Knowing our value brings the benefits of increased income. However, the thought of increased income often brings up anxiety for many. The increase is desired but handling taxes on that income can be somewhat disappointing.
Most taxpayers believe they have to pay at least 50% income tax on business income. Therefore, one of three things may occur:
- A portion of the income is unreported (cash sales)
- Incomplete records to avoid documenting the income (no bookkeeping)
- Services are given away instead of priced and billed. (the business owner may feel undeserving or fearful of taxes)
If you have ever said to yourself, “I don’t need the extra money, I have enough because the taxes are just too stressful anyway.” You have a money block due to fear of taxable income.
Eventually, your income sources will cost more money in the end and you will end up with a money leak due to being disobedient with finances. Haggai 1:6 You have planted much, but harvested little. You eat but never have enough. You drink but never have your fill. You put on clothes but are not warm. You earn wages, only to put them in a purse with holes in it.” The avoidance of paying taxes results in improper bookkeeping, missing many deductible expenses and falling short on paying tithes.
Paying taxes is not optional if you have taxable income but the amount of taxes is flexible. Tax deductions and credits lower the amount of taxable income. A number of tax deductions are controllable throughout the year with effective spending, budgeting, creating a money plan and using it, and bookkeeping with accounting software.
Top 3 Steps to Create a Path to Financial Obedience and Wealth
Bookkeeping, financial reporting, and recordkeeping are the top three steps to begin a path of financial obedience and to create financial wealth. Romans 13:6-7 NIV “This is also why you pay taxes, for the authorities are God’s servants, who give their full time to governing. 7 Give to everyone what you owe them: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respects; if honor, then honor.” This bible verse states we are to pay what is due. We also have a responsibility to pay what we owe others and we are to be honored for the revenue we earn.
Diligence in managing finances will reduce taxes and we remain in good standing with the IRS for payment. We also earn our value in order to provide for ourselves and our families.
Manage taxes by taking the following steps:
- report all earnings
- create a quarterly tax plan
- track owner’s pay and payroll
- track the cost of business (COGS or COSS) as well as controllable spending (expenses)
Learn more about how to calculate COGS or COSS and the differences between COGS/COSS and Expenses. Learn more…
If we create a spending plan with qualified business deductions we are able to qualify for larger deductions at the end of the year and save money on taxes. Check in with your tax preparer or accountant for a tax planning session.
If you would like to learn more about taxable income and the different types of income join me for a B&P ATA – Ask The Accountant session.
Tax deductions can vary in the amount allowed to be deducted. Example: charitable deductions for certain organizations can cap out at 50% while other organizations only qualify us for a 30% deduction depending on the type of organization. On the business side, most purchases are deductible.
Let’s brainstorm about ways to save you money in your personal and business finances. Hope over and schedule a money saver complimentary consultation. Stop the money leaks in your life today!