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The Annoying 5-Letter Word That Makes Most Business Owners Cringe — TAXES!

Alleson Tate
Young Black man with cornrows sitting at desk talking on his phone with a laptop in front of him.

Wealth management expert recommends beginning with the end in mind.

“Begin with the end in mind”, a quote by Stephen Covey and one of his seven habits of highly successful people, that sums up how taxpayers should approach managing their taxes. It means that you should start with a clear understanding and vision of your destination. This ensures that with every step you take, you’re heading in the right direction.

Here are 5 things you need to do before the end of February to take your business, finances, and life to the next level.

  1. Identify your business goals and the activities to reach them

What is the revenue goal for your business in 2024? What activities do you need to undertake in order to achieve your goal? In most industries, it’s a numbers game. If more people visit your website or storefront, book a call, and the like, the greater chance you have of making a sale. If they visit your business and they don’t convert to a customer, how do you nurture the relationship to increase the “like, know, trust” factor until they become a customer? In most industries, the money is in the follow-up. Implement the tools and systems you need to track your sales-generating activities, sales progress, and regularly evaluate what’s working and pivot if necessary.

  1. Get your financial books in order

Let’s face it, unless you’re a bookkeeper, you probably don’t regularly update your financial books and records. In 2024, make it a goal to hire a bookkeeper by February 29th. They can clean up your records for 2023, making it easier to file your tax return this April. In addition, having updated books and records helps you get ahead of your taxes for 2024. There is no need to fear tax season if you already know what’s coming.

  1. Create a strategy to pay less taxes

Waiting until the fourth quarter to figure out how much you will pay in taxes is too late. By then, you only have two strategies: 1. go on a spending spree and 2. max out your retirement accounts. While maxing out your retirement accounts is a good strategy, going on a spending spree without knowing how much money you need to spend is like throwing darts blindfolded. When you are spending money in your business, there isn’t a dollar-for-dollar savings. If you’re in the 24% tax bracket, you would need to spend over $4,000 to save $1,000 in taxes. 

Your tax strategist can help you identify which expenses, deductions, and credits, you

should leverage to reduce your tax bill. Some strategies, like hiring your children, take time to properly document and implement. Early planning is key. Will there be any significant changes to your business or personal life that will affect your

taxes? Will 2024 be your highest revenue year? Will you get married? Will you have a

baby? These are opportunities to strategically plan with your financial advisor and tax

strategist.

  1. Maximize retirement contributions

Business owners should plan to maximize contributions to tax-advantaged retirement accounts to lower their bill to Uncle Sam and build retirement wealth faster. If you have employees, consider using a 401(k). For 2024, you can contribute up to $23,000 (more if you are over 50). If you are using a 401(k) this is a great choice because the funds are automatically withdrawn and contributed to the account. You don’t get a chance to miss the money because you never saw it.

If you’re a solopreneur, consider using a SEP IRA or Solo 401(k). In 2024, you can contribute up to $69,000. Contributions to these plans are typically not automatic; therefore, you have to make them out of pocket. If you haven’t planned to make a sizable contribution, it can feel punitive and catches business owners by surprise at tax time.

Whether you have employees or not, both groups can use traditional IRAs and Roth IRAs. Depending on your total household income, you may receive a tax deduction for contributing to these accounts. For 2024, you can contribute up to $7,000 (more if you are over 50).

Identify the retirement plan you want to use along with how much you would like to contribute and set the cash aside each month in a high-yield savings account. For example, if you would like to contribute $7,000 to a traditional IRA, transfer $584 each month. To ensure this happens, automate the transfer so you don’t even think about it or are tempted to spend the money.

Each of the retirement accounts mentioned above has its own contribution rules and limits. Be sure to consult with your tax advisor to find the right plan for you, your business, and your savings goals.

  1. Set up your team of advisors

To unlock your peak performance, you must double down on your strengths and delegate your weaknesses. If you’re an amazing visionary, focus on creating the plan and build your team with the right players. If you want to keep your books up to date, don’t add another task to your ever-growing “to do” list – hire a bookkeeper.

If you want to pay less in taxes and develop a strategy to build wealth, hire a tax strategist and Certified Financial Planner professional. It may feel like you can’t afford to build out your team of advisors; however, the right team will save you thousands every year. You will see the return on investment (ROI) right away. This will free up your time and energy to work on the business versus working in the business.

2024 is the year you make more money through strategic planning, save time by hiring a team of advisors, save money with tax planning, build generational wealth, and get more of your life back to enjoy doing the things you love. By planning now with the end in mind, getting the right people in place to help set the vision, the rest essentially runs on autopilot.

Alleson Tate, CFP® is the Founder of Avere Wealth Management, an independent Registered Investment Advisory (RIA) firm based in Atlanta, GA specializing in wealth building and tax reduction strategies for business owners.

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