No Taxation Without Preparation
Benjamin Franklin once said that the only two things in life of which we could be sure were “death and taxes.” In the modern age, while death is still in the “very likely” category, it might be more accurate to say that the two things of which we can be most certain are “debt and taxes.” They seem to work together as twin anchors on our efforts to sail forward, to accomplish the things we’d like to accomplish – and to do the things we’ve always wished we could do.
Debt and taxes have a few other things in common as well. They’re both often necessary to secure the comforts and services we’ve come to consider “normal” while living in the communities we’ve chosen to live in. They both have the potential to be powerful tools (one individual and one collective) to make life better for ourselves and those we care about. And they both tend to cause us serious problems when we don’t pay enough attention to them or plan ahead of time how to best manage them.
Taxes – at least in theory – allow society to reach its collective goals. They pay for infrastructure like roads and parks and basic government services. Taxes allow you to send and receive mail for pennies per envelope. They provide for police protection, equip your local fire department, and hire professional educators to not only teach your children, but to do their best to make sure the neighbor’s kids aren’t completely hopeless as well. They fund our government, our national defense, and grandma’s retirement. And, yes – they pay for lots of stupid stuff, too… but that’s a voting and politics problem, not proof we should go back to living in the woods all alone and heavily armed.
Debt – when managed well – allows us as individuals to reach goals which would usually be impossible otherwise. How many of us would own nice homes if we had to save up and pay cash before we could move in? What kind of car or truck would you drive if you couldn’t finance it for a few years? What about medical bills? Back-to-school clothes? Paying for college or a family vacation or a child’s wedding? All of this would probably never happen, or a few lucky ones could manage and make it happen. This is why some debt can be good, but it’s good only if you know what you are doing and only if it’s making various otherwise unachievable things possible for you.
Society can collect a little bit from everyone to pay for the things we want society to do. You and I have to earn what we can and use it wisely to meet our individual goals. Sometimes, strategic debt is a part of that.
The Goalry Way
At Goalry, we have a conviction which guides almost everything we do. We believe that most people are perfectly capable of taking more effective control of their personal or small business finances if they’re given the right information and insight and offered the sorts of tools and connections that used to be available to only a select few.
We’re not interested in blogs or apps or professional partnerships that try to tell you or anyone else what you should do with your own money. That’s true whether the topic is how to best manage taxes, whether it’s better to have lower interest or cooler perks with your credit card, or analyzing the home equity benefits of remodeling your kitchen. What we are interested in is helping you make more informed decisions and connecting you to services which can assist you in turning your decisions into actions.
We’re not reaching our goal until you’re reaching more of your goals. Helping you navigate debt and taxes is one important step in making that happen.
Be a Tax Manager (Don’t Let Your Taxes Manage YOU)
OK, you don’t have to become an actual “tax manager” in the professional sense. (Tax managers are the folks who keep their company in compliance with various tax-related rules and regulations while finding creative ways to minimize the burden taxes might otherwise create for the organization.) But the ability and willingness to manage taxes for yourself or your small business throughout the year is often the difference between several very stressful days when tax time rolls around or handling it just like you do any of the other dozens of obligations you navigate successfully every month.
Very few people would argue that it makes sense to ignore your debt for eleven months out of the year, then try to sort it all out and catch up for a few days each spring before going back to ignoring it again. That would be reckless and irresponsible. Absolutely foolish. We’d suffer the consequences and deserve what we got as a result.
Not having an active tax management strategy for ourselves or our small business throughout the year is just as crazy. Like traditional debt, we should always have a pretty good how to manage taxes on a monthly basis in order to handle effectively annually. It should never be a surprise how much we owe and when each payment is due. As with most forms of debt, ignoring it doesn’t make it go away – it makes it worse, and usually more expensive. If we don’t set and pursue a few basic tax management goals which guide our decision-making all year long, we’re asking for our other financial and personal goals to be derailed completely.
It’s a cliché by now, but still absolutely true – when we fail to plan, we plan to fail.
How To Manage Taxes Year-Round
By now you’re worried that you should be starting a spreadsheet or buying a program or doing something other than what you’re doing right now. Actually, what you’re doing right now is exactly where we suggest you begin!
At some point, you may find a spreadsheet pretty helpful, but you probably don’t need to stop reading and do that now. There are some excellent software packages and online services you’ll probably want to consider at some point, but there’s no need to start there. (And yes, we can help you compare free tax software or other tax accounting services when you’re ready.) There are plenty of tools and options out there to help you manage taxes for yourself or your small business throughout the year and make tax time much less stressful.
We respectfully suggest starting somewhere a bit closer to where you are right now, however. As with so many things, the best starting place for any journey is gathering some ideas and information. Since you’re obviously right here, reading this now, you are officially ahead of the game already!
No Taxation Without Education
The most powerful thing you can do to begin meeting your tax goals isn’t a tax trick, a dollar amount, a deduction, or even a tax tracker app (although these can be amazing tools). The most important first step towards learning to more effectively manage taxes for yourself or your small business is to set aside a little time each week to learn more about the personal income tax and how it works in practice, or the many tax obligations of any business. It only makes sense that setting effective tax saving goals requires starting with a better understanding of the system itself.
This doesn’t have to mean signing up for classes at your local community college (although that can be fulfilling as well). It doesn’t even mean you have to order our books (we haven’t published any) or buy our video series (we haven’t recorded one) or commit hours and hours to being inspired and enlightened by nationally known super-expert Dash Flashly.
