAKER_00: Take the action.
• 10:21
  SPEAKER_00: If you want a team that handles this proactively, that makes sure you know what you owe before it's due, keeps you on track with estimated payments, and makes sure tax season is never a surprise.
• 10:33
  SPEAKER_00: That's us.
• 10:33
  SPEAKER_00: That's sidekick accounting.
• 10:35
  SPEAKER_00: Please book a strategy call.
• 10:37
  SPEAKER_00: You can go to chatwithmeg.com.
• 10:40
  SPEAKER_00: That will take you to my website.
• 10:43
  SPEAKER_00: Look at the thing down there.
• 10:45
  SPEAKER_00: Chatwithmeg.com.
• 10:47
  SPEAKER_00: And you can book a strategy call.
• 10:49
  SPEAKER_00: And hey, if you've got a fellow business owner who you think needs this conversation, maybe you've heard some grumblings now that we're past the April 15th deadline.
• 10:59
  SPEAKER_00: I want you to please share this episode.
• 11:01
  SPEAKER_00: I'm Megan.
• 11:02
  SPEAKER_00: This is the Profit Points Podcast, and I will see you next week.
• 11:07
  SPEAKER_00: Bye.
• 11:08
  SPEAKER_00: All right, that's your episode this time.
• 11:10
  SPEAKER_00: Don't forget your action step.
• 11:12
  SPEAKER_00: I want you to actually do it, not just add it to the list.
• 11:15
  SPEAKER_00: If this episode was helpful, share it with a fellow business owner who needs to hear it.
• 11:20
  SPEAKER_00: And if you're ready to go deeper on your specific numbers, book a strategy call with Sidekick Accounting.
• 11:25
  SPEAKER_00: Go to chatwithmeg.com, and I'll see you next time on Profit Points.