How to get clients to pay more taxes (and why they should)
Not long ago, I was working with a business in Montgomery County that was accustomed to working with a different advisor. It’s always interesting to see how others in my industry operate, and in this situation, I started having thoughts that my mind kept revisiting over and over again.
It seems to me that many advisors put too much focus on one of the businesses priorities being to reduce the amount of income taxes. In fact, there are some advisors that solely focus on ensuring the client pays as little as possible in taxes. As a CFO advisor focusing on profitable growth, I disagree.
The entrepreneurs that I have met and worked with over the years, start out by having a dream to create a business that solves a problem, is profitable, and is sustainable. In short, they want to get a return on their investment. When you focus on having as small a tax bill as possible, that can divert a business owner from achieving their ultimate goals.
I will take it a step further and say that I plan to have my clients pay more in taxes.
I know many of you are doing a double take right now, but you read that right. So put down those darts a moment while I explain why paying more in taxes can be a good thing.
Why a Higher Tax Bracket Can Be Good for You
As your revenue grows, so does your tax bill. Eventually, many of our clients shift to the highest tax brackets. A higher tax bracket means a higher percentage of the income will be taxed. Ultimately the higher taxable income is an opportunity to grow.
Are there instances where some strategies like implementing bonus depreciation when investing in fixed assets are a good idea? Sure! Absolutely!
Or, another common strategy we use is to ensure that if there are large customer deposits received, that those deposits are deferred on the tax return.
As an anticipatory CFO, I love investigating fresh avenues for growth and encouraging my clients to think higher and bigger. Try entering that new target market, develop that prototype, make that new flavor, combine forces with a new partner.
The Talent for Your Tax Bracket
A decision that is well worth the tax and other costs is to leverage hiring remote team members in other states. Payroll taxes vary according to state in the United States, but as remote work becomes more and more common, more employers are getting used to paying varying tax rates, complying with the various rules and regulations in different regions.
Being in a higher tax bracket means you have more choices about where to put the money made from growth. Lenders and investors will be much more likely to partner with a profitable business that shows higher earnings (resulting in greater income tax obligations).
More Taxes, More Growth
Focusing on paying less in taxes can distract you from your goals for growing your business; goals like buying a new still for your distillery, an excavator for your general contractor business, or project management software systems for your government contracting business. An anticipatory CFO can focus on these goals and turn them into forecasts.
My focus is on the growth of my clients. My choice to take this approach comes from my experience as an anticipatory CFO who knows how to work the system right so that you have more money to work with and clean books.
Do I want you to pay too much in taxes? Of course not. I want you to pay the right amount of taxes to prosper and use your growing funds in the most effective ways. Contact me for outsourced CFO services so you get the service you need, as much as you need, when you need it.