How Entrepreneurs Can Prepare for Tax Season All Year Long
This week, Maggie is chatting with Keila Hill-Trawick, who is the Founder and Principal of Little Fish Accounting, a boutique CPA firm dedicated to the accounting and tax needs of service providers and small online business owners. In this episode, they talk about how small business owners can prepare for tax season all year long.
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Keila Hill-Trawick is the Founder + Principal of Little Fish Accounting, a boutique CPA firm dedicated to the accounting and tax needs of service providers and small online business owners. Little Fish aims to guide business owners who want hands-on assistance with visioning and mapping, starting with the accurate foundational numbers to determine next steps.
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To join the Money Circle Community, visit www.maggiegermano.com/moneycircle.
To learn more about Maggie and her coaching and speaking services, visit www.maggiegermano.com.
The theme music is called Escaping Light by Aaron Sprinkle. The podcast artwork design is by Maggie’s dear husband, Dan Rader.
TRANSCRIPTION
Maggie Germano 0:08
Thanks for listening to the money circle podcast. I’m your host, Maggie Germano and I’m a financial coach for women. I’m passionate about helping women improve their relationships with money so that they can take better control of their futures. Part of that journey is making personal finance education more accessible and less judgmental, which is why this podcast exists. Each week, we’ll discuss a new financial topic to help you explore how you can make a difference in your own financial life, or in society as a whole. I’m currently on maternity leave until April, but there are still ways for you to get support from me while you’re on your financial journey. If you’re interested in diving deeper into issues like income inequality, debt or money, shame, check out my new money circle community. In this safe feminist space women gathered to talk about money without fear of being judged or shamed. We break down shame and build community and safety for everyone so that you can find the support you need to gain control over your finances. Visit Maggiegermano.com/moneycircle to learn more and to join the community today. I can’t wait to see you there. Hey there, and thanks for listening. I’m your host Maggie Germano. And this week, I’m chatting with Keila Hill-Trawick, who is the founder and principal of little fish accounting, a boutique CPA firm dedicated to the accounting and tax needs of service providers and small online business owners. In this episode, we talk about how small business owners can prepare for tax season all year long. If you run your own business, this episode is definitely for you. Enjoy. Okay, welcome, Keila. Thanks so much for being here today.
Keila Hill-Trawick 1:45
Thank you for having me. I’m excited.
Maggie Germano 1:47
Me too. And I’m glad to have you on again, for folks who are avid money circle listeners, you were a guest A while ago. But in case folks don’t remember or haven’t listened to that episode yet? Why don’t you tell us a little bit about who you are and what you do?
Keila Hill-Trawick 2:02
Yeah, so my name is Keila Hill-Trawick. I am the owner of little fish accounting, which is a CPA firm that’s dedicated to very small businesses. So we mostly serve online service providers and in person service providers generally. And we take care of all things accounting and tax to make sure that they are proactive about the things that are coming and also just really prepared for how the money choices that they make throughout the year affect those things.
Maggie Germano 2:32
That is a very important service as a small business owner, myself. And how did you find yourself into this work, especially with your own company?
Keila Hill-Trawick 2:43
Yeah, I mean, it was partly accidental, I was working for the government. I was bored, I had never had a job longer than two years, which is funny, because now a little fish is the longest job I’ve ever had, which is crazy. Um, but I was working. And I had several friends who were going out on their own, who were starting consulting practices and other kinds of services, and really needed to help with their accounting. And I was like, Well, I’m bored, I could do that. And I had a friend who I always bring up Amber, who was like, you could make money off this. And I was thinking, I have a job, they pay me really well. I get paid on time. I am not trying to be an entrepreneur. But I found that I was much more passionate and making sure that people had access to accounting information and that they could feel cared for and heard in a way that I don’t think the accounting industry does very well all the time. And so almost a year to the day I quit my job with a calculated risk of quitting during tax season thinking that if all of this went to crap, I would at least have money that would hold me over for the next couple of months. And we’ve been kind of going ever since.
Maggie Germano 3:51
That’s great. And I love hearing stories like that. And I feel like almost everyone I interview who is an entrepreneur, their own is like, Oh, yeah, I mean, I wasn’t planning on doing this, which is never my goal. I just kind of found it because they see a gap in an industry. And it sounds like the gap you saw was kind of caring for people and being thoughtful and compassionate as you’re helping people with the finances.
