Make Tax Season Stress-Free For Your Wedding Business with Katelyn Magnuson

Filing and paying your taxes is a necessary part of running a wedding business but there are things you can do to reduce the amount you have to pay. And yes, it’s perfectly legal.

When I started working with my current accountant, I learned a lot about the flexibility that comes with the tax system, all of the different things that you can do to save money, and all of the really common mistakes that wedding professionals make that cost them thousands each year.

My amazing tax & financial wizard, Katelyn Magnuson, saved me over $8000 on my taxes last year and is set to save me even more this year. That’s why I knew I had to bring her on the podcast to help you save money on your taxes and make tax season stress-free for your wedding business.

How do you save money on your taxes and avoid tax season stress? Listen to this episode to find out!

In this episode we’ll cover:

• What tax planning is and how it saves you money
• The different things you can do before the end of the year to save yourself money on your wedding business taxes
• The flexibility that exists in the tax system and how to use it to your advantage
• How Katelyn and her team saved me more than $8000 last year
• What a write-off is and why you shouldn’t spend money at random to try to reduce your taxes
• How tax deductions really work
• How I gamify my taxes
• How to get ready for tax season to it’s less stressful
• How to make data-informed decisions about advertising
• How you can get help with your taxes even if you’re not ready to outsource them yet
• When it’s time to start outsourcing your bookkeeping and taxes
• How to avoid issues with the IRS
• What to do if you get a letter from the IRS
• 5 big mistakes wedding pros make on their taxes that cost them thousands each year

How Google Analytics Can Make Growing Your Wedding Business Easier with Adrienna McDermott

Hello there, my friend. I am your host as always, Heidi Thompson, here helping wedding professionals of all different kinds book more of the clients they really want to be working with following a simple roadmap and building businesses that give you the freedom and flexibility that you’re after.

Now, part of every wedding business is, unfortunately, taxes. It’s just part of business. It’s just what we have to do.

I think a lot of people fall into the trap of thinking that your taxes are just a set amount of money that you have to pay, but you actually have a lot of control and a lot of different things that you can do in order to perfectly legally change the amount of tax that you’re paying to benefit you.

This episode is going to pertain specifically to wedding professionals in the US, although you may get some ideas from this if you’re located somewhere else.

When I started working with my current accountant, I learned a lot about the flexibility that comes with the tax system, all of the different things that you can be doing, and all of the really common mistakes that people make that cost them thousands. So we’ll talk about this in the interview that I’m going to get to with my amazing financial wizard, Katelyn.

She saved me more than $8000 by addressing one of these really common tax mistakes.

And she did it in a way where I actually understood what was going on, which I loved. After completely falling in love with Katelyn and her team and everything that she does and having her speak at the last Book More Wedding Summit, I finally got her team to put together a training for you.

This will be happening live on November 15th at 12 pm. Pacific and 3 pm Eastern Time. It’s all about these common tax mistakes and making sure that you are planning now to have a stress-free tax season and save as much as you possibly can.

Like I said, I addressed one of these mistakes with her and it saved me over $8,000. It’s going to save me that much this year too. It’s a recurring thing because it was an entity change which was something that I was just so confused about because I’m not a tax expert. So you are going to be able to learn directly from them. Like I said, that is happening on November 15th.

It is a completely free training that I have net Katelyn and her co-host Tyler into doing for you because I want you to get the results that I’ve gotten from them. You can grab your free spot at www.evolveyourweddingbusiness.com/taxes

I don’t want you to miss out because as you’ll learn in this interview with Katelyn, there is so much more that you can do now before the end of the calendar year to save yourself stress and save yourself money than if you wait until next year.

Today’s interview with Katelyn Magnuson is phenomenal so let’s get right into it.

What is tax planning?

Heidi: So, people who are listening may or may not have heard of the term tax planning. They know they need to file their taxes. They know they need to pay their taxes. But what exactly is tax planning?

Katelyn: Tax planning is looked at, in my opinion, as being proactive action that you can take for taxes, and tax planning is generally done off-season. The on-season for taxes being, you know, roughly January, February through the middle of April when everyone’s going a little bit bonkers. Tax planning is generally done on an ongoing basis, but especially in the off-season being summer and fall of the calendar year that you’re in.

So, for example, it’s October right now, and we are in the thick of tax planning for all of our clients. And what that means is we’re looking at their books. We’re analyzing their entity type. We’re seeing if any big changes are coming this year or next year.

Have there been a bunch of changes in their income?

Do we need to update what they’re paying for estimated taxes, or update their salaries?

So all of these things that we can be doing or advising them on to help make tax season less stressful, less anxiety-inducing, and also to save them as much money as possible. Within reason, right? We’re not committing tax fraud here, but to save them as much money as we can and also allow them to make empowered and informed decisions, both now and throughout the next year when it comes to their finances.

