The Ultimate Blog Podcast - 111. Taxes for Entrepreneurs with Stephanie Manley

Episode Date: January 30, 2024

As an entrepreneur, you will inevitably have to look at your taxes. We brought on Stephanie Manley to share more about taxes for entrepreneurs and how you can get ready for tax season the right way from the beginning! Stephanie shares her wisdom on why it’s crucial to keep tabs on every dollar you have earned and spent, the advantages of using certain tools to help with that, and explains more about the ins and outs of tax deductions as a blogger. She shares a lot of advice in this episode that you aren’t going to want to miss!Thanks for listening! Let us know your thoughts on Instagram: @sparkmediaconceptsCheck out MiloTree Cart HERE!Check out the show notes (link below) for more information including links and resources mentioned in today's episode!SHOW NOTES: www.sparkmediaconcepts.com/episode111

Welcome to the Ultimate Blog Podcast with Amy Reinecke and Jennifer Draper. We're on a mission to empower women who want to start or grow their own blog. This podcast is for women who want to learn blogging basics and who crave inspiration and encouragement. Whether you're just getting started or have been a blogger for years, we're excited to welcome you into this space where we are passionate about creating community over competition. We are bloggers who want to encourage you to believe in your potential, step outside the norm and step into a life where you create your own schedule, your own success and your own story. Join us for weekly episodes as we navigate blogging

and work from home life all while raising a family and having some serious fun along the way. all while raising a family and having some serious fun along the way. Well, today's conversation is a timely one because we are about a month into 2024. And I know what some of you are doing, and that is preparing for tax season. I'm sure you're gathering all your things that you need. And that is why I wanted to bring on Stephanie Manley to talk more about what that looks like. As an entrepreneur, there are some extra steps that we need to do in order to be prepared for tax season, some things that we need to consider. And Stephanie is an expert in this area. She enjoys assisting other thriving entrepreneurs to help them understand their

business numbers. And that's a girl after Jennifer's heart. She loves numbers for sure, as an accountant herself. And Stephanie is just here today to kind of give us like a basic overview of like, what do we need to be doing? How can we make tax time easier? What are some deductions that are often overlooked? And what happens if you're actually losing money? So welcome to the podcast, Stephanie Manley. Thank you so much. So glad to be here. Well, we are glad that you're here too. Jennifer is actually an accountant or was an accountant many years ago and quit accounting to become a blogger. But you're the expert today. We are

going to dive into this with you because a lot of people who start a blog might not look at it from the lens of, I'm starting a business. And that is kind of a narrative that Jennifer and I are trying to help them flip that script a little bit to take themselves seriously from the get-go. And so kind of with that lens in mind, Stephanie, could you kind of give new bloggers maybe a little pep talk with, hey, if you're just starting out on your blogging journey, here are some top things that you need to consider at the beginning of your journey? Absolutely. Yes. So I will say that, you know, some bloggers may do this as a hobby. And if that's the case, if you're not in it to

make a profit, that would be a hobby. Doesn't mean that you have to make a profit. But if you are in it to make a profit, whether that be a year, five years, 10 years down the road, you're growing this as a business, then you are legally a business. So with that in mind, you really do need to start keeping up with your income and your expenses. Being a blogger, I'm sure most of you are doing this from home. So you've got deductions such as like your home office deductions, if you have an office in your home, which is often overlooked. So making sure that you're keeping up with those things,

you know, purchasing a computer, maybe even to do your blogging with those types of things. But it's important from the get gogo to keep up with that income, keep up with the expenses. Even if you don't have income yet, that's okay. Because if you're losing money and you're not filing this on your taxes, you are leaving money on the table. Yeah. And when you say, you know, start keeping track of the income and expenses, do you suggest that somebody open a bank account separate from their personal account? And what system do you recommend using to keep track of all of this? Great question. I do highly recommend that if you have a business, you do have a separate bank

account 100%. That really not only just legitimizes the business, but it also helps you with mindset to like, this really is a business, you know, it's not just a hobby anymore. And there's two things I would recommend. So if you are, you know, really making money, you have a lot of income and expenses, I am a huge fan of QuickBooks Online. QuickBooks Online, though, does come with a monthly recurring fee that keeps going up, it seems year after year. So if you're not quite there yet, and that's fine, we've all been in those starting phases, I would recommend you use like just a spreadsheet. I actually have one of those that I designed for my own clients who are not quite

