20/04/2026
This is the part of Profit First that nobody explains clearly. And it is costing people money every single tax season.
Here is how it actually works.
In the Profit First system, all of your money comes into one income account. From there it gets allocated into four places. Profit. Taxes. Owner’s compensation. And operating expenses.
Simple enough. But here is where it gets important.
You are not taxed on your revenue. You are taxed on your net income. And in the Profit First world, your net income is the combination of your profit account, your tax account, and your owner’s compensation.
Why? Because those three buckets are what is not running back through the business as an expense.
If you are on payroll and have a W2, you are taxed on that amount plus your net business income. If you do not have a W2, you are taxed on the net income of the business alone.
This is exactly why we save between 5 and 15 percent in that tax account depending on where you are in the country. Because when tax time comes, that money needs to be sitting there ready. Not scrambled for. Not borrowed from somewhere else. Ready.
The tax account is not extra. It is essential.
This is the kind of thing we break down inside the PEACEful CEO membership every single month. Not just the what but the why behind every number in your business. So you stop guessing and start making decisions from a place of clarity.
If this is the first time this has made sense to you, you are in the right place.
Drop TAX in the comments and I will send you details on the membership.