Heidi: I think too, a lot of people don’t realize that there are multiple subsections of how taxes work. And I’m just going to speak about this in very unaccounting terms, so you can clarify that. But you know, I think a lot of people don’t realize that depending on how much your business is making, you can make some choices that can reduce the amount that you’re being taxed or change the way that you’re being taxed.

I think everyone just thinks it’s like just this one thing when really, it seems like there are kind of a million different directions you can go in.

Katelyn: You know what? Honestly, Heidi, that’s a really great way to phrase it. And I wouldn’t have even put it that way, but it’s so straightforward.

So many people think taxes are taxes are taxes are taxes. And, yes and no. Taxes are taxes are taxes when you’re traditionally employed, not necessarily the case when you’re self-employed, like you sort of alluded to is that there are certain thresholds.

There are certain markers that like when you’re hitting X in business profit, like maybe it makes sense to be taxed as an S corp, or maybe it makes sense to make some strategic moves to save on what you’re being taxed.

There’s sort of this flow chart of like, if this, then that, that we go through, you know, in my head all the time when we’re looking at working with a client, like if this, then that, and then we go through this whole other list of like check boxes for like what we could be doing or like what things to touch base with them on because it’s so much more nuanced than just like, yep, this is what you made. This is what you spent. This is what your taxes are.

Heidi: Yeah, and I think that was something when I started working with you, I was confused about because you hear like, oh, yeah, go with the S corp thing. Like, it’s just this blanket statement when really, you know, what we did together was looked at.

Okay. Here’s what you’re paying now. And here’s what you would pay. If you were taxed in this other way, so we can see, you know, I think I wound up saving more than $8,000 being taxed in that way. And that is something I wouldn’t have thought of. You just hear like, oh, you should do it this way, but you really do have to run the numbers.

Katelyn: Exactly. And that’s, there’s so much misinformation because everyone goes to Google it, right? If you don’t know what you’re Googling, you may have misinformation and it’s fascinating in kind of an awful gut-churning way sometimes, because we will have clients come to us that are an S corp long before they should have been, or are not an S corp or not being taxed as an S corp long after they should have been.

And both of these are heartbreaking because S Corp elections come with some added fees. And so if you’re not at the profit level, that makes sense. It’s like you’ve been overpaying for no real benefit here. And on the flip side of that, if you should have been taxed as an S Corp, you know, you and I were talking, Heidi, right before this, that we had someone come to us that thought they’d been an S Corp since 2020.

Surprise. They’re not. They’ve been overpaying to the tune of. You know, 5 plus figures a year in taxes for the last 2 going on almost 3 years or 3 going on 4 years now. And so there’s really the sweet spot where it makes sense. And I think that whether you’re working with us or someone else. Taking the time to have them explain to you, how does this benefit me?

Like, what is the monetary gain? Is it worth the extra hassle, which we do because it’s really important to me that you understand, hey, based on where you’re at this year, this is what this would save you as compared to the type that you are now, or the type that you’re looking to be. These are our added fees.

This is what you net in savings so that you can make an informed decision rather than just like. I can’t tell you Heidi, the number of times someone comes to me and they’re like, yeah, my accountant told me that I should be X, Y, Z. Well, yeah, but do you know why? Does it actually make sense? Yeah. That’s a big difference.

Heidi: Yeah, and that was the thing that I love is like, okay, well, let’s look, let’s pretend we’re doing the taxes right now. This is how it would be as you are. This is how it would be as an S corp. This is how much you would save, which, you know, people will tell you it can save you money.

If it’s going to save me like $200 I don’t care. It’s not worth my time. It’s not worth bothering to go through all this and file the paperwork. I wanted to see exactly or at least as close to exactly how much it would save me. So I knew that, you know, paying these filing fees and, you know, doing this extra paperwork was actually going to have a significant payoff and not just like pennies for the work.

Katelyn: And that’s what we want to see as well too, because there’s nothing worse than me. Like, yeah, you broke even after you paid the added fees and jumped through the hoops and made it a little bit more complicated.

We want to normally see after our fees, payroll fees, et cetera at least a thousand dollar savings. But we also want you to have the information because your threshold might be different. And we have people that sometimes they’re like, Oh, it’s $3,000. Like I really just don’t want to change what I’m doing.

And we have other people that are like, Oh, hell yeah. $3,000! Let’s do that now. But again, it’s so that you can make an informed decision.

I feel like a lot of tax information just out there when you start Googling is so vague and I mean, to the defense of people who create it, it kind of has to be because it is an insanely specific, you know, field where it’s like, well, it depends. I can’t really give you a direct answer until I see exactly what we’re working with.

