Marketing Happy Hour - Tax Preparation 101: Getting Organized + Saving Money | Katie Hardie of Hardie CPA

Episode Date: March 5, 2024

This week, we're chatting tax preparation with Katie Hardie, Owner of Hardie CPA - tailored tax & accounting solutions to help you succeed. Specifically, Katie covers organization tips for setting yourself up for success come tax season, plus how to save money with deductions. If you're a side hustler or entrepreneur, she also covers when to set up a business bank account and LLC for your brand. About Katie Hardie, in her own words: Hello! I’m Katie, the owner of Hardie CPA and your new helpful and professional CPA. As a small business owner myself, I understand the challenges of staying organized, compliant & analyzing the data to enhance your bottom line. My goal is to educate & empower other service-based small business owners by providing clarity & resources on complex accounting topics that typically leave you overwhelmed. I deliver a plan and guidance that will help you build a path forward for your business by getting organized & helping you save money in taxes. I believe that success & growth will follow when business finances are in order and this is one thing you do not have to manage alone! I am a member of the American Institute of Certified Public Accountants. I graduated from the University of South Florida with degrees in Finance & Accounting. I have a full range of experience as a CPA including tax, bookkeeping & audit. I grew up in Dunedin, Florida and have two daughters. I work virtually & travel on-site to meet clients in both the Dunedin & surrounding Tampa Bay area as well as all over the US. Check out Hardie CPA: ⁠hardiecpa.com | Estimated Tax Worksheet | Common Expenses Sample List | Blog: What's Tax Deductible for Your Business? ____ Say hi! DM us on Instagram and let us know which bonus episodes you're excited for - we can't wait to hear from you! Please also consider rating the show and leaving a review, as that helps us tremendously as we move forward in this Marketing Happy Hour journey and create more content for all of you. ⁠ ⁠⁠⁠⁠⁠⁠Join our FREE MHH Insiders online community to connect with Millennial and Gen Z marketing professionals around the world!⁠⁠⁠⁠⁠⁠ Get the latest from MHH, straight to your inbox: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Join our email list!⁠⁠⁠⁠⁠⁠⁠⁠⁠ Follow MHH on Social: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Instagram⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠Threads⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠Twitter⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠TikTok⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠ New to Marketing Happy Hour (or just want more)? ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Download our Marketing Happy Hour Starter Kit⁠⁠⁠⁠⁠⁠⁠ This podcast is an MHH Media production. ⁠⁠⁠⁠⁠⁠⁠Learn more about MHH Media!⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Interested in starting your own podcast? Grab our Podcast Launch Strategy Guide here.⁠⁠⁠⁠⁠

Hey, Katie, how are you doing today? Hi, I'm wonderful. Happy to be here. We're so excited that you're here and so excited to share your knowledge with our listeners. I know we're right in the middle here of tax season and it's so busy. And I know everybody that's listening could really use some advice from you. So we're excited that you're here to share that with us. But before we get started, I do have an important question for you that we ask all of our guests. And that is,

what is in your glass this afternoon? So in my glass this afternoon, I do have some coffee because the days are longer this time of year. I have my my handcrafted coffee mug here. Um, I know you can't see it, but shout out to river house pottery. Um, but I typically am not a big drinker. So like a happy hour type of drink. I like, um, I like a good cocktail, maybe like something fancy with gin or something like that. So when I'm not working all the hours of the day, I might, uh, enjoy one of those. Yeah, absolutely. I'm a big gin girl as well. So love that. But right now I'm just drinking a health aid kombucha, the passion fruit tangerine flavor. It's a new flavor for me and I'm actually really enjoying it. So what about you, Cass?

Love that. We love health aid. I just have water today, guys. I'm overcoming a cold. So just trying to hydrate as much as possible. So super simple, but also very necessary as well. So nothing too crazy on this end, but Katie, as Erica said, we're very excited to speak with you today. Just to preface, you have been doing my husband and I's taxes for a couple of years now, and we're truly grateful for just your expertise. We're both business owners. So a little different. I know some of our listeners are in the corporate for a couple of years now, and we're truly grateful for just your expertise. We're both business owners, so a little different. I know some of our listeners are in the corporate world, so a little bit different, the approach there, but hoping that you'll be able to share some insight and expertise for both sides today. But first, if you don't mind, can you share with us

