By now, either you or an accountant should be doing your bookkeeping. Look over your profit and loss statement, which will show your net profit or cash flow for any given period.
This is very important for a number of reasons, the most being that it will give you an idea of how much money you will have at your disposal from the business for your personal living expenses. It is important to know this for planning purposes. Therefore, if you know how much net income or net cash you are going to have available, you can plan your cash flow in case there are breakdowns or major repairs.
Knowing the amount of cash that you have on hand, combined with the amount of net cash that the business will yield over the next few months of operation, enables you to do the proper planning. To plan for economic conditions, breakdowns, and changes in the economy, your cash flow statement and future cash additions are of extreme importance.
We get many questions from owner operators about adding another truck. Your profit and loss statement is an integral part in computing whether the addition of another truck and driver will be a successful business venture.
The profit and loss is also used in computing your income taxes for the coming year. You can have a lot of money in your checking account, but unless you have planned to pay your income taxes, that money can disappear quite fast. Once you have an understanding of the amount of cash you have available to you and your taxes are covered, you now have an idea of the amount of cash available for your personal use.
The money left after your living expenses goes a long way in determining your financial security. Putting money aside for investments and retirement is the final stage in managing your money. Setting money aside for retirement has tremendous benefits. Not only is it a tax-planning vehicle -- as you can deduct payments made to a retirement plan and save on taxes -- but the money the retirement plan earns is earned tax free, and in non-deductible Roth IRA contributions can be taken out tax free upon retirement.
The benefits of tax free earnings are tremendous as the earnings grow your dollars faster. However, a successful trucking business starts with good record keeping and proper business planning.
How do I know how much in estimated taxes (quarterlies) I should be paying?
The government wants to get their share of a self-employed (owner/operator) individual’s income tax, somewhat like an employee (company driver) pays their income taxes throughout the year via income tax withholding. The self-employed owner/operator pays their taxes throughout the year via estimated tax payments (quarterlies).
For the current year, we set up the quarterlies based on the prior years’ taxes (income and SET) and adjusted for depreciation differences. But now is the time to verify if what is being paid is correct. What you now need is tax planning, and that starts with an income tax projection.
It’s time to have a tax projection prepared to make sure you have set aside enough money for your 2010 income taxes and to do financial and tax planning.
This article has been presented by PBS Tax & Bookkeeping Service, a company which has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. If you would like further information, please contact us at 800-697-5153. visit our Web Site at www.pbstax.com.
Everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.