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This was the year!
You took the bold step of making your side hustle your day job.
You had a decent year, you may not want to live on the income you made for very long, but you made it.
Pat yourself on the back, raise a glass - you are a bonafide entrepreneur, welcome to the club!
That was yesterday; then you filed your taxes.
I remember this day well... "I have to pay what!?"
If you have been an employee all your life, you likely have grown to expect a tax return, not to have to return your hard earned money to the government. You may have even expected to pay a certain sum, after all, everyone has to pay taxes but hoped that your other deductions would offset enough that it wouldn't hurt too much. We can't help it, not everything in our mind makes the switch from employee to a business owner in one year.
Don't give up.
It may feel like there is no point in owning a business if it is always going to be an uphill battle to get ahead.
Here's the thing, that is not how it has to be, and you have choices to solve this problem now.
So many times I see entrepreneurs fail to thrive because they think there are only two choices; to succeed or fail. There are always more than two choices; you just have to stop, think, strategize and decide.
Stop
Stop all the doomsday scenarios running through your brain how you are not going to make it because you're ruined, and allow your mind to open to the possibility that there is not just one way, but many around this.
Think
Think differently, as any life coach will tell you, change your mindset, and you change your life.
It goes a little something like this...
Everyone has to pay taxes, so, so do I. If I didn't know how much more I would have to pay as a sole proprietor or small business owner, now I do. Lesson learned. Now is probably a good time to hire an accountant for next year so I can plan ahead.
This is a sign of my success. I rocked the shit out of this year! I just need to get over this hump, and I will be on my way.
Strategize
Now that your mind is in a better place, it is time to figure out how you are going to pay this year's tax bill while still growing your business. I highly recommend hiring a financial planner. Most small business owners think that they can't afford one, this simply isn't true. There are two business professionals you can not afford NOT to hire, an accountant and a financial planner. They both can save you more money then you will ever pay them by educating you on deductions, tax savings and damn good ideas you're in the wrong industry to come up with yourself. Don't settle for the first one you google, interview and ask questions to make sure they can see things with a big picture strategy and that your best interest is at heart.
(The following brainstorming example is not to take the place of a financial professional's advice, or your own good sense. Only you and the professional you choose to entrust the knowledge with, know your true financial situation and how these ideas would impact the overall picture.)
Do you have resources of which you are unaware? What about:
Part of your plan should be how you are also going to pay next year's taxes. Hiring an accountant to project your quarterly taxes and show you how to pay them can then be part of your immediate strategy for paying your taxes now.
Decide
There are more solutions to consider, and it may take employing many ideas to make it work. But, you do not have to choose to quit. If you choose NOT to quit, then more decisions need to be made to move forward. The important thing is to move.
Happy Tax Day! You Earned It!
Pat yourself on the back, raise a glass - you are a bonafide entrepreneur, welcome to the club!
You took the bold step of making your side hustle your day job.
You had a decent year, you may not want to live on the income you made for very long, but you made it.
Pat yourself on the back, raise a glass - you are a bonafide entrepreneur, welcome to the club!
That was yesterday; then you filed your taxes.
I remember this day well... "I have to pay what!?"
If you have been an employee all your life, you likely have grown to expect a tax return, not to have to return your hard earned money to the government. You may have even expected to pay a certain sum, after all, everyone has to pay taxes but hoped that your other deductions would offset enough that it wouldn't hurt too much. We can't help it, not everything in our mind makes the switch from employee to a business owner in one year.
Don't give up.
It may feel like there is no point in owning a business if it is always going to be an uphill battle to get ahead.
Here's the thing, that is not how it has to be, and you have choices to solve this problem now.
So many times I see entrepreneurs fail to thrive because they think there are only two choices; to succeed or fail. There are always more than two choices; you just have to stop, think, strategize and decide.
Stop
Stop all the doomsday scenarios running through your brain how you are not going to make it because you're ruined, and allow your mind to open to the possibility that there is not just one way, but many around this.
Think
Think differently, as any life coach will tell you, change your mindset, and you change your life.
It goes a little something like this...
Everyone has to pay taxes, so, so do I. If I didn't know how much more I would have to pay as a sole proprietor or small business owner, now I do. Lesson learned. Now is probably a good time to hire an accountant for next year so I can plan ahead.
This is a sign of my success. I rocked the shit out of this year! I just need to get over this hump, and I will be on my way.
Strategize
Now that your mind is in a better place, it is time to figure out how you are going to pay this year's tax bill while still growing your business. I highly recommend hiring a financial planner. Most small business owners think that they can't afford one, this simply isn't true. There are two business professionals you can not afford NOT to hire, an accountant and a financial planner. They both can save you more money then you will ever pay them by educating you on deductions, tax savings and damn good ideas you're in the wrong industry to come up with yourself. Don't settle for the first one you google, interview and ask questions to make sure they can see things with a big picture strategy and that your best interest is at heart.
(The following brainstorming example is not to take the place of a financial professional's advice, or your own good sense. Only you and the professional you choose to entrust the knowledge with, know your true financial situation and how these ideas would impact the overall picture.)
Do you have resources of which you are unaware? What about:
- That 401K you still need to roll over - a financial advisor can help you decide if there is a way you can borrow from yourself to pay your taxes and how to do it with the least amount of tax penalty the next year.
- Do you have equity in your home? Maybe a home equity loan is an option.
- You may qualify for a personal loan, choosing one with the lowest interest rate and best terms is important. (enter the financial advisor again)
- Did you know that IRS offers a monthly payment plan for federal income taxes? You could qualify, it is very easy to apply, and you find out instantly - learn more here.
- The CRA in Canada also has its own version of payment arrangements - learn more here.
- You could ask your father-in-law for money. (I just put this one in here to make sure you are still awake) No really, depending on your relationship, you could ask your mother-in-law to ask your father-in-law for money.
Part of your plan should be how you are also going to pay next year's taxes. Hiring an accountant to project your quarterly taxes and show you how to pay them can then be part of your immediate strategy for paying your taxes now.
Decide
There are more solutions to consider, and it may take employing many ideas to make it work. But, you do not have to choose to quit. If you choose NOT to quit, then more decisions need to be made to move forward. The important thing is to move.
Happy Tax Day! You Earned It!
Pat yourself on the back, raise a glass - you are a bonafide entrepreneur, welcome to the club!
Rebecca Garza is a Start-up Business Coach and Online Marketing Consultant who helps small businesses build a brand presence and grow.