Keila Hill-Trawick 4:19
Yeah, very much. So. And it’s also funny, because I remember literally saying, I don’t have an entrepreneurial spirit. Like, that’s just not for me, I’m just gonna work until I retire, it’s fine. And so being in a position where I like to say using my skill in service, being in a place where I can use something that I’m good at and that I’m passionate about to really help other people kind of further their goals and dreams is super exciting.
Maggie Germano 4:45
Yeah, it’s a good combination of skill and passion.
Keila Hill-Trawick 4:49
Absolutely.
Maggie Germano 4:51
And so you started you mentioned that you work with very small businesses. Can you talk a little bit more about the types of clients that you work with? Right now and kind of what made you narrow in on that clientele?
Keila Hill-Trawick 5:05
Yeah, I mean, some of that was circumstantial, too, because the people that I first started talking to that first started kind of hiring us were just tiny businesses. And so for us, that means that over, I would say over 90% of our clients have less than 10 people on staff. And so the reason that I say very small is because the SBA will have you thinking they’re making like 1 million 10 million $100 million. And there, we do have some millionaire clients. And we also have some 1000, dear clients, and so really wanting to focus on people who would not otherwise have an accounting department that if they have a few people on their team, maybe some are employees, maybe all are contractors, but they don’t have a dedicated person to their finances.
Maggie Germano 5:50
Okay, yeah, no, that makes sense. And those are probably companies that might be overlooked sometimes, but who still needs support?
Keila Hill-Trawick 5:59
Absolutely. And the stories that I’ve gotten from a lot of clients and leads is that it feels like a very condescending experience when they go to larger accounting firms that either one, talk to them and accounting speak, and so they don’t really understand what’s going on. But there’s this assumption that like, you are not paying enough for me to really flesh that out for you. And then the other thing that I didn’t like, is this idea that I like to tell people, I’m not a wizard, I’m a CPA. And so there are things that I know because I went to school for it, because I have to take CPEs, because it’s my job. But that doesn’t mean that that information isn’t accessible for you to do some of it if you could. And so this paywall that I think a lot of businesses put up that basically says if you don’t have the money, then you don’t get this information, felt like it left a huge gap for people who are just starting out and may get to a place where they can hire an accountant, but like, what are you supposed to do until then?
Maggie Germano 6:54
Right, what are you supposed to do until then? And then how do you know if you can trust the person that you’re working with? If you don’t understand anything that’s going on? Exactly that? Yeah. And so what do you work on with your clients? Like, what are the things that you are actually helping them with or handling for them?
Keila Hill-Trawick 7:11
Yeah, so we have two main services. One is the virtual CFO package, which is monthly day to day support, where we are taking care of bookkeeping taxes, payroll bill payments, essentially, your accounting department rolled in one. And we also want to look at like budget and forecast analysis to see how we can use the historical data to really affect what decisions we make strategically for what you do going forward. And then the other main service that we offer is what’s called the tax prep suite. And for us, we realized that standalone tax prep wasn’t as valuable as I had hoped that it was, I think that it’s important, but it ends up being something that people just want to check a box on. And for us, I thought it was much more important that we have a relational experience where we were talking to you throughout the year, where there are tax planning sessions, where you are not waiting until March to find out how much you would owe in taxes. And so it’s a year long partnership with specific touch points, really to make sure that by the time we get to filing your taxes, it’s not a surprise to anyone, and that business owners have a more transparent idea of how the decisions that they make throughout the year ultimately end up on their tax returns. And then, in addition to that, we have ad hoc consulting. So for people who are not ready to sign up for ongoing service, but just want to talk to an expert that’s available. And we’re working on a course for startup businesses, because we know that that all of this is not accessible. If you just started out to really get everyone from I don’t know what to do to I at least have the foundational steps ready to be able to decide what I want to do next.
Maggie Germano 8:54
That’s fantastic. So it sounds like there’s a whole range of how folks can engage with you.
Keila Hill-Trawick 8:59
Yeah, and it was important that, you know, if we were going to make it accessible, that we understood that that wasn’t always financial, right, like it’s going to cost for us to do the work. But is there another way that we can provide service that can be at a touch point or a pay point that people can, I want to say afford, because it just depends on where you are to be able to afford, but that matches what you need, and when you need it so that you don’t feel like if I can’t sign on for all of the things, then I can’t have anything.
