As an Appraiser, I Used to Hate April 15

Okay full-disclosure, I still hate April 15, but just not as bad as I used to.  Paying taxes can be a challenge for anyone, but it seems especially hard for those who are self-employed.  Every spring, I used to get a big surprise from my tax returns until I changed one, small thing.

appraiser tax timeFor the first dozen or so years I was in business for myself (yes, 12 years – I guess it takes me a long time to learn) I would always end up owing much more money to Uncle Sam than I had anticipated.  There were many years that I owed more money than I even had to my name.  Some years, I had no money at all and still had a big tax bill on my desk.  Why was I always caught unaware?  Truth be told, it was never much of a surprise, but it always felt like it.  I kind of expected it each and every year, but I did not change my behavior as a consequence. Isn’t that the definition of insanity?  I digress.

One day, my accountant sat down with me and had a heart-to-heart.  “Dustin,” he asked, “why don’t you open up a new savings account, name it ‘Tax Savings,’ put a certain percentage in there each time you take a distribution, and leave it alone till April 15?”  Great question.  Seems simple, but I had never thought of doing that.  I asked him what percentage I would need to save and he gave me an estimate.

My appraisal firm is set up as an S-Corp.  Each month, I receive a salary.  I do not do anything with those payments because my payroll team takes care of that.  Every year, I fill out a W-4, claim my dependents, and the rest is automatic.  However, I will regularly take a distribution check (well, me and my partner) and it is here where things are different.  The first 10% of this money goes to charity.  The next 30% goes directly into that escrow account.  And it sits… and even gains a little interest.

When taxes are done in the early months of the year, I know what I will owe on April 15.  I almost always dip into that escrow account, but I have never been short.  Whatever is left over can either be kept there for next year or I will sometimes write myself a ‘tax refund’ check so I can feel special like all my W-2 employee friends and neighbors.  Hey, I like to take advantage of the tax season specials too, ya know.

Running a business is hard work, but adding the stress of not being able to pay your tax bill each year should not be part of it.  If you are finding yourself short every year when April 15 rolls around, I urge you to create a system similar to the one outlined above.  Do not wait till spring to find out you do not have enough money to pay your taxes.  Put the money away throughout the year.  If you are like me, you will hardly miss it.

9 thoughts on “As an Appraiser, I Used to Hate April 15”

  1. Pingback: As an Appraiser, I Used to Hate April 15 - Appraisal Buzz

  2. Ummmm……I have ALWAYS done this…from the beginning. And I always have enough to pay whatever Uncle Sam says I owe. (and my CPA didn’t have to tell me to…lol) I can’t imagine the stress of April 15 coming and you don’t have the money to pay taxes.

  3. It pays for everyone to have a CPA as they start their journey to self employment. In 1990 we became an S Corp. The best thing anyone can do. Should have a retirement fund as well. Just goes to show you that many people should not be self employed. And you cannot afford to be doing an appraisal today for under $400 today. Business education first. Self employment second.

    1. What do $400 fees have to do with business education. The fee depends on the complexity of the assignment. If you want to make that your minimum fee that is your choice but to say other appraisers can’t afford to be completing appraisals for under $400 is pure nonsense. Many clients will not pay that so welcome to reality.

    2. $400 is about the max that a typical consumer will “gamble” on an appraisal. This is why we will never get more than that and regularly get less. We should be advocating for less work, not more money. An appraisal report does not need to be 30 pages to be credible and supported. It could be 1 page and be just as good.

      1. Michael Morris

        Since when do you allow ANY client dictate the Sope of Wrk and/or the length of the report? That’s a client issue, not an appraisal issue. Put it this way, I have fired about 20x the # of clients as opposed to # of clients that have “fired” me.

  4. Yup, its 8 am April 15th and I have my tax papers on my desk to be mailed.

    Income tax is about the biggest racket in the history of man. I could write forever on the issue, but will make but one very significant point that too few ever consider. Anyone who can do simple math (that’s you appraisers) ought to take out paper and pencil (because the numbers are too large for a calculator) and figure out exactly how much each and every taxpayer is currently on the hook for the national debt. This is the amount of money that we owe, but have not yet been invoiced. This is the amount of money that has been spent in our names that is up and above what we will write a check for today. I challenge you all to do it. 17 trillion (total debt) divided by 150 million (roughly the number of taxpayers). Take a look at that number and ask yourself if you could write a check for that amount today, or ever? It makes me sick to my stomach. I think about this often, but no more than on April 15th when I write the largest check of the year. I will definitely have it in mind when I vote. As far as I am concerned, any politician who ignores or downplays that number is part of the problem, along with the fellow citizens who refuse to give it a thought. IMHO.

    Estimating your tax liability is not hard. Appraisers have no excuse – we crunch numbers for living. The coaches advice to put away money into a separate account is spot on – a simple savings account will do. It does require discipline.

    I do my own taxes every year. I would never trust another person to take care of my money the way I can take care of my money. CPAs will charge you an arm and a leg for the easiest part of doing taxes, which is filling out the forms. The hard part is keeping records. True it will take some time the first time you do a business return, but once you learn it the first time, you will realize what predatory animals CPAs are.

    Best thing I ever did (after learning to do my own taxes many years ago) was purchase a Neat scanner this year. Wow. I’ll have my taxes done in a fraction of the time and effort next year. Plus, my entire office will be more organized and paperless. This is not just for people who have a tech fetish, it truly is the best thing ever in terms of organizing documents. I predict every business will own one eventually. I would guess it wont be long before someone creates a smart scanner and printer in-one, if that hasn’t been done already.

  5. I’ll call you attention to an editorial written by Elmer T. Peterson in The Daily Oklahoman. Peterson said, ” A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy”.
    He was “spot on” as our politicians have allowed people to “belly up” to the trough of “Washington benefits”. I fear it has gone on too long and too far for it to be reversed and the nation stabilized.

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