In the spirit of David Rose, what exactly is a write off?

Katelyn: It’s the time of year when everyone kind of pops out of the woodwork and like all of our clients like, “Hey, do I need to spend more money to reduce my taxes?”

Is there anything I can buy at the end of the year? And a lot of that comes generally, generally, the answer is no, never. Your goal is never to go spend more money just because and the reason be. I’m gonna use the term write-off in deduction synonymously. So a write-off is a qualified business expense that is considered ordinary and necessary.

Now, that is the IRS’s definition, and I paraphrased of course, but ordinary and necessary is where you get into sort of this gray area, right? Because yeah, you have to be able to justify should you be audited that this was like. It’s an ordinary, it’s a necessary business expense. So that’s where you will also sometimes find conflicting information from like, maybe you talk to one accountant, but not another.

And they said that you could write off your massages. And this other accountant said that you couldn’t, or that you’re going to have this gray area to navigate. But a write off essentially, let’s say that you spend a thousand dollars on a computer.

It’s a write off. You’re using it for your business. It is totally considered ordinary and necessary. That does not mean that you were spending a thousand dollars less in taxes. A write off is not a one-to-one reduction in taxes. It is a percentage. And we’re going to give some general information here because like you said, Heidi, it’s so personal, but it depends on your overall household income.

So for example, the majority of the clients that we’re working with are in roughly the 22 percent income tax bracket federally. So we’re going to use that for this example. So if you spend a thousand dollars on this computer for your business, you get to save 22 percent approximately on your taxes.

So 22%. So think of it like you’re getting a discount on the computer, but you are still paying more money out of your pocket than if you’d not purchased anything.

Heidi: That’s so key right there because I think a lot of people think it is that one to one like I spend $1,000 then I have to pay $1,000 less on my taxes.

Katelyn: Nope. You get to pay $220 less. So you’re still out $780 now. There are a couple of things and we’re going to get like slightly off for a second here, but there are a couple of times when it would make sense. Right?

So, we’re actually getting ready to send a newsletter out for November to all of our tax clients heading off this question that comes out all the time. There’s some logic around buying things at the end of the year at the beginning of the year. If you have the following circumstances, maybe this year. You had a really, really profitable year and next year you’re not expecting it to be as profitable.

Maybe your bookings are smaller. Maybe you’re taking time off. Maybe you’re reconfiguring your business in that case. And let’s say you need to buy a computer, right? Your current computer is on its last legs, or you need to buy a new camera body, whatever it is. In that case, it would make more sense generally to buy that before the end of this year, rather than next year, because you are most likely in a higher tax bracket this year if you have higher profit.

Heidi: So that discount that you’re getting on your taxes is higher this year than next year. And the flip side, and I like the way you phrase that like, buy it in January. I like the way you phrase it as like, it’s the discount. So it’s like, you can get 22 percent off or depending on, like, maybe your revenue skyrocketed.

You can get. I don’t know, 30 percent off or 40 percent off.

Katelyn: What we see Heidi is if someone has a child or if someone, you know, has to take time off for medical leave or they reconfigure their business, that’s when we see those big changes year to year in income. That’s generally the only time where it makes more sense to have like a strategy around when you’re making larger purchases.

Heidi: That makes a lot of sense. Yeah. Like if you’re going to be out with your newborn for the first six months of the year, you’re not going to be working at all. Yeah. Obviously, you’re going to be in a lower tax bracket. Right. Exactly. That is very helpful to know.

Like you can say, don’t make purchases to try to lower your taxes, but there’s always a caveat, but here’s the caveat with the little asterisk down at the bottom. And it really does depend on you and your unique situation, which is the weird thing about taxes. But I think the interesting thing about taxes, because you can do so much.

I feel like people think of taxes as this like rigid thing and it just is what it is. I feel like it’s much more like Play-Doh. It’s like. kind of molded around, like, how things are going, what you’re doing, what you’re trying to do. And it can really make a difference. Like I said, like, in 1 year from making that 1 change, I saved $8,000.

Katelyn: That’s pretty significant. That was pretty awesome. It’s such a no-brainer when you hit, like, when it makes sense for your business, for your place in life, for your income level, like, there are all of these qualifiers, but when it makes sense, like, damn, it’s, it’s big. And I think a lot of people hide from it because it’s uncomfortable.

Heidi: It’s funny. I have this view of taxes and maybe this is why I pay attention to tax stuff, I kind of look at it as, like credit card points. Like, I feel like I’m kind of like. I’m kind of scheming. I’m kind of like winning the game. I can do all this stuff and it pays off for me. So I’m interested in it.

Whereas, you know, if it’s just money, I have to pay the government, I’m not interested in that , right?