ready for QBO. It's called the Calculated Tax Planner. And you can essentially just put in your income and expenses and it calculates everything for you for tax time for you to give it to your preparer. Oh, that's incredibly helpful. Because I think what holds a lot of people back is that they don't even know like, what can I include? A lot of creatives when they start, you know, they're what I just said, they're creative. And so they might not be business minded from the start. And that that's kind of like, you know, walking with two left feet, they're not quite sure exactly what needs to be tracked and things. Can we just dive into that? And I know that this is very simple. Some of you listening might be like, well, I already know this stuff. But I have a feeling that there are a lot of you who might not know some of the things that you can

actually include as business expense and things like that. So Stephanie, can you give some basics about what you can essentially include as expenses on your tax return? Absolutely. So first rule of thumb is it needs to be an ordinary expense for your type of business. So just think about blogging in general, what are some things that are common that you would normally deduct? So I'm sure a trip to Maui would not be one of those things unless you're blogging about Maui, right? Right. Things like office supplies, right? Journals, your computer. I talked about home office expenses earlier. So a percentage of your utilities, your mortgage, your rent, those types of things. Anything that you're using in your business is going to be deductible for you.

Your cell phone as well. That's another one that you might not think about, especially with social media. If you're utilizing social media, whether or not you're taking calls or not is one thing. But if you're utilizing social media, that's essentially a vehicle as well. So just another one that came to mind for me to think about. Yeah. Internet too. 100%. Yes. Lots of internet. What would we do? Yes. And so often I hear, well, I can't use my cell phone or I can't use my internet because it's not exclusive for business. And that is not accurate. You should be tracking like, what percentage of time are you on your phone working on business? And if you're on Facebook a lot or posting things to your blog, you're probably

using it a lot more than you think. Internet for your home is the same same scenario for that. So you don't have to have your own phone for business. You don't have to have your own personal internet line just for business. You can use a percentage of both of those things. So let's talk about, you know, not waiting until tax time to start pulling all this information together. How often do you recommend people track their income and expenses? And what other kinds of reasons would they want to keep track of all of this throughout the year? What else are they going to do with this information? Absolutely. So I am... For my own personal bookkeeping clients, we actually track this weekly.

That's because they have a lot of transactions. But honestly, as long as you're doing this monthly, you're going to be okay. And doing that monthly obviously will save you all the time in a headache. Come closer to tax seasons, you're not doing it all at one time. But as a proactive bookkeeper, I like to do that during the year so that you can look at your projections. You can look at ways to save money. Maybe you have subscriptions. I see this a lot, too.

You signed up for something on a free trial and totally forgot to cancel it. And here it is, charging your credit card. So those things you're not going to catch in time to save money if you're doing it all at one time. I would, again, say every month, you should be fine doing it that way. And just make sure you're reviewing your numbers. Don't just do it and put it to the side. Review the numbers and then make some goals for the next month. Yeah. And I think that's such an important thing to remember is you don't want to bury your head in the sand. I think it's easy to do. We don't want to look at it. We don't want to think about it. We make assumptions about what our numbers might look like. But we have to kind of face that head on.

We need to be taking a look at this so that we can make good decisions every month. And I can tell you that I've had the same thing happen. I signed up for things that I needed at one point in time and totally forgot about it. And so it feels good when you can go through and cut some of those extra expenses out as well. And then maybe that helps you to be able to take a little more money out of the business yourself. And I know we haven't talked about different structures of business. But I think one of the questions people might be asking themselves is, what do I do with... If I'm making some money, I've got some expenses or some money left over. So that's now my money. How do you kind of figure out what's yours to use, what you have to put in the business and that kind of thing so that you know how much to pay yourself or how you pay yourself

properly? Great question. I do hear that as well. So if you know what your monthly recurring expenses are, again, you have to do your bookkeeping to figure that out, then you know what you need to put aside. So I always recommend my clients have a cushion of three months at least. And if you're, I'm not sure, honestly, I'm not sure about blogging. Is it usually the same every month? Or is it, you know, it kind of comes and goes, it ebbs and flows, right? Depending on the season? Yeah, it's of comes and goes. It ebbs and flows, right? Depending on the season. Yeah, it's pretty variable. Yeah. Very variable. Okay.