what you do at your firm? Yes. So at my firm, Hardy CPA, I work with a lot of business owners. So mainly business owners, small business, S-Corp owners. And I just help with all things on that financial side. So PACs mainly, payroll, bookkeeping, planning, things like that. That's awesome. And so needed. So kudos to you there. For the first part of this conversation, we want to focus on some individual taxes as that looming deadline approaches on April 15th. Everybody knows about that. But the biggest question that we see from our peers when it comes to taxes, especially in the corporate world, or just trying to navigate for the first time filing your own taxes, you know, how can they reduce the amount that they'll

owe once tax season rolls around? Yeah. So one thing I would say, and not just to like shout out to myself, but work working with a professional can really help because I see a lot of times when someone does come to work with me and I'll look at their prior year returns, I can see things that were missed that people just aren't aware of. And so in my firm, I use a questionnaire to kind of capture a lot of information to make sure that we're not missing anything and that all available deductions, if they apply to you or are available to you, that we're taking advantage of that. So also a professional can help you plan ahead. So if you're buying or selling property, sometimes it can make the difference in how you set things up and how you plan ahead. And so that can help save in tax for sure, if you have those kinds of things going

on. Otherwise, just if you're kind of in the business world and you're kind of just like doing your W-2 job, you can do things like contribute to a retirement account. So like a 401k through your employer or a traditional IRA, you can set up on your own and contribute to something like that. And there are limits, but you can contribute to that throughout the year. And depending on the type of account, there can be a tax deduction. So like, for example, for the IRA, it has to be traditional to get the deduction. It can't be a Roth IRA. So things like that. If you have a high deductible health care plan, you can contribute to a health savings account. I think those are awesome if you have that option. So something like that can really help. We all have medical expenses, whether it's just a checkup or just, you know, routine taking care of ourselves. It doesn't

have to be anything major to see savings there and your money continues to grow. You don't lose it. So I love health savings accounts. And then I would just say, you know, making sure you're paying enough throughout the year, because if you come up short at the end of the year and you end up owing a lot, you can end up paying penalties. And so if we can avoid paying those penalties, it's a good idea to make sure you have your W-4 updated if you're working with an employer. And if you notice something's off when you do file your taxes, you know, if your estimate isn't really accurate, if you're working with an employer. And if you notice something's off when you do file your taxes, if your estimate isn't really accurate, if you're owing a lot at the end of the year,

that's something to definitely look into. So you're not paying in penalties and interest that you don't need to pay. Absolutely. I appreciate your advice there for sure. I have one follow-up question kind of, is there any insight that you can share or is there any like

rule to follow when you're trying to file your taxes? You know, should you itemize these different things in these different deductions or claim that standard deduction that some of us just don't even know what that means? You know, what advice can you share just around that? And if it even differs from different individuals? Yeah, that's a great question. So itemizing versus taking the standard deduction. So the standard deduction is just a set amount based on your filing status. So if you're filing as a single filer or head of household or married filing joint, they give you a certain number each year. It usually increases a little bit each year that you can take as a deduction from your income. So that helps reduce your tax burden. And itemizing is a little bit different. So then

you have certain expenses that you can take. And if those expenses add up to more than the standard deduction, then you're allowed to itemize and take the higher deduction. They raised the standard deduction not too long ago. So most people don't itemize anymore because the standard deduction is higher. It's just harder to use those expenses to reach, to beat the standard deduction. So let me elaborate a little bit. The, when you're itemizing, you're deducting things like medical expenses, and they have to be substantial because they don't start counting the medical expenses as deductible unless it's over a certain percentage of your income. And so that can be pretty high. I don't

see a lot of that. And then you can deduct sales tax on large purchases. They give you an amount for like a local sales tax. You can deduct your mortgage interest. If you're a homeowner, your real estate taxes that you paid, any charitable contributions. So when you take all of those items and you add them up, if that's higher than the standard deduction, you would take those. But actually I did want to mention that now that interest rates are so much higher on people's homes, I am seeing more people itemizing just because the mortgage interest is so high that, um, it is something that we look at to make sure you're getting, you

know, the best deduction. So that's something you would want to want to consider. Awesome. So it sounds like just kind of track all of that stuff just in case and at the end of the year, kind of see what makes the most sense. I want to kind of shift gears a little bit from individual taxes, maybe in a corporate space to business owners. So as I said earlier, we do have some entrepreneurs, some side hustlers that listen and approaching those taxes are quite a bit different from individual personal