Katelyn: You’re, you’re gamifying your taxes, which I feel like is actually, that might be the trick to winning in taxes, right? As much as any of us can. Yeah. What if we pull this? What, what have I not like used that I could be utilizing, like, you know, has something new come out from the IRS?

Like we saw, oh my God. We saw all of the things with Covid and like PPP and EIDL and all these like. Good and bad programs came about, but it was just like trying to keep up with drinking from a fire hose to be able to, you know, help clients take advantage of everything that did come to them during that time.

Heidi: Oh, I bet. And like, there are so many different strategies, like, you know, depending on what you want to do. Like, if you’re getting ready to buy a house, maybe, you know, you don’t want to take every single deduction and lower your income. If you’re trying to reduce the amount you’re paying in student loans, maybe you do want to take every deduction.

Katelyn: Exactly. And that’s why it’s so personal. Like that’s part of what we normally ask too, like, Hey, in the next couple of years, are you looking to move? Are you looking to qualify for a mortgage? Are you having a child? Do you have any big plans?

And I think sometimes people just think we’re being nosy and we actually like updated it on our, our questionnaire, like, Hey, we’re not asking just to ask this all impacts, like what goes into our planning and like what we’re going to be discussing because it can look really different for someone that’s a digital nomad that doesn’t plan on having children that doesn’t give a shit whether they own a house or not versus someone that has three children that wants to retire their spouse.

Very different situations, very different finances. And so for that reason, very different taxes.

What should people do to get ready for tax season?

Heidi: So let’s talk about getting ready for tax season. I know you said people kind of gear up into this, like, should I start spending random money? What are some other things that you see people do? And what are some things that people should be doing?

Katelyn: So there, it’s kind of a 50/50. We, this time of year. We see a huge uptick in people, like the second everyone goes back to school, right, whether you have kids or not, it just feels like fall comes around. You get close to the end of Q3, the beginning of Q4. People are like, “Oh, yeah, I put off doing my bookkeeping all year. I should probably do that.”

And you have a subset of people that do it and they ask questions and they reach out and that’s great. And then you have another subset of people that are like, yeah, yeah, yeah. I’ll get to it. I’ll get to it. I’ll get to it. Maybe like fall, Q4 is their busy season.

But if you are not outsourcing your bookkeeping or doing your bookkeeping regularly. And what I mean by bookkeeping, because people will ask is categorizing your transactions. Having some semblance of understanding of what your income is, what your expenses are, what your profit is makes a huge difference when you’re looking at taxes because you can’t forecast what you’re going to owe for taxes, you can’t even forecast what to pay for estimated taxes if you don’t know what your profit is for the year, it makes it more difficult to outsource if you do decide to work with a professional.

It doesn’t have to be perfect, right? I just had a conversation with someone the other day who’s doing her own bookkeeping and she might still have a couple hundred transactions to still go categorize. I told her to get 90% through it because that gets us more than close enough to be able to give you actionable information.

But a lot of people will wait until after the first of the year or later, sometimes they wait until April or the middle of the year and then they’ll go, okay, I’m ready to do my taxes.

Okay. We need your transactions. And they’re like, oh, I don’t know. And then they end up paying more in taxes or Heidi like you and I were talking about they may not be the right entity type. They may be a sole proprietor and maybe they made over 40 or 50,000 in profit. Maybe it’s time for that S corp election.

If they don’t have their bookkeeping up to date before the end of the year there are so many fewer paths or fewer options that they have to take if they’re not being proactive about it.

Heidi: That’s the thing I think most people don’t realize, and I didn’t until I started learning more about this, is like how many doors shut to you on January 1st.

Katelyn: Exactly. And you can do so much if you do it before, even if it’s like toward the end of the year, even if it’s in November or December, it’s still before that cutoff but that’s difficult to do if your books aren’t done yet. It puts a lot of pressure on either them or us or whomever, you know, if you’re, you’re trying to make it happen because that’s what we do right now with all of our tax plans.

We’re having all those calls. We’re having all these discussions. We’re asking to review their books because guess what? Stuff happens in Q3 and Q4 that can make a dramatic impact on what we may have advised in July if we chatted. So having that conversation, like maybe you expected to have a ton of bookings for 2024 in Q3 and Q4.

Maybe they didn’t come through. We’ve seen some changes in, you know, buyer behavior recently. We’ve seen shortenings. All of these things are changing and so that might impact your overall tax plan and it can be the flip side. Maybe things went wild and you have so much more profit than you anticipated.

And so not having accurate books, you, you can only make so much, like so much of an informed decision when you do not have accurate bookkeeping. I’m going to harp on it because if you do nothing else or take nothing else away from it, that is one of the biggest things to be doing.