So at least having those three months put aside is helpful. And if you're doing your bookkeeping monthly, you can see those ebbs and flows. You can see those profitable months and those lost months as well. But as far as paying yourself, you do want to pay yourself out of your profits. Obviously, if you're not making a profit, it is hard to pay yourself out of your business. And depending on your entity type, if you're a sole proprietor, so you don't have an LLC or anything, or if you just are an LLC single member, then you can just write yourself a check or transfer funds from your business account

to your personal account, you're welcome to do that. If you have bloggers here that have grown in their profits, and now they are an S corporation, it's time for payroll. And I see that happen or not happen too, too often. They become an S corp and their accountant doesn't tell them the requirements of that. So make sure you're doing payroll for yourself. Okay, well, you brought it up. So let's talk about it. How does one know when they're ready to be an S-Corp? Because we have never really talked about that on the podcast. We recommend that people get an LLC right out of the gate. But there does come a time that you are making enough that you want to turn into an

S-Corp. So can you kind of walk through that process and what that looks like? Maybe some requirements that need to be had. So if someone listening to this is like, hold on, I need all those. Can you kind of share first off what it is? And then secondly, what are the benefits of becoming an S-Corp? Absolutely. To me, there's a sweet spot. That's what I call it. When you transition from that sole member LLC to an S-corp, and that's usually between $50,000 to $60,000 of profit. Now, of course, this is going to vary if you're married and you have other income sources. So it's not just a cut and dry thing. You can't say, well, I made $50,000. It's time to move. You really do need to do some tax planning and tax strategy with your accountant. The benefits of an S corporation. Well, you can now

pay yourself a salary for less than that $50,000. And then you can take a distribution out as well. So you're saving taxes is what you're doing. But if you do it too soon, you're going to pay more. And if you do it too late, you're going to pay more as well. So that's why, you know, if you're making money, it's time to hire a bookkeeper. It's time to hire an accountant to help you with this tax planning. I think that's really good advice because it's scary to be in that situation. I think a lot of people would just be like, oh, I am not numbers minded. I do not understand taxes. I am not gonna get myself in trouble. I'm out.

But the fact of the matter is, it is a really reasonable business expense when you are making money from your blog to hire someone to start to help you with that. And so I think I would just encourage anyone listening that's like shutting down at this point. This is something that you can totally handle. You will have somebody, you know, you find somebody that can really help you with this, and it will not be as overwhelming as it possibly sounds right now.

Absolutely. Yeah. Oh, just like blogging, Like blogging scares me. Just the word blogging scares me. Because, you know, that's not my lane. So, you know, having a blog, I would totally not do that on my own, because that is not my field of expertise. And the same thing, you know, with other if it's not in your lane, outsource it. That's what you should be doing. I think that's good advice for all things. Honestly, that we chat about here on the podcast is we all have like our gifts and things that we're really good at. And we all have things that are kind of our sticking points that maybe we don't understand the ins and outs of it. We're not an expert in any way. And that's when we encourage you to go find an expert or someone who can kind of ease that because if it's's not in your zone of genius, it's going to feel way harder for you to do versus somebody who does this every day like Stephanie. I'm sure Stephanie, numbers don't scare you in the slightest. You can look at them and you're like,

yeah, it's fine. It's a number. I'll share an example. We had a meeting with our financial advisor yesterday, me and my husband. And my husband is a VP of finance. And so he looks at numbers very differently than I look at numbers. And we leave and he's like, that was a great meeting. And I'm like, we're never going to retire. And he's like, really? I just feel really empowered after that meeting. And I look at it totally different. But numbers aren't my thing. So I think that we have to allow people to help us see things that we are unable to see on our own because we might not be actually even able to see the whole picture because we don't know enough. And so learning the bits and pieces

of what you need to know for tax time, not being afraid to look at your numbers, even if it does overwhelm you like it does me. It's one thing, like Jennifer said, to put your head in the sand. If you put your head in the sand, though, you might end up causing more trouble for yourself if you pretend like the numbers don't exist. This is an important part of blogging and having a business is to know what you are making or what you're not making. So let's kind of talk about that for a minute. What happens if somebody is blogging? And this is very making. So let's kind of talk about that for a minute. What happens if somebody is blogging? And this is very normal. So I want to say that in the first couple of years, you might be spending more than you're actually making.