Maggie Germano 9:28
Right? Yeah, no, that makes a lot of sense. And, and I loved how you were describing the tax prep suite too, because that’s something that I’ve always kind of butted up against, not just with my own business, but also when I’m working with clients who aren’t maybe our contractors or maybe they have their own small business. And they’re just like, I have no idea what is going on with my taxes. I don’t know how much to be saving over the course of the year. They’re terrified of April because they have no idea what’s going to happen and And I like as a financial coach, I know the basics, but I still do find myself in that feeling of like, I don’t even know if I’m setting enough aside or if I’m setting enough, or setting aside too much. And I and having that like, ongoing year long guidance, I think is really crucial.
Keila Hill-Trawick 10:19
Yeah. And I think it also puts people in a position where your taxes don’t feel like a black box, right? Like there’s a goal that it’s not just a, you sign off on your return, somebody put all the numbers in for you. I like to tell my clients, there’s no expectation that you’ll be a CPA at the end of this. But I want you to have a gut check of does this number make sense to me? Do I understand where that tax came from? And if you don’t, you should be working with someone who allows you to ask all of the questions that you need to, to feel comfortable before you sign off on it. Because I think a lot of people are just like they did them. They said I owe this much. That seems fine, I’ll sign and there may be opportunities or other things that they’re missing out on that they just didn’t know how to ask about.
Maggie Germano 11:01
Yeah. Now that makes a lot of sense. Again, that’s part of the understanding things a bit more and trusting the person that you’re working with, so that you can ask those questions.
Keila Hill-Trawick 11:11
Absolutely.
Maggie Germano 11:12
Yeah. So what is one thing that you wish entrepreneurs and small business owners understood about taxes? If you could choose one.
Keila Hill-Trawick 11:23
I would say the one thing that I wish that people understood is that what the tax return is for, like, I’ve had people say, I don’t understand why I didn’t get a refund. And I’m like, you didn’t pay any taxes. So like, refunds don’t just come from the IRS, you put money in, and your tax return is settling up from what you did for the year. And so essentially, there’s this idea that like throughout the year, you’re supposed to be paying estimated taxes, if you don’t, we’ll get to that. But you’re supposed to be paying estimated taxes, you get to tax time. And you essentially say I made this much I spent this much the tax system does its magic and says cool, you owe X amount of dollars. And what you are doing is saying, oh, okay, because I already paid you y amount of dollars last year. And if I paid more than x, then I get a refund. And if I paid less than x, then I have to pay the difference. And I think that in addition to the refund, people seem to not understand that, like that number is going to be owed anyway. So like people who don’t make estimated taxes on white, at the end of the year, this number is still owed is just a matter of are you going to be surprised about it? Or are you going to try to estimate to get some of it out of the way before you get to that point in the year. And so I think that if people better understood what tax payments were for, that they’re just paying in advance towards a number that you should have some sense of but get closer to once you get to tax time. They wouldn’t be so surprised when they either didn’t get a refund or owed money. Because they understand how that should have been calculated throughout the period.
Maggie Germano 13:04
Right? Yeah, no, I think that makes a lot of sense. And the way you describe it makes it like be like, Oh, well, yeah, duh. But. But I think when people are used to working as an employee at a company, they don’t realize their employer is handling their taxes for them. And there’s they’re getting paid. Every time you’re getting paid. There’s getting there’s taxes being taken out of your paycheck, and those are being paid. They’re not holding that cash until April when you file your taxes you’re paying over the course of the year. And I think when you become a business owner, that is something that then becomes very surprising.
Keila Hill-Trawick 13:39
Exactly. And I think that if we better understood it as employees, it wouldn’t be such a surprise, because to your point, it’s the same thing. They’re taking money out of your check every two weeks, and they are sending it to the IRS. And so when you get to the end of the year, and you do this same magic, the IRS is doing that same thing, per your tax return you owe x, your job already paid us this much out of your check, you have a refund or don’t. But I think because we don’t understand it as employees as entrepreneurs, it’s like where did the taxes come from in the first place?
Maggie Germano 14:12
Exactly. So it would be easier if we started thinking about it in the same kind of way as an entrepreneur and setting aside that money every month paying those estimated quarterly taxes. So that like you said, We don’t get to March or April when we file and are totally shocked. And then we have to set up a payment plan for the next couple years.