In an ideal world, year-round, every month at a minimum, doing your bookkeeping, having an idea of where you’re at, if you put it off and you’re like, yeah, yeah, I’ll get to it, making sure that’s done by the end of Q3, very beginning of Q4 gives you just enough time if you hustle and you’re proactive to be able to potentially make some changes if needed, if your income or your revenue shows that it’s needed.

Heidi: Yeah, and I think most people think, oh, I don’t have to have it done until I’m ready to file my taxes. That misses all these benefits.

Katelyn: Exactly. Oh, that is such a, that makes me so sad to hear. No, Heidi, the worst, the worst thing. And at least twice a year, if not more, we have it happen when someone comes to us.

They had a really great year. So they were really busy. So they weren’t doing any of the other things except keeping their head above water. Right? Which we see happen when things get crazy and they’re technical They come to us, especially if they’re in California, but there are other places too. They come to us.

They’ve been a sole proprietor. They come to us, you know, in March, they’re ready to file their taxes. There is not a damn thing we can do outside of a little bit of a retirement contribution if that’s an option to really save them money. There’s no S corp election because we can’t retroactively elect to be taxed as an S corp unless you’re an LLC.

You can’t register an LLC for the year before after the year is closed. Like all of these things that I die inside when I’m looking at them, like, Oh my God, if you would have just reached out three months ago, this could have been a completely different conversation. And I think most people are just completely unaware that yes, it makes sense to reach out to someone.

In an ideal world situation, when would you like to see people getting ready?

Katelyn: Literally as soon as possible, right? Like. Right now, October, November, and December are the, I need to make something happen months.

Availability is generally a little bit limited, but still available for accounting professionals. It’s our off-season and I say that in like quotes because it feels like nothing is ever off-season anymore, which is just wild. But tomorrow, this week, whatever you can do, even if it’s just a check-in, right?

It might be as simple as, Hey. I want to review all of this. I want to make sure that I’m not missing out on things that I could be doing because chances are, you probably are then in a proactive best-case scenario. The goal would be that you find a firm that you love, and that you’re able to proactively work with.

And we work with our clients year-round. So we’ll be rebooking all of our clients who are going to continue working with us when their taxes are filed so that we can have a check-in or a conversation anytime between like, July and October. And then we do an end-of-year check-in to make sure that nothing that we’ve discussed, especially for those July check-ins, that nothing that we’ve discussed has dramatically changed.

So that’s what it looks like from a proactive maintenance standpoint, right? As we’re checking in sort of mid-year, two-thirds of the way through the year. And then we’re just, hey, This is what we had. You’re still on track. Your books look totally what we were expecting based on the averages, but that would be the ideal year-round setup.

When is it time to start outsourcing your books and taxes?

Katelyn: Well for us, it’s a little bit less transactional and more of like, oh, we’re actually partnering to make the best decisions because it’s not always saving you the most in taxes, right?

Like, if you’re qualifying for a house, there are other strategies behind how you’re choosing to file what you’re choosing. I say choosing what you’re choosing to pay within the ability that you have to choose. So outsourcing looks really different outsourcing for our firm. Looks like having the support to meet you where you’re at in your business.

We’re really big on education and empowerment. We want you to understand as much as you want to understand. And that varies from person to person. Some people are like, “Oh, my God, I’m a sponge. Tell me everything.” Some people are like, “I want to know the bare minimum to know that, like, I’m not committing tax fraud, but like, this also just really stresses me out.”

Um, and that’s a different conversation that we have. So I normally recommend if you are a sole proprietor or a single-member LLC, those are both what are known as disregarded entities, which is kind of a rude way of saying that you don’t have to file separate business returns. The business returns that you have to get filed together with your personal due by April 15th.

They’re on a schedule. See, you file them through TurboTax. I’m not promoting TurboTax. I’m just saying that it’s an option. And if you’re feeling really good about that, maybe you’re making a few thousand dollars a year, $10,000 a year in profit, probably fine to keep doing yourself at this point.

If you feel good with it, because other people are like, “Oh my God, the second I can afford to pay someone, I am paying someone.” Once you’re starting to make more than like $10,000 a year, I would at the very least be having a check in going over. What am I doing wrong? What am I doing right? Is there anything that I’m missing?

Because you’re setting the foundations here for a profitable business for you to have the confidence to know. Okay, based on your personal circumstances, based on what you’re making, based on what’s going on, what your plans are. We’d love to see you back here, and I’ve actually said this, like, we’d love to see you back here when you’re making this because these are the next 3 steps.

And 1 of those steps is normally an S Corp election. And if you are already an S Corp, or if you’re a partnership or a multi-member LLC or anything else. Your taxes should be outsourced immediately. It doesn’t have to be your personal, but your business taxes at the very least should be outsourced. I cannot tell you the number of times that things are missed on business taxes, or people don’t realize they have to file separate business returns.

