Business taxes. They’re basically just a variable expense, but they get their own category.

Did you just fall asleep?

Wake up! I promise not to make your eyes roll back in your head. If you hand your tax papers in The Black Box (aka your accountant’s office) and have no idea how your taxes owing comes out of there, this is for you.

## How do business taxes work? To sum it up, you owe a certain percent of your profit to the government. Notice that I said profit and not total sales.

Simple, if not a little mafia-y, right? Yes! Except for the 8 million exceptions to that simple rule. That’s why tax accountants are important – they know all the exceptions.

So how does a simple girl from {insert your home town} figure all of this uncertainty into her budget.

You Guess!
Err… I mean make an educated estimate. This is where knowing your fixed expenses and variable expenses pays off.

It goes like this:

(subtract)

(subtract)

Your Variable Expenses For That Income Goal

Equals

Projected Profit

Then you estimate your tax rate on your profit. To do that, either talk to an accountant or Google it. In most cases you’ll want to use your personal income tax rate and not the corporate or business tax rate. You’ll probably be taking that money out of your business.

So then we have:

Projected Profit

*multiplied by*

Tax rate (as a decimal)

Equals

Savings for Taxes

Example
You start that company where they mail glitter to people. You’re an evil genius.

Actual photo of me ruining a coworker’s birthday.

You rent a small space because you don’t want glitter all over your house (smart) for \$300 a month, including utilities and phone line. Your website costs you \$50 a month.

Fixed Expenses = \$350 a month

It costs \$0.10 for an envelope, \$.05 for a letter, \$.20 for glitter, and \$1.00 for a stamp for each order. And Paypal takes \$0.35 per order.

Variable Expense = \$1.70 per order

Your goal for the month is to sell 200 envelopes of the herpes of the craft world, and your personal tax rate is about 30%.

Your Income Goal :\$10 x 200 = \$2000

(subtract)

(subtract)

Your Variable Expenses For That Income Goal: \$1.70 x 200 = \$340

Equals

Projected Profit: \$2000 – \$350 – \$340 = \$1310

*multiplied by*

Tax rate (as a decimal): 30% = 0.30

Equals

Savings for Taxes: \$1310 x 0.30 = \$393

BOOM! No surprises when you take your taxes in.

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