Keila Hill-Trawick 14:35
Exactly. If you if you get nothing else. I want people to understand that there’s an opportunity for you to know in advance a range of what you owe. I think people just assume that I have to wait until I find my return to find out if I owe 500 or $5,000. And there’s an opportunity for you to say I can kind of guess throughout the year and get relatively close to it. It doesn’t have to be This empty soulless place of I don’t know, when I show up, I’ll find out how much I have to pay them.
Maggie Germano 15:06
Yeah, no, I totally agree it shouldn’t be so scary. Um, so this episode is going to come out close to the beginning of the year. So early 2021. And I wanted, you know, I reached out to you to talk about, you know, how entrepreneurs can be planning for tax season, the entire year. So not just like starting in January, until April, but like thinking about the whole year starting in January for when we’re going to file next year. So if someone was like just getting started with a business, maybe they’re like, launch their business on January 1. And so they’re like starting with a clean slate, what are some of the steps they can take to get a handle on the tat their taxes for all of the entire year.
Keila Hill-Trawick 15:50
So one of the things that I’ll say is that I think a lot of people think that tax prep is about math, and is about numbers. But it’s not. It’s really about organization. And so your goals are to be as organized as possible, so that your numbers can be accurate, because you know how to support them. So the first thing I would say, that I say on all things is track everything, every single dollar that’s going in and out of your business, you want to be tracking it, and you want to track it as it’s happening. So that you don’t get to the end of the year, and are trying to remember how much you spent on something specific. The best way to do that is through an accounting system. I recommend QuickBooks because most of our clients use it. And it’s one of the more intuitive, but use whatever makes sense for you to use, connect it to what I would say my next tip is your business bank account. So make sure that you’re separating your business, finances, from your personal finances, for a couple of reasons. One, the IRS loves it, because it’s very easy for them to see what was business related and what isn’t. But the other thing is, it really gives you a good picture of your business. And so if you are looking at a business bank account, and you’re tracking through this accounting system, everything that goes through there is related to your business, you’re not going through and thinking, take this rent out, use these three items, but take these two items out because they’re personal. So it makes it more streamlined and what that does for you. If you keep up with those habits throughout the year, by the time you get to tax time and your tax preparer is like how much did you profit, you can pull that information directly out of the accounting system and feel confident that it’s correct, because you’ve been doing your part throughout the year to make sure that it’s accurate.
Maggie Germano 17:41
That makes a lot of sense. And it makes it sound very simple. But I think a lot of people struggle with that of like, I mean, I work with people on their personal finances. So I know how hard it can be to track your expenses and your income and everything like that. But yeah, like just even the act of separating your business expenses from your personal expenses, because I’ve definitely seen people try to detangle, all of that. And it just makes it so much more stressful than it needs to be. And there are plenty of free business bank options out there now or low fee as well, if that’s not an option, but it there’s just so many options now to just be able to keep those separate.
Keila Hill-Trawick 18:23
There are And to your point, it adds stress that you don’t need. Most people don’t have a million transactions coming through their business account. But we probably feel like we have a million personal transactions, we could go outside was like I had brunch, and then I had to Ubers. And then I got on the train. And then I went on a trip. And then I did two things, I paid for Asana and I bought a laptop. And then I have to go through all of these other transactions to get down to those couple. And so that way, when you get to a point where you’re trying to file taxes, even if you’re late, even if you didn’t do it every month, and that was the end of the quarter, and you’re like, Ah, now I have to do it, you’ll have much fewer transactions, because you’re only looking at the business stuff instead of trying to detangle first and then categorize.
Maggie Germano 19:13
Yeah, I’m with you there. And then you also don’t have to get frustrated by noticing your spending how your personal spending habits at the same time that you’re going through and looking at your business spending. Exactly. And so what kind of advice do you have related to the estimated quarterly taxes? I know that that scares a lot of people and and like you were saying it shouldn’t be as scary as it is, you know, taxes shouldn’t be that scary. So what is your advice on staying on top of those quarterly taxes?