And there are a lot of potential pitfalls at that point. Normally, we have like three clients total, I think, that have us do their business returns and not their personal. And that’s okay. The potential for them to miss things is significantly lower when like their personal returns are very, very straightforward, which I let them know because it was a budget concern, but I would absolutely be outsourcing them at that point.

When you’re an S corp, you have payroll going on. You have so many more moving pieces, or you should, you should have payroll going on. If you have an S corp election, not everyone does. And then if you’re looking to outsource bookkeeping, it looks kind of similar in that, are you making enough profit?

We have a lot of people that’ll work with us that might not be making a ton of profit, but maybe they have a day job and they’re using their day job to supplement, you know, their living expenses and bookkeeping is something that they just do not want to be doing. I did the same thing. I had a day job for years along with my business. And so it let me choose to outsource the things that I didn’t want to do right from the get-go. And it was marvelous.

It was a little tough when I left the day job because there was a dip for a hot second. I was like, Oh, I don’t want to take those back on. But I would be looking at basically what are your priorities, right? We have some clients that will do a check-in once a year, to make sure that they haven’t dramatically messed anything up and they’re good running their accounting.

We have some clients are like, I don’t care what I am making, I will always pay you to do my bookkeeping and my accounting. They get monthly reports, they get their taxes done. They have someone to ask questions of throughout the year. That level of support works really well for them. But regardless of whether it’s our firm or another firm, you should connect with the person that you’re working with, right?

Or the team that you’re working with, you should feel like you can ask them questions. You should feel, at least in my opinion, that no question is too small, too stupid to whatever we have. People come to us. They’re like, yeah, I haven’t heard back from my accountant in 3 months. I don’t know if my taxes have been filed all the time.

Like, that’s not how it should be. And unfortunately, it is that way a lot. There is a lot of difficulty with turnover in the accounting realm, because fewer people are entering than are leaving. And that has caused sort of this. I mean, Heidi, I’m sure you see it in the wedding industry business. If you have low prices, you have to have higher volume.

When you have higher volume, your service offerings aren’t always what they’re looking for, right? So if you, if you’re paying $500 a year for a tax return, you’re not going to get a lot of support generally, or maybe you do for a year and then the tax professional burns out. Which we watch happen a lot, so it’s, it’s tough.

And I think that setting expectations, right? Because if you’re going to work with someone and they’re charging $500 for your returns, you should know that that’s not going to come with hopefully year-round email support, you know, unlimited calls. Like there, there are all these things that you should be expecting for a lower price point and have realistic expectations.

And that’s also on the service provider, right? Provide realistic expectations of what comes with their package. I think that so often when we’re bootstrapping things, or if we’re earlier on in business, we look at a lower price. Sometimes it’s not always the better option.

And so maybe having a conversation like we do with clients, like, Hey, I can’t afford X, Y, Z. What options do we have? Can you do my business return? Like, we’re not going to lower our prices, but we can absolutely change some deliverables. And that I think has been really important for clients to know that everything’s done properly.

Heidi: I think a lot of people are just realizing that they can get advice and that it’s not just like a, you do my taxes situation. Like, maybe I’m in a situation where I need to, or I want to do my own, but like you said, I want to check in with someone once a year. That is a thing that a lot of people like you offer.

Katelyn: Absolutely, and I’m all for that because I don’t… I want you to stay in business as long as you want to stay in business like really truly. I love helping people. I love seeing them succeed and whatever that looks like. And I also understand that we don’t have unlimited budgets. So if it’s not in the budget to pay us to do your returns, one of the best things you can do is a call once or twice a year is a touch base call.

It’s making sure you haven’t fucked up your bookkeeping as one of our clients says. But they’ll literally have a call with me once or twice a year and go, “I don’t know what I did, but I think something’s wrong.” And like, we’re here for that. We want you to succeed, even if we’re not doing everything for you.

And that’s a level of help I think most people don’t really know is available to them, right? It’s that mid-range. It’s either you do yourself or you completely outsource and there’s, there’s so much more available to you that like, Not that I want to spend my entire life on calls, but there’s a huge amount that we can cover in 30 minutes for your peace of mind, for your education, for knowing that you’re in an okay spot or on the flip side, raising some flags and being like, Hey man, it might be time to like, look at a little bit more robust support.

Things have changed. You’re like, you’ve got a lot more complexities going on here, but regardless you leave with more information than you came with.

Heidi: I think too, it’s really important to have someone in your corner that you can talk to about these sorts of things. A few years ago, I got a letter from the IRS that they claimed I didn’t claim some income that I absolutely did.

