I was coaching a new client the other day, and he came to me with this question:
“I just got hit with a huge tax bill and have no idea how to pay it. What should I do?”
This particular client is a $10 million a year real estate brokerage, and his tax bill was about $180,000. It’s a lot of money to just have to come up with. If you’re in this situation right now hopefully, your tax bill is less than that. Hopefully, it’s not more, but regardless, the question is, “What do I do when I get hit with a huge tax bill like this?”
It really depends on the situation of the company, and your financial position. Basically, it’s two fold. One is dealing with the situation at hand, and you’re going to have to figure out how to pay the tax bill. That might include negotiating a payment plan with the taxing entity, or taking out a personal loan to satisfy the obligation. Do not just avoid it. The interest and penalties will only increase and make things worse.
You may not want to make payments but I would much rather see a business set up a payment plan over time, instead of draining all their cash resources to pay a tax bill. Then it kills their cash flow, and it really makes it very difficult to operate their business. It’s much easier and much better to divide the obligation up up over time
But the second part of the equation is to make sure you’re never in this position again. Establish a tax account and start setting aside small amounts of money over the long haul, so that when the next tax year comes due, you’re going to have the money that you need in that account to pay the tax bill.
We teach you how to do this in the Profit Plus Advisors program. It’s super important to know how to do this so that you never get hit with another big, nasty tax bill again. The good news is that if you do this right, at the end of the year, you can actually end up reimbursing yourself for any taxes that you paid throughout the year and getting a refund of your own money back. You did that all for yourself, and you didn’t even have to send any money to the IRS.
If it feels like a hopeless situation, I assure you, it’s not. You can absolutely deal with it. If you need some one-on-one help, just feel free to reach out and get some help!
Do you need help dealing with a huge tax bill? Schedule a call with a Profit Advisor. Our complimentary one-hour session is the first step towards having a financially solid business. Schedule a call today.