Keila Hill-Trawick 19:48
Yeah, so the first thing is know that IRS quarters are not like calendar quarters. They just couldn’t make it easy. And so your estimated taxes are due on April, June. September and January 15. And you’ll think of that as the 15th of the month after the period. So, for example, April 15, is covering all of the income and expenses that happened through March 31. So that’s first know that it’s not exactly the same. The second thing to know is that penalties for estimating taxes are not, um, they’re not like credit card penalties. It’s not like it’s due on the 15th. And as of the 16th, they’re hitting you with a late fee. They’re charging you for how late you are. And so if you have cashflow struggles, or the 15th is not the best time because you get paid on the first pay them on the first don’t feel like you have to take yourself broke to pay them exactly on that day, because the goal is really to pay as close to that date as possible. And then finally, using a very, very broad range, expect that your federal taxes are going to take between 20 and 25% of your profit. If you just look at your profit, and you take 20 to 25%, you should be really close to what your federal tax burden will be. And then based on your state is generally five to eight additional percentage amounts that are going to have to go to the state. And so if you use those as kind of your baseline, generally expect that 30% of what you make 30 plus percent is going to go towards taxes. And because I always stand on this soapbox every single time, a lot of that is going to affect your pricing, right like if you know you want to make $100, you can’t charge 100 because 30 off top is gone. And what you instead want to do is make sure that you’re pricing high enough to cover that. And women, especially women of color, are notorious for underpricing ourselves. And so if you’re already pricing too low, then when taxes come out, it feels like it’s giving some of your money instead of this idea on the back end, which is that those taxes, those tax amounts never belong to you. And so if you price at a point that says I’m going to charge 130, for example, because I know $30 is going to taxes and I get to keep the other 100, it puts you at less of a risk of not paying your taxes because it doesn’t feel like it’s coming out of your bank account. It feels like it’s coming from the account that you already set aside for them.
Maggie Germano 22:23
That is such good advice. And I think that’s a huge takeaway for people where it’s like, it’s not just about pricing based on how much you want that take home pay to be. It’s also about pricing and keeping in mind the taxes. I’m sure there’s also you have conversations with clients about like, what is the overhead? What does that kind of look like to and keeping that in mind? And it’s it? It can seem so simple to just be like, Oh, yeah, no, it’s like $100. Like, that’s plenty. It’s like, what there’s so much other stuff included. And and like you said, then it’ll be so much easier just to put that $30 out of 100 into your tax savings account.
Keila Hill-Trawick 23:03
And it also helps you I mean, you know, we’re talking about the accounting side, but it also helps you determine, for example, how to best support your clients, right. So like, one of the other soap boxes that I always stand on is not using cash app and Venmo for your business, right? Well, a lot of the reasons that people use it is because it’s free, it’s not charging you any fees. But really, you just need to price for the fee. Like, again, don’t charge 100 if you don’t want to pay the $5 fee, charged 105, so that that’s being charged properly, and you can do the service in the way that you want to. And so even if you’re not at a position where you can raise that price, you have to make some different decisions. Thinking in that way gets you to a place where you understand that your take home pay to your point is not only based on like these operating expenses, it’s also these other things that don’t seem directly tied to each dollar, but are taking money from your ultimate take home pay if you don’t account for them on the front end.
Maggie Germano 24:01
Yeah, that’s a that’s a really good point. And when you think about it, adding $5 on to $100 service or adding even $30 to $100 service, that’s probably not going to make the client flinch. But it will make a big difference for the business owner, when you take into account the 100 times over the course of the year that someone buys that from you and you get charged for that fee. But then you’re you’re covering that on top based on what you’ve charged.
Keila Hill-Trawick 24:31
Right very much so and you have a better expectation of what money you’re earning because a lot of people will start planning what they’re going to make. In this example, I charge $100 I got 10 people I got 1000 but you did it because 300 of that got to go to the taxes. You know 150 of that is fees. And so if you’re planning your business around this idea that that $1,000 is going to be there and it turns out it was only $630 you have a whole different conversation around What you’re able to do in your business, what you’re able to do for yourself, and how you’re making strategic decisions about the rest of your business, and what you can do, because you have an actual number that you’re starting from, instead of this hypothetical number, that’s not really taking into account what it costs to run.
Maggie Germano 25:16
Right? Because that 30% for taxes can add up pretty high over the course of the year and really impact how you’re able to support yourself, pay your bills, keep your business even afloat.
