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Ask Dave

Big Back Taxes

Carisa can set aside a fourth of what she takes home from her small business account to pay off and avoid future back taxes.

QUESTION: Carisa has a small business that has exploded in the last couple of years. She now has $7,000 in back taxes that she didn’t set aside. Her business will net $70,000 in profit this year. How can she get that paid and avoid this in the future?

ANSWER: If you’ve got money in your business account that you take home to pay personal bills, set aside a fourth of it for taxes. You have Social Security plus income taxes, which equals about a fourth. That keeps it from happening again. Since 10% of your profit can clear this up, do that now. Don’t talk to me about Christmas or a vacation. Get the IRS out of your life now.