I ran across this promotion on a recent trip. Most people, particular entrepreneurs, think taxes are cruel because one of the biggest mistakes made by entrepreneurs is not paying enough attention to their taxes. This includes their income taxes, sales taxes and employment taxes.
I’m fond of telling people that the quickest way to put cash in your pocket is to reduce your taxes. I will also tell you that the quickest and surest way to go out of business is to not pay the taxes you owe.
I see many new businesses generate significant amounts of cash flow only to get in trouble because they didn’t reserve enough of their cash flow to pay their taxes. What happens is that the entrepreneur finds many uses for the cash during the year (success breeds spending). Then, comes tax time and they find out from their accountant that they owe a bunch of money and they don’t have it. Then they spend the next several months paying off the prior year taxes.
As soon as the prior year is paid off, next year is due. So the entrepreneur gets into a nasty routine of always being behind on their tax payments. And they begin to feel like they are working full time for the government (which isn’t far from the truth, unfortunately). The best way to handle taxes is to start with a strategy. A tax strategy is simply a plan of action developed by you and your tax advisor to permanently reduce your taxes and to set aside enough money monthly to pay what obligation you do owe.