Keila Hill-Trawick 25:29
Yeah, and it makes it so that then you think, and if we go back to the topic earlier about your taxes being a settling up, you think that you can’t afford to pay your taxes. And so you’re like, I know that it’s 30%. But I can only afford to give them 10 you’re still going to owe the rest. And so I think people end up kicking the can down the road of Okay, well, I can’t really give it to them right now. Because I can’t afford it, instead of kind of flipping the script to say, if I know that they have to come off top, then what do I need to make to be able to afford the rest of my things? Because they’re going to get or want their money regardless? At an additional cost to you if you don’t do it on time?
Maggie Germano 26:10
Yeah, they’re they’re not just going to be like, Oh, okay. Yeah, don’t worry about it. You can’t afford it. They want their money.
Keila Hill-Trawick 26:16
Yeah, they’re gonna be like, you can’t afford the other things that you did. But you were supposed to have paid us already.
Maggie Germano 26:23
Exactly. So if existing business owners are starting the year, I’m staring down tax season in the next couple of months, and they’re starting to panic. And they’re not sure. Like maybe they you know, 2020 was tough, because it was 20 is tough for everybody. And they weren’t necessarily on top of things with their taxes. What steps can they take to start kind of preparing for tax season for filing their 2020 taxes and kind of get on top of that.
Keila Hill-Trawick 26:54
The first thing I would say start looking for your accountant or tax preparer. Now, a lot of people kind of push it off, because tax season deadline isn’t until April 15. And so they’re like, I’ll find somebody before the deadline. But people are already getting booked out in December and January. And so one, you want to not be in a desperate position where you just have to take the person that has availability for you, but to you put yourself at risk of not being able to file on time, if you are not getting to anyone until March and so accountants are opening their tax doors already December in January is a really good time to get in, because that’s when they’re setting their bandwidth. Also, remember that a lot of tax preparers and accountants are small businesses. And so they’re only going to take on so many people. And so the opportunity for them to have a waitlist or to get full fast is really quick when you don’t have that many people on the team. And then the other thing that I would say is like catch up, get your financial statements in order, get your tax documents in order, as you’re starting to get those things in the mail or get them in your email, go ahead and start putting them to the side. If you already have an accountant or tax preparer, they should be able to tell you what they’re going to ask for from you so that you know what types of things to be gathering. And then I would say the last thing is start thinking about your goals for next year. Not in like a I need to plan everything out goal. But you’re able then to look at what you did this past year, what you made and what you spent and what you’re looking at for taxes and use that information to determine Is this a pricing situation? Do I need to raise prices next year? Do I need to hire help next year? Do I need to start thinking about a different business entity type? Like those are all pieces that you can start considering now that are going to feel too late to do when you get to spring?
Maggie Germano 28:50
No, that makes a lot of sense. So yeah, taking advantage not only of getting a professional to help you for filing in the spring, but also taking advantage of the beginning of the year to start implementing any changes you may need to make.
Keila Hill-Trawick 29:05
Yeah, and remember that like you are interviewing the person that you want to take over your money, right? And so you have power there you have power to say, Are you the right fit for me? Do you serve as my industry? Do you work in a way that works for me, you know, if you know that you need a lot of hand holding a new a lot of phone calls, then you want to make sure that you’re working with a tax preparer that’s really able to work with you in that way. And that’s going to be really difficult for someone who works electronically for most of the year. And so take the time to start early enough to interview people to see if they’re giving you what you need. Because that’s what this is about. It’s not just about kind of checking the box to say that your taxes are done. It’s really about building a relationship to help you build good habits. So that that doesn’t feel like such a scary time for you every year.
Maggie Germano 29:54
Yeah, that’s really good advice. Because I mean, I think I think people forget that they need to actually like working with the people that they hire, because you have to trust them. And you have to want to talk to them and ask them questions and engage with them and also get the support that you need. I mean, I know that I’m switching to a different tax person for the our 20 taxes, because I didn’t feel like I was getting enough support from the person that we hired last year, I wanted more ongoing support during the course of the year to make sure that I was doing the right thing with my estimated quarterly taxes and all that. And the responsiveness I needed was not there. And so instead of just paying them again, to do that again, and then getting frustrated next year, I found a new person. So I think that, yeah, that’s something that we we tend to forget. And so just making sure that you are getting, like you said, the support that you need, so that you’re going to be it’s going to be effective.
