Solopreneur Tip #1: Learn to Love Your Taxes

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Early on in my solopreneur career (and even now), I was surprised at how many businesses around me were closing after one year.

When I asked what happened, the answer I received the most was “I don’t know how I am going to pay my taxes. My accountant says that I owe….”

If I could give you one piece of advice when you are starting or growing your own business as a solopreneur, it would not be more education, a stronger social media following, or to start networking. It would be this: learn to love your taxes.

Here is what this mental shift did for me:

It allowed me to create a life that I wanted.

It gave me access to huge credit opportunities, opened doors in real estate investing, improved my debt to income ratio, and presented me with access to people that I wouldn’t have otherwise had.

Now when I pay my taxes, I do it with gratitude. I look at the society around me that functions with streets, community, access, and a long list of things that I would pay so much more for each day for my life to have access to.

If you are scared of money, taxes are intimidating, or handling your bookkeeping isn’t your jam, owning your own business might not be for you.

You might want to pursue a hobby instead of a career because the creative freedom of doing something for fun instead of doing it for profit is entirely different.

I am in my money every single day. I know how much money is in each of my accounts, how much I have used on credit that day, and what I am putting aside for my tax responsibility.

The first five or six years as a full-time solopreneur were unnerving when it came to tax time. I usually ended up having to place my tax debt on a credit card and pay it off over the course of the year.

Don’t let it stop you. Success in your business doesn’t mean that tax time isn’t challenging especially in the early years.

Beginning Solopreneur Tips:

Be honest. There is no getting around it. Letting your taxes work for you isn’t done by cheating them. It’s done by knowing the rules and letting them work for you each day before they are due.

In the beginning, if you can know that 1 out of every 5 dollars that you make goes to taxes, you are off to a good start.

Keep a daily journal for your write-offs to match with your receipts. (I buy a new tax journal every year where I write down everything from dining to expenses and miles driven.)

Start making quarterly payments.

Get a business credit card for all of your purchases and keep them separate from your personal expenses so they are all in one place.

Start doing your own taxes. With TurboTax, ChatGPT, AI assistants, and Google, there is no reason to rely solely on an accountant. This is how I learned everything. If your CPA messes up, guess who is still responsible? YOU.

Seasoned Solopreneur Tips:

Start looking at what you want to do with your money, and allow your taxes to work for you not against you.

Understand the benefits of single, married, and head of household.

Some clients may be open to employing you remotely vs contracting you. Find out which works for you.

For years, I have taken less write offs and paid more taxes than required because I wanted to show more profits. Taking fewer write-offs will show a higher net income on your tax return, which lenders often use to determine your ability to repay loans or mortgages. Lenders usually look at Adjusted Gross Income (AGI) or net profit from your Schedule C when assessing self-employed borrowers. All the extra money that I spent on paying more taxes was more than repaid by the profits that I earned in my real estate sales.

It’s easy for the money that you should be setting aside for taxes to feel like it’s yours when it isn’t. I found my quarterly payments to be soul-crushing so I decided to start making bi-weekly payments to the IRS that are automatically deducted from my account. Those amounts make my quarterly payments less overwhelming.

Check out what a Solo 401(k) is. A Solo 401(k) is important at tax time because it lets solopreneurs maximize retirement contributions while reducing taxable income, lowering their overall tax burden.

The Why:

Let your money work for you. I know where all my money is every single day. I have no delusion that being a successful solopreneur is directly tied to profit, survivability, and self-worth.

Allowing a CPA to dictate my money for me would be like paying someone to dictate the best strategy for my marriage, my career, or my friendships. When it comes to things that matter most, I’d rather do the work myself and make those choices with an understanding of the “why”.

I wouldn’t trust a strategist to manage my marriage, career, or friendships, so why would I expect someone else to manage my money correctly and keep my business intact?

Make tax law your new friend, and take the time to get to know it. Like any true friendship, it will evolve over time, but if you keep showing up and investing in it, both you and your business will reap the rewards.

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