And act as if it’s a major burden on You, Your Goals, and Your Success. It’s what You signed up for. It’s part of the deal. And today is when We (You and I) execute the proverbial paradigm shift.
Disclaimer: Before reading any further, if you’re of the mindset that taxes should be abolished, or worse, you support a Flat Tax, then save your thumb joint a few scrolls and head back to the Dames tab as this Article is not for you — it’s for the Guy that wants to make it into the “Top 40”, yup the 40% Tax Bracket. Technically it’s 39.6%, but let’s not ruin the pun).
Like most, when it comes to taxes you’re probably jaded. You’ve heard it all before. The overly-broad rhetoric about “Death and Taxes”, or the misguided Meals & Entertainment deduction. “Don’t worry I got this meal –it’s deductible.” Psst, yeah, but only 50% of it. Neither of these should sound new to you, nor are they the basis for this article – they’re just the basis for my argument: STOP LISTENING TO THAT NOISE and embrace the Circumstance.
When you decided to embark on your path to financial success, You made a deal. Whether it’s apparent on the surface or not, when you set up shop, you pledged a portion of your profits to that country, that territory, or that municipality (“Taxing Entities or Entity”) in exchange for access to something of theirs. Whatever that something may be: their populace of individuals with large amounts of discretionary income; their stable legal and economic environment; their labor pool. It should come as no shock to you that these Taxing Entities aren’t in the business of giving up the goodies for free. Frankly, why would they?
Let’s narrow the focus here a bit and personalize the mentality. After-all, we are entering that American past-time known as “Tax Season”. I love Tax Season, not because I’m a CPA (Editorial Note: I’m not a Tax Accountant – see my bio), it’s because my Trust Fund (aka the U.S. Dept. of Treasury) disburses to me a nice fat check every year, kinda like an annuity. Forgive the metaphor. Just focus on the mindset. Somewhere along the way, near the end of my days behind the bar, I stopped begrudging and I embraced the circumstance. I embraced the fact that I live in a socioeconomic environment that allows me to work as hard as I want and make as much money as I want. Once I had that mindset, I no longer saw filing my taxes as a burden. To the contrary, I saw this as a mechanism, one of which I would use to my advantage. In short, it became my savings account and a financial reporting mechanism.
Uncle Sam holds your what?!
My money. First, I changed my W-4 so they would withhold as much as I was able to mark those lines with a 1 instead of a 0. “If you don’t see it, you can’t spend it.” We’ve heard this our whole life, but for some reason this was the good advice that didn’t stick with many of us until our mid-late 20’s or later. Savings accounts and shoe-boxes are accessible but Your Trust Fund, well that’s only accessible during Tax Season when it’s time to get that annuity. Now I know what some of you are thinking . “But you’re not getting any interest on your money.” You’re right. However, I also wasn’t getting any interest on it when I spent it in small, meaningless increments. I’ll swap “lost interest” for that large lump sum nearly every time.
As for the financial reporting aspect:
For individuals that live in a cash-basis world, a tax return provides the basic line items you need to measure your performance during the developmental stage. For individuals its obvious in its simplicity. Examples include basic items such as:
1) Top-Line Revenue
2) Deductible Expenses
Speaking of deductions, once you’re able to itemize your deductions, do it! It’s worth the additional time and you’ll be surprised at how adept you’ll become at intrinsically monitoring those line items throughout the year. If you use TurboTax (like I do) don’t skip the modules the first few years, read them through even if it is to just check ‘N/A’.
As for small companies, you should NOT be filing your own taxes – even if you’re cash strapped. The cash you spend is not a fee from an accountant, it’s an investment into your goals (your cash-flows)! In exchange for that cash you paid an accountant (which is deductible) you get more than you may realize. You get more time (which is not taxable). Your accountant will likely find more deductions than you or TurboTax could, and if it’s a sizable firm like mine, you get access to as much as you are able to cultivate. CPA’s are plugged in with everyone: referrals, lawyers, investors, incubators, etc.
So yeah. Embrace the Circumstance!
You want to get in the Top 40! You want to be the guy that pays income tax, sales and use tax, and personal property tax. Because That Guy, probably pays a luxury tax on the Aston Martin he imported – by air. That Guy is probably subject to the Alternative Minimum Tax, which is pretty much the tax equivalent to one of those password-only parties where everyone wears a mask. That Guy probably has a team of CPA’s providing him transfer and pricing techniques and gifting strategies, all the while mapping his succession plan. That Guy understood that he had to embrace the circumstance and respect his boss.
Circumstance is the Boss.