Taxes are our biggest expense, bar none. But, when you know how to use the tax system to your advantage, you can actually have the government subsidizing your expenses. It’s the best part of owning your own business.
Yet, most of us are doing it miserably wrong, and hoping that a CPA or bookkeeper will come along to save us.
It’s not the case. Unless you are making enough money to pay a minimum of $1,000/mo (and likely a lot more - I pay my CPA team $3k/mo) to advise you on saving money on your taxes, your CPA isn’t going to help you save money on your taxes.
If you cannot afford to pay a tax advising CPA, you’re probably hiring a tax filing CPA, and they are going to be as conservative as possible in getting your tax return filed, and they are going to base your tax return on the numbers you give them.
Even if you are paying a tax advising CPA, if you do not know the right questions to ask, or how to make sure you are actually getting good guidance, they are not going to save you money on your taxes. Period. And, it may even cost you more than you expected.
The first year I made a million, I had a great CPA, but I wasn’t asking the right questions, and she wasn’t proactively guiding me, and I ended up with an unexpected $115,000 tax bill …
The worst part is that if we had planned proactively, it likely could have been as low as $50,000 or less.
So, listen in on today’s episode of the Quingdom podcast and learn the right questions to ask, how to save yourself money on your taxes, and what you need to know once you become a business owner to hire the right CPA.
TLDL:
You cannot hire a CPA to save you money on your taxes until you are prepared to pay $1k-$2,500/mo or so for tax advice, not just tax filing. You’re likely going to be around $3M/year of revenue before you are ready to do that.
In the meantime, focus on learning to be your own best advisor, which starts with you working with a bookkeeper to have your books reconciled and your income and expenses categorized and reviewed every month.
Each month, meet with your bookkeeper, review their preliminary categorization, and re-categorize creatively for maximum deductions.
Then, every October or November, latest, get tax projections from your CPA based on year to date revenue and expenses PLUS expected revenue and expenses through year end. When you get your tax projections back, as your CPA for 3 strategies to decrease your taxable income before year end, based on those projections.
To become your own best advisor, and learn how to categorize your expenses so you can maximize your ability to write-off the most significant number of expenses against your income, I recommend these two resources:
Sandy Botkin’s book: How to Save Money on Your Taxes Big-Time and the
LIFT Foundation System, my course to support you to get smart about legal, insurance, financial and tax matters.
Post your follow up questions in the comments, and I’ll answer them in a future episode.
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