If you follow the profit first system you have set aside money throughout the year into your tax account.
Are You Following The Profit First System?
Ideally, as of AT LEAST tax day at the latest, you have made a payment towards your income tax payment. So, lets just assume you have filed, you know the dollar amount, and you have paid that. Now there is money still left over in the tax account, what do you do with it?
You Do Have A Couple Of Options…
The general principle is IT’S YOUR MONEY, you can do with it whatever you want. A lot of our clients treat it as an additional profit distribution, or some clients utilize it to accelerate paying down their debt. It would be treated just like an extra profit distribution being used for the purpose of paying down your debt. There is nothing wrong though if you want to use it just as a straight profit distribution, you save the money to benefit you as an owner and you can choose to do that.
Look At The Tax Balance As Of 12/31
One thing I want to make sure that you look at on your tax account is to look at the tax balance as of 12/31. If you have been following the profit first system and putting money into your tax account, then January through May you have still been putting money into your tax account. We don’t want you to spend that money ahead of the next tax season, that money should still be sitting in the account when you are done.
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