Keila Hill-Trawick 30:53
Yeah. And so that, you know, it goes beyond the tax season. So some tax preparers only work tax season, and then they’re like, We’re closed. And so if you have a question in June, that’s not the person that you want to talk to. And for some people, that’s fine. They’re like, I just needed this knocked out. But you need to know that. And you need to know that before you engage them to do the work. And then you need them in July, you don’t have anybody to call.
Maggie Germano 31:17
Yeah, that’s a good point. And so are there other steps that you haven’t mentioned that small business owners can take throughout the year to stay on top of their taxes,
Keila Hill-Trawick 31:26
I think they estimated quarterly taxes are a big one that’s really based on your bookkeeping, make sure that you’re keeping up on your bookkeeping, no matter how small it seems. Some people will say, Oh, my business is small, I don’t even need QuickBooks or anything like that, I would still recommend that you get it. But part of that is so that it’s a less manual process for you, if you have to remember to put it into the spreadsheet every day or every week, you’re going to miss stuff. But if it’s pulling directly out of your account, you’re much less likely to miss it. And so make it easy for you, it’s already something that most people don’t enjoy, don’t add a burden to it to save like $15 a month, if it’s something that you could afford to put towards it. And then I would say the other thing is take advantage of an accountant or tax preparer before the end of the year. So find someone that you trust talking to and set up a consult call to talk with them in June, July or August to say, am I on the right track. If you’re a W two employee that also has a business but also has a rental property, like you want to check in with somebody and say, Hey, this is how much they’ve taken out of my check. There’s an IRS paycheck checkup, site or resource where you can put in the information so we can tell you if you’re on track for paying the right amount. And also you have the opportunity to talk to somebody and say, is this deductible? should I invest in this thing? You know, I get a lot of people who come to me at the end of the year, and say, How do I save on taxes, I want to deduct everything. And I’m like, Well, you know, if you deduct everything, you’re gonna show that you didn’t make any money, which is fine. But you can also buy a house if you say that you made $112 this year. And so being able to talk about those goals, especially as a business owner, before you get to the end of the year, put you in a position to be able to say how do I need to set up my stuff to meet the goals that I’m trying to make this year that don’t feel like a mad dash on 12/31 to hurry up and get out of the way?
Maggie Germano 33:24
Yeah, that’s really good advice. And I mean, especially I’ve definitely heard people be like, oh, like, it doesn’t matter if that if it costs that much like you can just write it off anyway. It’s like, well, like, yes, it may be, then it wouldn’t that money wouldn’t go to taxes, but that money is also not going in your pocket. So like being strategic and thoughtful about how you’re investing in your business is important.
Keila Hill-Trawick 33:45
I mean, the sheer number of conversations I have where I’m like, I’m not going to advise you to spend $10,000 to save $2,000 in taxes like that cash doesn’t exist for you now. So to your point I think people get so caught up by it’s deductible is deductible, am I but if needed, it’s also a waste of money.
Maggie Germano 34:05
Right? Of course, if it’s going to be spending that you need to do or you want to do it’s an investment you want to make on your business. Yes, of course, deduct it, right. Like that’s kind of part of the point. But yeah, if it’s not money you can or should be spending or would otherwise be spending. There’s no point in doing that just to save on taxes. Exactly. So is there anything else we haven’t touched on? Whether it is taxes specifically or managing accounting for your small business? Anything we haven’t touched on yet that you want to make sure listeners take away today?
Keila Hill-Trawick 34:39
Not necessarily that we haven’t touched on but one of the things that I want to say that I think is really important to say is that it doesn’t have to be something that’s scary. I think we’ve built up this narrative in the media and in the accounting industry that like the IRS is out to get you and that’s not true. And so there are obviously real fears. There are real threats, whether that’s fraud or audit, or all of those things. But if you’re trying to do the right thing, if you’re tracking your items, if you have support for the things that you’re doing, you don’t have to be afraid that the IRS is trying to chase you down. They want you to pay them. And so if you owe them money, you have opportunities to pay them in full or to set up a payment plan, or call them and, you know, maybe have a tax resolution specialist help you with an offer and compromise or like these other options. It doesn’t have to be I owe this money, and I have to be terrified about it. And so that’s one thing to keep in mind is that, you know, the IRS is not necessarily this big, bad wolf that’s out to make sure that you give them things they want to get paid, but they’re not trying to scare you, or put you in jail, like people who are like, they’re going to take my business and put me in jail. I’m like, we don’t make enough money for them to do that. And that’s not what they’re out to do. They want to make sure that people are abiding by the tax law. And then I would say the other thing is, don’t feel shame around it. I think there’s this expectation that you should have known and you should have been putting enough taxes away, and how could you not have had your bookkeeping in order, I like to remind people that most people get into business, to do the thing they got into business for if I’m a baker, I didn’t get into business to be my own accountant, I got into business to bake goods. And so having this idea that, like I should have known that, know that, and I’m sure you come into this all the time, people come to me all the time with the same questions that you’re asking. So you are not alone, you are not in a place where it’s like, I can’t believe that you don’t know this, you know, you start from the place of wanting to figure it out, you get the information that you can you hire an expert for the rest, and then you just do your part, but there’s no reason to feel like you’re behind or should have had this all figured out. Because unless you went to school for it like I did, why would you?