So you might be actually losing money. What does that do for a person? Is that something that you would say, Oh, you don't need to claim it on your taxes? Or is it something that you're like, this could actually benefit you? Great, Mo, you don't need to claim it on your taxes? Or is it something that you're like, this could actually benefit you? Great question. And you said it's completely normal in blogging. Well, it's really normal in a lot of businesses. So not just blogging, this is very common.

And if you are losing money, one, it's okay. But two, you should be claiming this on your taxes. So for example, maybe you have a day job or you're married and your husband has a day job. So if you or your husband were to make $50,000 and you're married and your business lost $5,000, if you do not claim your business, you're going to pay taxes on the full $50,000. But if you do claim your business, you're going to be paying taxes on the $50,000 minus the $5,000 that you lost. So now you're only going to pay taxes on $45,000, which is a lot less than $50,000. So you can take the difference,

spend that back in your business. Try to grow your business before marketing. back in your business. Try to grow your business before marketing. Are you looking for a simplified way to earn revenue from selling your own digital products? We have found an incredible resource for you with Milo Tree Cart. Milo Tree Cart is founded by Jillian Leslie, host of the Blogger Genius Podcast. So she knows exactly the kind of platform a blogger needs to sell their products. There are ready-made sales pages, one-click sales funnels, a user-friendly sales dashboard, all while also getting a dedicated support team to assist you. You can bundle your digital downloads or sell them separately. You have unlimited product storage and all file types are accepted on the platform.

Milo Tree Cart simplifies the process of getting your digital products into the hands of those you created them for, all while generating more revenue for your blogging business. Click the link in our show notes today to sign up for Milo Tree Cart and start earning more from your digital products in 2024. Yeah, I think that's an important point for people to realize. And I think they sometimes feel a little bit scared, like, am I going to get in trouble and all those kinds of things. But there's some things that you can put in place yourself to document your expenses, to show that they're required for a business, to show that you've set this up as a business that would help you if the IRS had any questions. Is that right?

Absolutely. Yes. So like I said in the beginning, there's hobbies and there's businesses. So if you are running this like a business, you have a business bank account, maybe you've set up your LLC, it's not required, but I highly recommend just like you guys said earlier, and you are keeping your receipts, you're documenting, you're doing your bookkeeping, all those things are greatly important. So if you were audited, which doesn't mean that you will be, but always be prepared, right? If you have all those things, you're going to be fine. And you recommend keeping all that for how many years? How many years do you recommend keeping some of that documentation? I recommend keeping documentation, especially if you're in business for yourself for seven years.

Good rule of thumb. Yes, yes. And if you have receipts on receipt paper now, we all know that they fade, right? receipts on receipt paper. Now we all know that they fade, right? So I am a huge component of taking a picture with your phone. Those pictures are just as good as the actual receipt before they fade. I'm the world's worst myself of grabbing a receipt and putting it in the pocket of my car. Don't do that. Make sure you take a picture of it right away because you do need that. I was just going to ask that question. Can it be all electronically saved? Because gosh, in this day and age, we are getting rid of paper and we're doing everything digital.

So it's good to know that we could just create a little file folder right there on our computer and put all of our receipts and have them all in one place ready to go. Absolutely. Okay. So when somebody starts making some money, let's say last year, they made quite a bit of money and they ended up with quite an amount that they had to pay in at the end of the year. And that is not fun for anybody. I mean, we all love getting a return, not having to pay in. So how can you prepare for that? I know there's

quarterly tax payments. How do you know when you're ready to do that? Or is that something that an accountant needs to recommend to you? What is kind of the process with that? And what are the benefits of doing quarterly tax payments? Great question. Yes, if you are making a profit, you are required to make estimated tax payments. It's not an option. Some think it is, but trust me, it's not. So if you did owe last year because of your business, you are required to make those quarterly payments. So if you owed $1,000 last year, you need to be making quarterly payments of $250 in the next year, right?

So yes, whoever prepares your return should be telling you that when you file your taxes. But then also, maybe this year, you've really increased your revenue and you're making larger profits. You also need to be monitoring that on a quarterly basis and paying in more when necessary. If you don't do this, you are going to have estimated tax payment penalties, which do add up. So again, you're just throwing away money, in my opinion, when you do that. So stay on top of your bookkeeping. You know, if you're making profits, make sure you're paying in your estimated payments.

