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So you are getting a tax refund, now what?

Posted by Linda Chambers on Fri, Mar 30, 2018 @ 09:00 AM

If you are like most people when you get a tax refund you want to go treat yourself with these new found gains; go on vacation, eat out, buy new clothes or toys, etc.

But you need to treat them like what they really are, delayed income. Hopefully you don't blow each paycheck on just fun things that leaves you with nothing to show for it, so what really is the best way to spend a tax refund?

refundcoming

1. Treat it as a normal paycheck. Hopefully you have a system in place on how you spend your work income so do exactly the same thing.

2. If you do not already have a rainy day or emergency fund open it now with all this money into a separate account you do not plan on accessing except in an emergency.

3. Use it to pay on or off your highest interest bill, reducing your monthly expenses.

4. Invest in yourself. Pay for a certification class, go to a business convention, pay for your CDL license. Anything that will increase your work value.

5. Add it to a down payment you are building for a house. The higher your down payment the lower the loan amount and lowers future monthly mortgage payments.

6. Pay for needed vehicle or home repairs. Things that are truly needed not just a cosmetic home improvement.

7. Invest in your retirement. Pay into or open an IRA.

8. Invest in your children's future, pay into or open a college savings account.

9. Invest in your business. Buy new equipment, in full, that will improve your work or expand your ability to do new jobs. Pay off any loans you have now to reduce expenses.

10. Spend a small amount for fun, ex: $100 for a fun night out for the family.

This is what my husband and I have done with our tax refund for years no matter if it is less than a few hundred dollars or thousands. We have a 20/20/20/20/10/10 plan;

20% to catch up on any overdue bill or prepay any large upcoming one, like quarterly car or house insurance.

20% into savings.

20% to pay on highest interest credit card.

20% to pay for vehicle maintenance, new tires, brakes etc.

10% tithe to the church.

10% for fun.

The main thing is that you try to not have to pay extra at tax time. It is really best to calculate your payroll taxes so that you can bring home as much as possible with each paycheck instead of deferring that money into a large tax refund that you will just have to pay more taxes on again next year.

Tags: Taxes, tax refund, business plan

Taxes

Posted by Linda Chambers on Fri, Mar 27, 2009 @ 09:00 AM

One of the most dreaded words of the small business owner.

I wanted to share a few tips we have found to pass on along with some other links that may help some of you.

First tip: Get some professional help. I do not mean to have to pay a fortune for this help but too many small business owners think they can do it themselves and find out only years later after an audit, that they either owe money they don't have or wasted money they could have gotten back, but is now too late to recover it.

Even if you just read up on the subject, go on line for a self help like at Entrepreneur.com or pay for a tax filing program you will be ahead of the game.

Here is a link to a great lady I know Diana Crawford. She did tax audit videos for a client and it has helped many people, one link is at the end of this post. Besides just being an accountant with a CPA degree she is an Intuit QuickBooks expert. So if you use QuickBooks and have a problem give her a shout (I suggest you use some type of computer program). She will help anyone or at least steer them to a local person that can. She teaches QuickBooks small business classes for free and does Beta testing for Intuit on new versions of QuickBooks and is an Intuit Trainer. If you already have QuickBooks there is a wealth of free information just through Intuit Support on line.

dcrawford@cmccpas.com is her e-mail. Please indicate on the subject line or in your e-mail that you are a Soap Warehouse customer. She is also available to do any ones businesses taxes, her firm handles clients across the country.

Right now we are planing to start recording her free "How to set up your small business with QuickBooks" sessions so she will have more time to devote to hosting other advanced classes. We are also discussing with her to possibly make a video just for pressure washing businesses to address their specific needs to put on our site. I will let everyone know as soon as new sessions are available.

Next make sure you are tracking every expense. Do you give out coupons or give discounts for services to customers? You need to track that money as cost of advertising, this expense is to be taken against the money you made. If you list your total income minus cost of labor and supplies but forget this amount it could be costing you hundreds of dollars a year in tax savings.

Mileage vs actual cost: Always keep a log book in your company vehicle listing the beginning millage on Jan 1. on the first page and then keep a millage log to and from every customer or stop. List every dollar spent on gas, oil changes, tires, tune ups, repairs etc. I also suggest putting this information into a spreadsheet at least once a week or so. This way at the end of the year you can evaluate if you should take the flat mileage rate of the miles you drove for work or the actual costs of using your vehicle for business. Don't forgot the mileage on your personal vehicle either especially if it is used to do other errands like deposit money in the bank or pick up office supplies. Keep an estimate book in your family , so if you meet someone, hand them a card and give them an estimate, you can write off some of that mileage as well.

Even something as simple as doing your laundry can save you money. If you spend the few extra dollars to put a company name patch on your clothes you are then able to write off not only the cost of the items, but the cost of the patch and cleaning them for the entire year. Because they are then considered a uniform not just personal apparel, but I suggest wearing them sometimes even when you are not working to promote your business name. I will sometimes wear our Soap Warehouse business tag out just to try and start conversations and get new leads. Even putting a sign with your business's name and number on your personal car will allow you to write off the costs it takes to do it plus gives you the added advertising. I have even lent a set of magnetic signs to friends to put on their vehicle when I know are going on a long cross country trip to generate calls. I never know where my next customer may be coming from.

Here is a link to a video Diana did on how to report itemized deductions you might learn from.


Good Luck with Uncle Sam this year.

Tags: Entrepreneur.com, QuickBooks, Intuit, Taxes, itemized deductions

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