And then I owed them like $11,000. And my first reaction, yeah, my first reaction reading the letter, like I didn’t even freak out. I was like, yeah, this is bullshit. No, no, I know, I know for a fact I don’t owe this and I am going to go talk to the person that I have in my corner, ask them, what do I do in this situation?

Okay, we write this letter, we say this and it just went away. There are people who would probably be like, oh, I guess I better start paying that.

Katelyn: Oh, yeah. So, Heidi, I’m so glad you brought this up. It is amazing how often the IRS or the states make clerical errors. And so many people think that the state or the IRS is this all-knowing final authority on everything, right?

So you get a notice. I got the USPS mail preview. I see something coming from the IRS. I’m like, shit, what is it now? Last year it was 16 letters with address changes because they had a glitch in their system and they kept sending me letters to let me know that I’d updated my address.

And I was like, cool, thanks. Really glad we’re paying taxpayer dollars to have you send redundant letters. But it happens and so you have to be able to look at, like, it doesn’t, it is not the final word. Like, yes, it may be. It may be right. There’s normally a negotiation option if it is correct where you can like, negotiate some penalties and fees, negotiate some payment options.

Or it could be wrong altogether like they make mistakes frequently, they’re not perfect. And so being able to refute those and send a letter and they do everything through the mail, which is because it takes so long to get a response sometimes. Use discernment when reviewing their notices, like they’re not always correct.

Heidi: One year, I think this is when like the facade of the IRS knows everything kind of fell apart for me one year. I forgot to sign my return and they sent me my paper return and it was marked up with red pen. I was like, these people are operating with there’s, there’s no tech that they’re using to process these returns.

Like, okay. I am no longer thinking that they know everything because they are using pen and paper to process returns. Okay.

Katelyn: No, it’s ridiculous. Like the thing for me, Heidi, we were looking at like, you know, when everyone’s like, Oh my God, they’re hiring 87 000 employees. Like this is going to be awful. Yeah.

But like 50,000 people are retiring. So they’re only actually hiring 37,000 new employees. And like, I would kill for some faster response times from the IRS. So I’m, I’m here for it. I’m not doing anything shady to begin with. I fully expect to get audited at some point in my life. I’m a business owner comes with the territory.

Okay. You can get audited for doing nothing wrong, just, you know, happenstance, and like they have things they’re working off of the software system. I think from like the 70s or 80s or something ridiculous where I think if you have more than 4 dependents, they have to manually process your returns because their software system doesn’t have the space for additional dependence.

Heidi: Oh, my God. I wonder if it’s that system. I remember it was like during COVID they were talking about there’s some system and it might have been the IRS is operating on that. The people who know how to program it are like dying because it’s so old.

Katelyn: Yeah, no, Heidi, it’s, it’s atrocious, like absolutely atrocious. I dream of the day when we have a better tax processing system because it’s ridiculous. And yet the number of times that like we have letters sent that are erroneous or like. All it takes is one little glitch in the software, right? And then you see it across like our hundred plus clients where, Oh, guess what?

Illinois even did it this year. Illinois had an issue. We have three clients in Illinois, in Chicago, and they had an error where they didn’t match up business tax payments with business accounts. So guess what? That automatically sends out a letter that says, Hey, you owe penalties and this business tax.

You try to call them. We’re sorry. Our call volume is too high. Goodbye. Yeah, because they just told everybody they own money and they don’t know. So then you have to send a letter in. In the meantime, they keep threatening to send you to collections because they’re just sending automated letters out while your letter is sitting in a stack on someone’s desk waiting to be processed.

Like it’s, it’s ridiculous. It’s stressful. It is. And I think we, like, I’m glad you brought up, like, they’re not all-knowing it is very much a, yeah, no, you handled this wrong. That’s a very likely possibility.

Heidi: And I was just thinking like if I wouldn’t have had the confidence in working with a professional. If I hadn’t had someone in my corner that I could show this letter to and be like, what the hell is this? I probably freaked out, right? Cause they’re saying I owe this and I guess I just need to pay it. And that’s like, that’s terrifying. That’s one of those situations you think of that’s going to happen and completely ruin you.

And all it took was a less than one-page letter being like, no, you’re wrong. Here you go. Here’s my evidence. Goodbye. Please rectify this.

So, obviously, there are a lot of nightmares that can happen with the IRS and I am very excited to be able to make that segue because you are hosting a training called No IRS Nightmares Here: Stress-Free Tax Planning and it’s coming up on November 15th.

So for those of you listening, you can go grab your spot in this free training at www.evolveyourweddingbusiness.com/taxes. But why don’t you tell us what they are going to learn?

Katelyn: Yes, I’m so excited for it. So, well, you know, I get really excited for any sort of tax savings or like tax strategy.