Maggie Germano 36:58
That’s such a good takeaway, because I totally agree with you. And I was going to say, unless you took an entire accounting class, and why would you know this, most of us have no idea what we’re doing when it comes to taxes. And like finances in general, you learn by doing. And so it’s just, it’s, it’s not funny, but it’s Oh, it’s like, darkly funny how pervasive the idea that we should know what we’re doing is when none of us are getting formal education around any of it. So I think that that’s a really important takeaway.
Keila Hill-Trawick 37:30
give yourself credit for being an expert in the thing that you do. Like, I’m great at accounting. And then I went to hire people this year as employees and realized that I didn’t know anything about HR. Like, I’m not going to feel bad for not knowing that I’m really good at the thing that I do. And so if you’re a coach or a service provider, or you make jewelry, or you sell shea butter, or whatever the things are that you do, you are awesome at that, and don’t kind of negate your own worth, or your expertise as a business owner, because this is an area that you weren’t taught to learn.
Maggie Germano 38:05
Yeah, I love that. That’s a great takeaway. So is there anything you want to promote to listeners right now that you have going on?
Keila Hill-Trawick 38:14
Um, so you can always find us online at little fish accounting, we are on Instagram, especially. And then on the Internet at littlefishaccounting.com. One of the things that I am co founder in a new business called accountants of color, where we are really supporting bipoc accountants to make sure that they have access to resources, guidance, support, really just wanting to make sure that accountants who might not otherwise be, I guess, taken care of have the ability and the background to be able to build profitable and successful accounting firms. And so that’s something that I’m really excited about. And one of the things that I think would be great for listeners is, our first kind of order of business was to create a directory so that there was never an excuse for people to say, Hey, I couldn’t find a person of color to do my accounting or taxes. And so by the time you hear this episode that will be live on accountantsofcolor.co and so I would love for you all to go check it out. Support if you can, and just really spread the word because like I said, at this point, you’re at a place where you want to be looking for someone. And that’s just one other resource to be able to choose from a pool of qualified candidates who can kind of help you on your accounting and tax journey.
Maggie Germano 39:34
That’s awesome. I can’t wait to see that. And I will certainly link to that in the show notes. So no one has to go digging for it. And anyway, it’ll be very accessible.
Keila Hill-Trawick 39:43
Yay. I’m glad to hear it.
Maggie Germano 39:45
That’s great. Well, thank you so much for taking the time to share your expertise today. I think that this is super, super helpful and you’ve helped make things a little bit more demystified and less scary for people.
Keila Hill-Trawick 40:00
That’s always the goal. So I’m happy to be here happy to provide all of the gyms that I can to make sure that our mission of making accounting accessible to people gets met. So I hope that everyone got what they needed, or at least a point of what they needed so that they can kind of go do the homework and figure out next steps. But yeah, excited to be here.
Maggie Germano 40:19
Great. Thanks so much.
Thank you so much for listening to the money circle podcast this week. If you like the conversations we’re having here and you’d like to go even deeper. Join the new money circle community. In this safe intersectional feminist space. We will break down money shame and build community and safety for everyone so that you can find the support you need to gain control over your finances. Visit Maggiegermano.com/moneycircle to learn more and to join. If you’d like to get more connected with me, subscribe to my weekly newsletter at MaggieGermano.com/subscribe. to learn more about my financial coaching services, my speaking and workshop offerings or just to read my blog visit Maggiegermano.com. You can also follow me on instagram and twitter @MaggieGermano. I look forward to hearing from you. Bye bye
