Your business’ gross sales and net revenue figures are both important pieces of the income tax puzzle. You’ll report both numbers on your business tax return, but you’ll also factor in other items that will affect the final amount you’re taxed. Depending on your business structure, taxes are either assessed to the company or to its owners.
Whether taxes are assessed to your company or you specifically, that can be a lot of information to keep track of (and track down once tax season rolls around).
I rarely come across a business owner who knows their net revenue to date. It’s difficult to keep track of sales minus business expenses, depreciation, the cost of goods sold, and other factors.
However, if you ask any business owner how much they’ve made that year, they’ll usually have a good idea off the top of their head.
If you’re practicing the “tax bucket” savings plan I recommended recently, you’ll need to know how much to deposit into your savings account each month. I work with my clients to determine what percentage of their gross sales to deposit into their tax bucket.
For example, if a company has $30k a month in gross sales and we’ve estimated their tax liability, we can then calculate a percentage of their gross sales to be set aside for taxes. In this example, the company’s income tax liability is 3% of $30k, or $900 a month. If sales fluctuate, so does the deposit. When sales are down, they need to deposit 3% of $20k, or $600 a month.
It’s a simple way to approximate your tax liability. The IRS won’t let you use an estimate, but I find it’s helpful for the business owners I work with!
Want to talk with a professional to make sure all aspects of your tax needs are squared away? Let’s have a conversation.