income taxes. So curious from you, are there any common mistakes that business owners make when it comes to handling their taxes and how can those be remedied? Yeah, another great question. Common mistakes I see are just number one to me is staying organized. So if you're not staying organized, you're missing deductions. It's hard to look back and remember what happened over the year when it's the end of the year, as much as we think we can when we look back. And it's hard if you're not keeping track. Also, if you're not staying organized of your revenues and expenses and things like that, then not only do things get missed, but you're also probably not making accurate estimated tax payments throughout the year. And because the IRS has a pay-as-you-go system, when you work for yourself or when you do a side hustle, there's not an employer there who's withholding that federal income tax estimate throughout the year. So you're

expected to pay that in on your own. And if you don't know how much you're earning, it's hard to make an estimate of how much you should be paying in. So that can relieve a lot of stress if you're staying on top of that and things don't get missed. So I feel like you get the more deductions and you feel better come tax time. And, and so staying organized is a common mistake. I see a lot of people, another common mistake I see is just not being aware of what's deductible as a business owner. So that was one of the first blogs I created just to say what's tax deductible for your business, because there is a lot to wrap your head around when you're first starting out. And so it just kind of lists the most common business expense expenses and what

they are. And so just being informed about that. And then one thing I like to share about what's deductible for your business is number one, the IRS says it needs to be ordinary and necessary in your line of work. So, you know, nothing can't be anything too lavish, right? It's, it's, but it varies by industry. So what's ordinary and necessary in your line of work may not be for someone else. So that's something to consider. And then another thing I like to tell business owners is that if they are making a purchase and they're wondering if it's deductible, they can ask themselves, would I be making this purchase if I didn't have this business? So if you are purchasing a course or you're getting, you know, marketing copy, for example, and you would think to yourself, would I be buying this if I didn't have this business? And if the answer is no, then it's most likely deductible. And then of course,

if you have a CPA or something like that, that you work with, you can always ask them too, but yeah. And then again, staying organized. So as those questions come up, you're, you're getting that sorted out throughout the year can be really helpful. Yeah, for sure. Well, for those that are side hustlers, you know, they have their W-2 job, but they also have some W-9 income coming in. When, how soon should side hustlers be kind of setting themselves up tax-wise for that work that they're doing and to what point or to how much do they make? Should they be paying those estimated taxes? You know, how do we approach that when we start working on a side business? All these things that, right, when you start your side hustle and then you, or you start

your business and you're, you have that mindset and you know what to do for your business, but then you start bringing in money and then you're like, okay, now what do I do? Right? So these are important considerations, definitely taxes. So if you expect to owe over $1,000 at the end of the year, then the IRS expects you to pay in throughout the year. Otherwise, they can charge you that underpayment penalty. So that's what we're trying to avoid, right? So if you are looking at your income

and your net income, so you, the IRS looks at your profit when you file taxes at the end of the year. So they want to know what is your net income or your profit? And that's going to be after expenses. So after all of your expenses for the period, you know, what are you left with? And then you can take a percentage of that as an estimate. And if you can kind of project that that would be over a thousand for the year, then it, you know, you can send something in and it's pretty easy to do. You can pay online. I actually have a worksheet on my website for small business owners. It kind of walks through estimated tax payments. You know, what's your revenue? What are your expenses? Here's a percentage of an estimate. And then here's where you can go make a payment if you

need to. But also you don't have to owe over a thousand to make a payment, right? You can, you can go on at any time and make a payment towards your estimated income tax throughout the year. And I always think it's better to pay something in if you can. If you pay too much, you'll get it back when you file your taxes. But if you don't pay enough, then that tax would be due by the filing deadline. So that's as far as estimated taxes. And when should they really start worrying about that?

I feel like as soon as you start collecting money, like I mentioned, so you have your first sale or you're collecting money from clients. I think that's when you should start tracking all of that. So one thing, number one is keeping business and personal separate is really important. And that's part of staying organized. So I always recommend getting a separate business bank account if you can. And I think we're going to talk about LLCs a little bit later, so I can get into a little bit more detail on that. But keeping that separate, opening a business bank account is a really good idea. And then tracking your revenues and expenses. So you want to know

everything that's coming in and everything that's going out. Usually by month is pretty easy to do. So you just, what are my revenues? Here are the most common expense categories, keeping track of the totals of that by month. And then you can look back over the quarter and say, how much did I earn? What's my net income? And you can make those quarterly estimated tax payments.