Yeah. So once again, this is just a great reminder that getting a little bit of help in this area is so important. And as an encouragement to anyone, I did income tax as my job for 13 years, and I still hire an accountant to help me now with my taxes and some of the bookkeeping issues that I have. Because it's just a lot to keep up on in a business. As a blogger, we have so many hats that we have to wear in our business. And this is something that's important enough. You don't want to drop the ball. You don't want to end up owing a lot of money and having a lot of penalties or interest that you owe to the IRS. That's not fun for anybody. So just that encouragement that it's okay to reach out for some help in this area for

somebody that's a little more experienced and has a little more expertise when it comes to taxes. So I love that you said that, Jennifer, about making sure that you are utilizing somebody because I think it can feel very overwhelming. And Stephanie, I know that you work with people. You just told us that you work with people all over the US. And so what is something that somebody needs to look for in regards to looking for a bookkeeper? What are some top things? Obviously, they can work with you, but they might have somebody local too, or somebody who is already doing their bookkeeping. What would be some key points with what a person would be looking for to make sure the person preparing their taxes actually indeed knows what they're

doing when it comes to doing an entrepreneur's taxes? Of course, the first thing I would say is to have a conversation with them. Look at their reviews from other people as well. And to me, a bookkeeper is like your doctor. You need to have that trust relationship. You need to be able to have those hard conversations. I have hard conversations with my clients sometimes. You're spending too much. I have to tell them that. So being able to have those conversations and feel comfortable enough is very, very important. Ask them about their certificates. Ask them how long they've been doing this. Also, you want a bookkeeper who asks you questions, not just takes your work and spits out a financial statement, but actually asks you, gets to know you and your business and gives you advice on how to grow your business,

how to be more profitable. Those are very, very important to me. But again, just having that conversation. It doesn't feel good. Listen to your gut is the one thing that I would always say. And if it doesn't feel right, it's probably not. That is such good advice. Because I think we'll get that feeling like,

oh, they might know or they might not. And I love... Basically, what you described is just somebody being in your corner and helping you grow your business, which I think is so important on the finance side of things. So if somebody is like, okay, Stephanie, I've loved all this that you have today and you shared and I feel like you really know your stuff. How can they connect with you and possibly start utilizing your services that you provide? Sure. So I have given you guys a link to fill out an intake form for me. That's a couple of questions that will lead you to my calendar so you can get on and I will have a personal conversation with you. I don't leave that to my team. So your calls are always going to be with me. I do have helpers, of course, that help me on the back end. And that's one thing that does make our firm different than others. So even though I have

other people helping me, I'm always going to be the one you'll see. I'm always going to be the one that you will talk with about your financials. So that's one thing. If you are ready to maybe just do your own bookkeeping, I'm good with that too. And I do have that calculated tax planner for you. So if you want to make that call, we can talk about that to say, you know, you're not quite ready for a bookkeeper. I'd love to help you. And this is a way that I can do that for you as well. just a really... I love the honest conversation that we've had here today. And I'm sure that people will be reaching out maybe with some specific questions or to talk to you directly about their own taxes because I think it is a complicated time. But we wanted to make sure that you guys go into this tax season feeling informed. And with it being the beginning of a new year, let's start out on best foot forward.

Let's just take this year proactive. I wrote that down when you said that earlier, Stephanie, about being a proactive bookkeeper. I absolutely love that you said that. And I think that is really, really great encouragement to everyone listening is not to bury your head in the sands this year, but to really just be proactive and looking at your business, looking at how you're doing and what can be done differently, and how you can continue to grow and succeed in blogging. So thank you, Stephanie, so much for joining us today on the podcast. Thank you for having me. I really appreciate it. Thank you.

Thanks so much for tuning in today. If you'd like to continue the conversation about blogging with us, please find us on Instagram at Spark Media Concepts. You can also sign up for our weekly newsletter where we share blogging tips and inspiration. You can sign up by finding the link in the show notes. For those of you who are ready for the next step and want to start your own blog, join the waitlist for the Ultimate Blog Bootcamp. The link to join the waitlist is also in the show notes. Go out and make today a great day.