We are going to cover the five biggest mistakes that we see happening or the areas where we see five of these happening. And Tyler, our senior tax accountant on the team will be joining me for this masterclass. We’re going to cover any mileage and auto deductions that you might be missing out on strategies that go along with that.

If you’re overlooking self-employed health insurance, especially if you’re an S corp looking to be an S corp, there are some things, uh, Heidi, you and I actually be chatting about this later on. We’re, we’re including it in our client newsletter. We’ll be going over some benefits there and potential savings of self-employed health insurance plans, and retirement contributions, just like how we talked about, you get a discount on buying things at the end of the year, right?

In your business, same thing, and what I normally encourage is if you don’t need to buy anything, but you have money to burn or spend or whatever, putting it towards your retirement is a huge difference and still gives you the savings plus paying future you, which is great. So we’re going to chat about retirement contributions that are available to you as a business owner and how those were working and what the timing is on them.

The big one, Heidi, that you and I talk about all the time is choosing the wrong entity type. And on the flip side, what entity type makes sense for you? So again, going over what the different entities are, you know, sole proprietors, single-member LLCs, partnerships, corporations, and then talking about the elusive S corp election, because many people think that that is an entity type instead, it is how you are taxed. Think about it as like a blanket that you put over your bed and the bed is the entity type. The blanket is how you’re taxed or the election.

And then lastly, navigating the Augusta Rule. The Augusta Rule allows you to rent back a portion of your house to yourself for part of the year with some real clear-cut rules, and you get to pay yourself that income tax-free from your business, which is exciting. There’s going to be a PDF takeaway that has a summary of everything that we cover so that you can reference it in the future and hopefully utilize some of these for yourself.

Heidi: Yeah, if taxes remotely stress you out, which I feel like they do to most people, especially most business owners, you absolutely need to sign up for this training. It is happening, like I said, November 15th at 12 pm Pacific, 3 pm Eastern. It’s a totally free training. You’re going to learn a ton. You’re going to be able to go implement this right away because it is before the end of the year, that magical cutoff that we mentioned. And you’ll also get to know Katelyn and her co host Tyler. So that maybe if you’re looking for someone that you need some help with, whether it’s, you know, fully outsourcing everything or just having that check-in, you at least can see.

I think Katelyn knows what she’s talking about. If you haven’t noticed already, which I will recommend Katelyn and her company all day long. They save me money every year. They’re my favorite people. So it’s easy to be someone’s favorite person when you can save them chunks of money, right? So go grab your free spot over at www.evolveyourweddingbusiness.com/taxes.

Other than signing up for that free training, how can people get in contact with you?

Katelyn: The best spot would be via our website and I can totally drop that in there. We have both a traditional, you know, email contact form, and we also have, I think it’s called our nifty form on there, but it’s just an Asana form that asks for some information about you and your business and where you’re at so that we can get more information to you.

If you want to follow along and have more information, you know, free tax resources, uh, bookkeeping, et cetera, https://www.instagram.com/thefreelancecfo is a great spot. And we are revitalizing our blog, which is at https://thefreelancecfo.biz/blog

And lastly, we have our group program that I’m really excited about called Wealth Witches. It’s a holistic finance program where we chat about everything that makes our finances tick and our wealth grows and we do trainings in that every month. And that has been really exciting and all of our tax clients get access to it, which is great from an educational standpoint.

Heidi: Yeah, because this, you know, folds right into business finance, personal finance, like it’s all one ecosystem that we need to take care of.

Katelyn: Exactly. And it all feeds into itself. Like everything is so connected. And I think it’s really easy to forget that sometimes.

Heidi: Fantastic. I will put all those links in the show notes again.

You can grab your spot for that training at www.evolveyourweddingbusiness.com/taxes. We will see you there. And Katelyn, thank you so much for joining me today.

Katelyn: Thank you. This is really exciting. You know, I love nerding out on taxes and saving money!

About Katelyn

Katelyn is the visionary behind The Freelance CFO, a full-service accounting firm that specializes in empowering entrepreneurs and businesses to achieve financial success. With a unique blend of expertise in accounting, bookkeeping, and tax preparation, Katelyn and her team offer a customized approach to meet clients where they are, breaking down barriers to financial freedom.

Katelyn is also the creator of Wealth Witches, a monthly membership program that blends holistic finance with energetics and woo, aimed at helping entrepreneurs live a life full of ANDs, not ORs. Based in Boise, Idaho, but a frequent traveler, she’s passionate about retirement planning, woo, and her chickens.

Approachable and non-judgmental, Katelyn is the go-to expert for those looking to make and save money easily, invest wisely, and yes, buy that damn latte.

Website: www.thefreelancecfo.biz
Instagram: @thefreelancecfo

 

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Links & Resources:

Save Your Spot For The Tax Masterclass with Katelyn!
The Wedding Business Collective

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