It can start by simply setting aside a quite hour each week (or two half-hours, if you prefer) to read a Taxry blog or two. We prioritize straightforward information in plain, simple English. (We’d rather you walk away feeling smarter than walk away thinking we sound pretty smart.) What’s the standard deduction and when should you take it? How can you legally reduce your taxable income? Which investments, donations, or other choices throughout the year can maximize your tax refund? And what are all those things taking money out of our paychecks every time in the first place?
As you get comfortable, we’ll sometimes point you to other reputable online sources as well. We’ll talk you through the most up-to-date tax preparation software comparison. We help you start establishing your own personal income tax goals or business tax goals. Whether it’s sorting out the little things (“When should I claim income from a garage sale or selling stuff online?”) or making sense of the big things (“What are the most advantageous corporation tax structures?”), our experts can break it down one topic at a time.
Let’s be honest – it costs nothing to educate ourselves; it costs us plenty when we don’t.
Checking Boxes and Labeling Emails
Some of the biggest stress-reducers come from simply paying attention to little things throughout the year. For example, when you were hired at your current job, you probably filled out some forms (sometimes so many you lost track of what they all actually did!) One of them was a W-4. As you probably know, your W-4 tells your employer how much to take out of each of your paychecks to pass along to the government. It doesn’t change the actual total of personal income tax you’re expected to pay each year, just how much of it is deducted before you see it.
When we file our personal income taxes each year, many of us hope for a big refund. That’s understandable, but it’s not actually ideal. If we manage taxes appropriately the rest of the year, we won’t owe or get back a significant amount. Getting a big refund means we didn’t do a very good job with that W-4 and we should change it as soon as possible (just talk to payroll or whoever signs the checks).
That’s money you could have been investing, or using to pay down high interest debt, or spending on your family. Owing money also means we need to make a change to our W-4. Why put yourself in arrears to the government when a simple adjustment you’ll probably hardly notice on each paycheck could solve the problem immediately? The number one way to meet your IRS debt goals is not to go in debt to the IRS!
Here’s another example: how many receipts, forms, letters, or other records do you end up scrambling to locate when tax time comes around each year? How often have you stared at a charge on your credit card statement or a paper receipt in your hands, trying to figure out who you paid this amount to, and for what? It takes almost no extra time to dedicate a folder in your desk or an oversized envelope in your home office to save any paperwork you might need come tax time – and to make a brief note on the item itself exactly what it is before filing it away. You may think you’ll remember, and maybe you will… but you’ll definitely remember if it’s written right there at the top in your own handwriting.
Likewise, most popular email services make it easy to label or categorize your email before saving. It takes a few seconds tops to tag emailed receipts, confirmations, or other communications which might come in handy come tax time. Better yet, when it’s electronic, you don’t even have to be sure ahead of time that you’ll need it. You don’t have to worry that your “tax tracker” folder is going to get “too full.”
Of course, there are popular apps out there which will help you do this in real time as well. We’ve analyzed these first-generation efforts and have some exciting news coming very shortly in that area. For the moment, however, the point is that a little attention to your income tax goals throughout the year takes very little extra time but can make a huge difference in both the time you invest and they money you save. That means more time to devote to the things you do care about. It means more resources for reaching your own goals now and down the road.
Business Tax Services
Managing taxes for your small business presents its own challenges and headaches. Not only are you paying small business taxes, you’re responsible for withholding and passing along numerous taxes from any employees you may have. Too many entrepreneurs have had their dreams derailed because they weren’t able to navigate the tax requirements of running their own business. Just like your small business requires a clear vision and a detailed business plan, any business must also have business tax goals. It must have a plan for avoiding problems with the IRS or state tax agencies, and a clear system for handling any IRS debt goals which may nevertheless arise.
We can help you sort out your small business taxes and compare business tax services as well. We’ll never try to tell you what to do, but we can help you make more informed decisions about the best way forward for yourself and your business.
Manage Debt. Manage Taxes. Manage Goals.
It’s true – none of us like taxes and none of us love debt. Both, however, are often essential in the 21st century for creating the world we believe is possible for ourselves and those in our care. Both are tools with the potential to help us reach certain goals – as a community, as a business, or as an individual.
We manage our own debt, one way or the other. Most of us recognize how important it is to do the research and explore the options and compare the tools. Most of us understand that while we can’t control everything, we’re nevertheless responsible for handling our debt the best we can, start to finish. We also realize that debt can be a powerful tool for reaching our goals. It can offer us a financial flexibility we’d never have without it. Without careful management, however, debt can quickly become a burden that cripples us instead.
We have less control over taxation. We can vote, and we can express our wants and opinions, but taxes are a societal choice designed to accomplish community goals (and yes, we realize it doesn’t always seem like it’s working out quite that way). Ideally, taxes can offer society a powerful tool for accomplishing big things we might never manage without them. Like debt, they can also become a burden on individuals or society as a whole and work against the very things they were designed to make possible.
That doesn’t mean, however, that we should simply do our best to ignore them or that we don’t still have substantial control over how we manage our own tax saving goals throughout the year. We can inform ourselves. We can organize our stuff. And we can take advantage of the wide range of tax accounting services and tools already available. We can use the rest of the year to compare free tax software, to analyze potential changes we could make to minimize our tax obligations, and to more carefully consider how our tax management goals fit into our larger financial targets and personal aspirations.