Biblical Entrepreneurship and Taxes in the US
What are the most important things to know as a new or small business owner regarding taxes?
This is a great question; one I would like to hear more entrepreneurs ask.
Here is why.
I have been preparing and filing tax returns for over 10 years now. What I have found is that people are super confused by the tax system in the United States. This is not because the public is unintelligent; our tax system is complex and changes often depending on the administration in political power. They use the tax system as a bargaining tool to gain the favor needed to move the administration’s agenda forward. So “complicated” is a great descriptor, to say the least.
As an entrepreneur, you are focused on the business. Your goals. How to maximize your time, energy, and resources. So many people I have worked with have found tax time super overwhelming. They don’t know how to document their income and expenses. They don’t know what to track or why. They have tried software that is supposed to make it easier, but they don’t know what the software is doing. So, they file an extension and feel like they have accomplished something when they have really just delayed the inevitable.
EYE OPENER
I have worked with many people who haven’t filed a tax return for YEARS. Yes, even Christian business owners. This creates a mountain of stress. There are various reasons for this unfortunate circumstance. Usually, it is a lack of education on the who, what, where, when, and why to file. Sometimes (more than you can imagine), it is an act of rebellion.
The Word teaches us to pay our taxes in many Bible verses, a simple Google search will show you that. Let’s focus on Romans 13:1-7:
| Let everyone be subject to the governing authorities, for there is no authority except that which God has established. The authorities that exist have been established by God. Consequently, whoever rebels against the authority is rebelling against what God has instituted, and those who do so will bring judgment on themselves. For rulers hold no terror for those who do right, but for those who do wrong. Do you want to be free from fear of the one in authority? Then do what is right and you will be commended. For the one in authority is God’s servant for your good. But if you do wrong, be afraid, for rulers do not bear the sword for no reason. They are God’s servants, agents of wrath to bring punishment on the wrongdoer. Therefore, it is necessary to submit to the authorities, not only because of possible punishment but also as a matter of conscience. This is also why you pay taxes, for the authorities are God’s servants, who give their full time to governing. Give to everyone what you owe them: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor. |
Therefore, it is better for all if taxes are paid regardless of your politics or whether you agree with the government on HOW they tax. Or what they do with the taxes. Obviously, voting for our values is important. But, as Christians, we are to be honest in ALL our business dealings. We do not “cheat” on our taxes. If we are audited, we must prove our position with confidence and be a shining example of the Fruits of the Spirit in our dealings with IRS officers and officials. THEY are NOT the ENEMY. They are people who happen to be in authority for holding you accountable. A rebellious spirit will not go well for anyone in this boat. We are to be respectful to them even if they are not kind to us. They are doing their job. When you really stop FEELING and start LISTENING, they are an opportunity for Marketplace Ministry and showing the love of Jesus.
TIPS AND TAKEAWAYS (#6 MAY BLOW YOUR MIND)
So, what are the most important things to know as a new or small business owner regarding taxes?
- If you have not paid your taxes this or previous years, it is time to repent and change your attitude. You are probably going to owe. This is not fun, but there is HOPE.
- You will need to get organized. You do not have to hire someone to get you organized. You can do it yourself.
- Have a separate bank account for your business, and do not spend out of that account for personal expenses. You may take a draw by transferring out of that account. But don’t go to Wal-Mart and buy household items with your business debit card. This opens your personal finances up to an audit due to co-mingling funds. If you don’t like the IRS looking closely at your business, you probably REALLY don’t want them looking into your personal stuff.
- Pay QUARTERLY, even if you have been filing yearly. If you have a profit and your business is more than a few years old, you will pay a penalty for not paying quarterly. Many people do not realize this. They don’t look at the form. They only pay the amount due and drive on. Most recently, I had a client whose former tax person told her she didn’t need to file quarterly. For YEARS!! She pulled out last year’s return and found she gave the IRS over $300 in penalties.
- Track your profits and losses WEEKLY so you can pay yourself and put away at least 20% of your profit for that week into a savings account for your taxes.
- If you file your business on a Schedule C form with your 1040 form, your charitable giving is not reported on the business form. It is reported on your “Personal Deductions Schedule A” form. If you do not have enough deductions to get over the standard deduction, you can not “write it off.”
Although we never give just to get a deduction, we must realize that we can make a difference in other ways, too. Consider doing business with other Christian businesses to support them by spending your operations dollars using their products and services. It might not be the cheapest. But it will get you a SPIRITUAL return that will certainly bless the other business and begin to starve out the evil corporate machine.
This kind of spending is a direct write-off as a business expense and glorifies the Kingdom of God. In fact, I have prayed about needing a service I could not afford. I prayed about it, and the immediate answer, one I was not expecting, was to use my tithe to pay for the service. I did, and this turned out to be the biggest blessing of my life as an entrepreneur. I’m not saying you should just replace giving with conducting business this way. You should always pray before you make this big a move like I did. God will tell you where and when it is wise.
BLESS UNIVERSITY
If you would like to learn more about how to manage the money side of your business, take a look at my 300-level course for BLESS University. BLESS is an acronym that teaches you how to:
- Budget
- Ledger
- Estimate Taxes
- Save using tax-qualified vehicles while managing debt
- Setting up an organized SYSTEM that you can use year after year without paying more.
This is not going to teach you how to prepare taxes. It is a practical system that includes tools and knowledge for managing your back office so you can be prepared to have someone else prepare the taxes for you. It is not advisable to prepare your own tax returns unless you understand how to fill out the forms.
If you would like to know more about me, BLESS University, or my tax business, I have included links below:
https://www.goldhummingbird.com/
https://survive.goldhummingbird.com/business-money-management
For more great articles that provide you with insights to help you with your entrepreneurship journey from discovery to succession, click HERE to view the Nehemiah Entrepreneurship Community’s library of Kingdom Business Leaders Resources.
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