So I think right away, you should start with being organized and tracking all of those things. And, and that should set you up pretty well for the year and for tax time. So helpful. And I know so many people who do start a side hustle or start their even creator journey where they're creating content for brands and getting paid for it, you know, on the side, they don't know to start with staying organized and tracking all of that in the beginning so that they're set up for success. So thank you so much

for sharing that. You mentioned that we were going to chat a little bit about LLCs here, and let's just get into that right now. I'm curious to hear when a business owner should establish an LLC versus just, you know, being independent? Yeah. So an LLC, I can't speak to the legal benefits of that. Of course, some benefit, some companies and businesses are riskier than others. And so you're obviously limiting your liability. But I would probably speak to an attorney if you were worried about the legal liability side of that. But for the tax side, when should you form an LLC? So forming an LLC and getting a federal tax ID number can allow you to

open up a bank account. So like we talked about before, setting up a business bank account is a great idea. And to have it under the business's name, you have typically have to have registered with the state and have an LLC or be incorporated and get a tax id number so when you go to the bank and try and set up a business account those are the pieces of information that they would ask for and if you are not ready yet to be an LLC then sometimes I would recommend setting up just a separate bank account under your own name, personally. So if you're not there yet, but you want to keep things separate, you can open up a separate checking account. So as far as taxes considerations, to file as a sole proprietor,

you do not have to be an LLC. So you can file your taxes and report your income and expenses from your business as a sole proprietor, and report your income and expenses from your business as a sole proprietary, just using your social security number and your name. So it's not necessary. And you would want to consider that annual fee for maintaining an LLC. So if you do set up an LLC, there's an annual fee with the state in Florida, it's like $140, but it varies by state. So just the cost of that is something to consider. And if you want to open a business bank account, and then of course your liability. And then one other thing for tax purposes is if you want to elect, if your business is growing and you're thinking about electing to be taxed as an S

corporation, you will have to have an LLC first or be incorporated. So that's something to think about. If you are thinking for the 2024 tax year, I, you know, things are really growing. I'm thinking making an S corp election might really benefit me for tax purposes. Well, if you are not an LLC for the whole year, then you cannot be elect to be taxed as an S-corp for the entire year. You would do like a partial year from whenever you got that LLC. So something to keep in mind as well. Yeah. Awesome. Thank you for that. Well, I want to talk to just overall hiring a CPA. In your opinion, when should someone consider doing that and how can they get started working with you if they're interested? I think like we spoke about before, if you are working and your taxes are more complicated than

just kind of plugging in a W-2, I think it can be beneficial to work with a professional just because sometimes we don't know what we don't know and the right questions to ask, you know, to figure out what we're missing. And so really having someone on your side to help point that out and help guide you in the right direction, especially if you have a business, it can be more complicated, you know, to make sure you're not missing those deductions like mileage or home office or the self-employed health insurance, or just someone to bounce ideas off of if you're considering opening retirement accounts for your business and things like that. So I think it can be really helpful, especially if you have

a rental property or you are buying and selling property. So any real complexities that come up, just there's so much to know. And sometimes we just can't possibly gather all of that information from Google and feel like we're covered. And so just kind of having a partner in that, I think is a good idea. If you have any of those complexities that come up, you can find me at my website, hardycpa.com. It's H-A-R-D-I-E-C-P-A.com. And I have some resources there. I have a blog, the latest blog post about the BOI reporting. So if you have an LLC and you're not aware of that, you can check that out and just find some information on that. Make sure you're staying compliant with that. My email, katie at hardycpa.com. If you're a small business owner, I do have a small business questionnaire on my website where you can go and just answer a few questions about yourself and your business and what you're looking for. It really helps us get the conversation started. And then we can set up a call typically

to discuss in more detail and see how I might be able to help. So that is awesome. And we will link out everything in the show notes. So people know where to find you and how to access those resources. But thank you so much, Katie, for joining us. I know this is going to be a very helpful conversation, especially timely as we're approaching the tax deadline here. But thank you so much, Katie, for joining us. I know this is going to be a very helpful conversation, especially timely as we're approaching the tax deadline here. So thank you again for joining us. Absolutely. Thank you so much for having me. We are so excited to share that our first ever free marketing happy hour digital resource is now available. Download the dream career game plan today at marketinghappyhr.com forward slash freebie. That's marketinghappyhr.com forward slash freebie. This five-step workbook will guide you through

defining your goals, building your network, diversifying your skills, influencing where you're at and investing in your growth. Cassie and I created this resource with marketing careers in mind, but the framework can be applied to any industry. Our hope is that this workbook will help you truly elevate your career, whether you're in the market for a new position or just looking to make your mark in your current organization. No matter where this resource finds you, we are cheering you on every step of the way. So go check it out at marketinghappyhr.com forward slash freebie to download and make your career dreams come true.