Are you hard on yourself when it comes to savings for taxes?
Even though I have a system for saving for taxes, I’m always a little nervous that I’m going to owe a big fat bill.
For those of you that have checked “file my taxes” off of your to-do list, let me send you a heartfelt congratulations.
As we pivot our focus to moving forward, there’s one mistake I see that I want to draw your attention to.
If you collect sales tax, you need a separate bank account for it.
This is another account in addition to the 5 accounts from Profit First (Income, Profit, Owner’s Pay, Operating Expenses, & Taxes).
When it comes to sales tax, it’s important to remember that you are collecting it on behalf of the government. You sell your product for a set price, and the government adds sales tax to the top of it.
Your job is to collect it, and then turn around and give it to the government.
What happens too often is sales tax gets lumped into our operating expense account. And, unfortunately, what gets dumped in there gets spent.
By opening a separate bank account, you can immediately put the needed percentage into that account before making your other allocations.
Don’t get stuck with penalties when it comes to your sales tax. Open the account today and start allocating the funds.
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