Episode 130: Your tax write-off and bookkeeping questions answered

On this episode, my guest Parker Stevenson, Co-Owner and Chief Business Officer of Evolved Finance, takes a crack at answering 12 different tax and bookkeeping questions from fellow creatives in the Braden's Besties Facebook Group.

This episode is sponsored by my FREE training: 3 legal & tax mistakes made by creative entrepreneurs & how you can avoid them. Sign up for this free Masterclass here, and get ready to unf*ck your biz.

1. First year of business and have a profit loss. How much can I report as a loss? Will I get audited? Is there a limit? (asked by Jennefer Cooper)

Hire an accountant! An accountant will help you to write-off as many expenses as you can while still being profitable. Tell yourself, "It's okay for me to pay taxes because that means I have a profitable business."

2. As a small business owner, (two-person LLC), can I deduct the cost of my vehicle on my taxes? (asked by Robes Pierre LaMontagne)

Involve your accountant in this conversation. This is where tax code often benefits the wealthy. If you're a small business or using your car a lot for the business there may be write-offs there whether it's mileage or your lease, but get an accountant involved as these are case by case situations. Some accounts lean more conservatively while others lean more aggressively so the answer can vary by who you talk to. Ask them their outlook on some of your expenses that you run through your business after they have an understanding of your business.

3. I'm starting a business as a live wedding artist. I'm travelling for weddings 30 weekends out of year. Can I claim my spare car and its maintenance for my business? I only drive it for my weddings.: (asked by Shanna Britt)

Explain your vehicle situation (or other possible business expenses) to your accountant as clearly as possible. It's your responsibility as a business owner to make your accountant aware of your expenses and how you use it for your business to get their approval if they feel comfortable with it being on the profit and loss statement. If you think it's a business expense, tell your bookkeeper, they can always add it to the check with accountant list for your P&L. It's not your bookkeeper's job to make the final decision on whether or not it's a business expense. The more you and your accountant can be on the same page, the better.

4. As a nutritionist I recommend supplements & clients want to purchase them from me: I'm wondering how wholesale works? If I want to purchase & keep stock of certain products in my office & resell them, what do I need to do so I don't f*ck up my biz & taxes? (asked by EM Luisi)

If you want to get into inventory and sales tax, know that it's going to be rough as it does change your tax situation and tracking your finances. If inventory is not going to be a big revenue generator for you, how can we keep it as easy as possible for you? Can you become an affiliate instead of a wholesaler? IF you are doing wholesale, make sure you hire a bookkeeper who understands wholesale and inventory.

5. Can I deduct the cost of a business coach on my taxes for my business? (asked by Kimberly Carman)

Absolutely. This would most likely fall under the Continuing Education category. This category would also include business books, courses, masterminds, tickets to conferences, retreats, etc. Check out the Unf*ck Your Biz book by Braden Drake for more resources.

6. What is the write-off most creatives miss or don't take advantage of? (asked by Bluebell Florals) and 7. What am I not writing off that I should be? (asked by Danielle Bacon)

If you're spending money developing your business skills, run it through the business. Big corporations are spending money on training their executives, you can too. Other write-offs to ask yourself about include - are you asking your accountant about your cell phone, about your internet, about your rent, about your utilities. Although health insurance does not get written off through the business, are you making sure to let your accountant know that you're paying for health insurance for yourself so they can help you deduct it on your personal side of your tax return. The goal is to get the owner benefit write-offs you deserve at the end of the year.

8. What’s the most common thing people try to write-off on their taxes as creative businesses that is NOT allowed? (asked by Savannah Grace)

Groceries do not count (unless you're serving food at a live business event). You also cannot write-off clothes for your business presentation, especially if you plan to wear it in your personal life.

9. Best systems/programs for bookkeeping? I'm currently using a mix of Quickbooks and Google Sheets and it's not pretty.

It is never pretty when the business owner is doing their own book keeping. If your business is small enough that you don't need a bookkeeping software then just use a Google Sheet. Track your total cash, revenue brought in for the month, track what expenses went through so you have something organized to give your accountant. If you have so many transactions that you don't have time or know how to keep up with them, it's time to hire a bookkeeper.

10. Easiest way to keep it all organized throughout the year? (asked by Kayla Lauriano)

Have a monthly process, don't wait until the end of the year to organize your receipts, bank statements and credit card statements. Have a folder in your email for your digital receipts. If you're buying in stores, a simple folder of receipts for each month is necessary, and you can also download an app to store photos of those receipts. Shoeboxed is one example. If you already pay for an app, see if they offer this service. You should hold on to your receipts at least 10 years, especially if you have a small business where you don't have many.

11. First thing a small business should do for taxes, on a very limited budget? (asked by Francisca Li)

Find an account. Do it right, don't regret starting a business. Know that you need to make at least $500 to $1000 for the year to cover the cost of your accountant at the end of the year. Track everything, even if it's only expenses and not a lot of income. Pay attention to your numbers from the start.

12. Is it better to bookkeep in-house or outsource? (asked by Samantha Bradshaw) At what point in time should you look to outsource your bookkeeping? Once you are ready to outsource, what should you look for in terms of who you are going to hire?

Everyone's going to inevitably outsource at some point. You need someone who is a bookkeeping expert to do this. Outsource your bookkeeping, even if it's to Bench, a freelance bookkeeper, or even someone starting out just to help you start out as you grow. Interview your bookkeepers, don't just hire the first one. Find one with processes and systems. Red flags to look for include bookkeepers still using Quickbooks desktop because it means they haven't moved into modern business meaning they may not understand your type of business. Look for bookkeepers who work with businesses like yours. Find out when you will get your books every month, when they are going to give you financial reporting, if it's just them or if they have other people supporting them. You want to find out how reliable they are going to be and how quickly they will respond to emails. How much will they proactively deliver? Systems like Bench.co have systems that will allow them to answer more quickly. Trust your instincts as you learn if your bookkeeper understands your business model.

Evolve Finance specializes in online business working with coaches, course creators, bloggers, consultants, those selling digital products, and some service providers, focusing on businesses that make 6 figures or more in revenue in US dollars.

Get in touch with our guest

Parker Stevenson, Co-Owner and Chief Business Officer of Evolved Finance
Check out Evolved Finance's website
Follow Evolved Finance on Instagram
Like Evolved Finance on Facebook

Learn more from Parker on episodes 118 and 119 of the Unf*ck Your Biz podcast.

Get in touch with our guest

Parker Stevenson,  Co-Owner and Chief Business Officer of Evolved Finance

Check out Evolved Finance's website

Follow Evolved Finance on Instagram

Like Evolved Finance on Facebook