Tax Day and an Entrepreneur’s Opportunity to Cut the Crap
Apr 10th
I’m not one to use “Cut the Crap” kind of language. It’s a little snarky, and I’ve built my businesses on a philosophy of “come on in, the water is warm.” When your business is to get people to look at, talk about, and tell the truth about their numbers, you end up working through a lot of fear, avoidance, self-loathing, or simple vagueness with clients. There are so many of us that don’t like numbers or believe that we aren’t good at math. Layer that with our feelings about our finances, and you have multitudes of people who would rather do anything than look at, or talk about, their numbers. Well, come on in, the water is indeed warm.
There’s nothing like April 15th to focus on your numbers. It’s a golden opportunity many of us only get once a year, even though we should be looking at our income every month. I started riffing on what “Cut the Crap” had to do with numbers because of an upcoming spot on a colleague’s podcast, Powder Keg of Awesome. It’s one of their taglines, and I wanted to be prepared to speak their language for their mostly entrepreneurial audience. So what does cut the crap mean in relation to April 15th? Let’s do the math.
- Go grab your tax return.
- Get out a blank sheet of paper.
- If you’re self-employed, look at Line 12 on your 1040. That’s how much your business made last year. Write it down.
- If you’re incorporated or in a partnership, you’ll also need to grab Line 17 and, if paid via payroll, Line 7. Add those up. That’s how much you earned from your business last year.
- Now, take those numbers and divide by 12. Write that number down.
- That was your monthly income last year. Write “I earned this much each month” next to the number.
- Now, divide that number by 173 hours (the full time equivalent hours worked in an average month.) Write that number down. Then write “this was my hourly ‘wage’ next to your number.
Simple. I know. But so few of us ever look at it that way. In fact many small business owners don’t look at their numbers on a monthly basis at all. And even those that do end up looking at lengthy and disorganized Quickbooks reports. The simplicity allows us to connect with our feelings. Or, cut through the crap.
When you write the number down do you feel a sense of pride, gratitude or pleasant surprise? If the feelings that arise from this simple exercise fall on the side of positivity, then you are likely well aligned with how your business is performing and how it’s supporting you and your family.
But if feelings arise that create a pit in your stomach, self-loathing, disappointment or unpleasant surprise, then it’s time to look harder. I know the self-loathing feeling. I did this exercise years ago and realized I hadn’t paid myself much more than my teenage assistant. I could have justified it all over the place; I was transitioning my business transition, blah, blah, blah. Instead, I chose to cut the crap. I chose to embrace the feelings, and the intensity of the feelings spurred me to make a change.
I believe less is more when it comes to numbers. The more numbers you have to read and digest, the less you can connect with your feelings and intuition. Your analytical brain kicks in. There’s nothing wrong with analysis; it’s important too. But equally important is connecting with your business’ numbers and the feelings that they stir. The final part of the exercise: go back to your piece of paper and write some of the feelings that your numbers spurred in you.
And then focus on what your sheet of paper will look like next April 15th. Happy Tax Day.
Where Should I Go To Get My Taxes Done?
Apr 16th
This is a question I get asked a lot by friends, clients and other entrepreneurs. I have an easy answer for my clients: Mike. I’ve known Mike since my Coopers & Lybrand (now PwC) days. He’s honest, dependable, smart and fair-priced. If a client were to get audited three years from now, I know he’s still going to be in business. He’s going to stand by his work.
When a new client asks me, with a tilt to her head, “Is he…creative?,” I say “On a scale of 1 to 10, Mike is a 5.” What I mean by that is that he’s a middle of the road guy. He’s going to get you the tax deductions you deserve but he’s not going to stretch any rules too far, make anything up or do any funny math. And I believe that’s just the kind of tax preparer you want.
My staff asked me to focus this blog on how to maximize tax deductions; to share some secrets and tricks. The truth is, it doesn’t work that way for “the 99%”. (More accurately, probably 90%) For low and middle income wage earners that don’t own a home, the deductions are fairly standard, pardon the pun. For home owners, there are more deductions, but they are still fairly standard: interest, property taxes, etc. As your income rises, it’s likely that there are more opportunities as you’re likely spending money in areas that are indeed deductible. But I’m not talking rising from $40,000 to $80,000. I’m talking rising well into the six figures.
For consultants and small business owners, it’s a bit more complex, but not much. Deducting office supplies, employee’s payroll and auto mileage isn’t rocket science. If you spend money on your business, it’s most likely deductible.
I think many business owners suspect they’re missing out. They suspect that if they had the RIGHT tax preparer, they would maximize their deductions. That myth gets perpetuated by radio commercials that inform us we’re missing out if we don’t incorporate and by home-based business experts that declare you can deduct the cost of your dog because it protects your home office. Really? I suppose it could be argued, but I wouldn’t want to sit across from an IRS officer trying to explain why I wrote off dog food, unless I was a professional breeder.
The simple truth is that, until you amass significant wealth or own complex businesses, the choices for tax preparation are fairly simple. They boil down to software like Turbo Tax, retail tax preparation companies like H&R Block, or choosing a tax professional ranging from an Enrolled Agent to a Certified Public Accountant to an attorney that specializes in taxation.
And here’s my opinion of the options:
Turbo Tax (or any other reputable tax software):
Pros – This is a great option for those that are comfortable with computers and don’t have any situations that are too complex such as multiple businesses, uncommon deductions or specialty credits. I often recommend this as the best option for someone who is newly in business, but only when I’m certain the person will use the power of Turbo Tax and not just blow through it as quickly as possible. The value of Turbo Tax for a new business owner is that when you follow it down the paths of its questions, it then educates you on the convoluted rules of business deductions. It synthesizes the 72,000 pages of tax code into user-friendly questions, and then, if you ask, it tells you the rule behind the question.
Cons – There is no human review function. For my clients that use it, I glance at their return before they send it in. An educated second set of eyes is always good practice, whether using Turbo Tax or a $300/hour tax accountant.
H&R Block (or any other reputable retail tax preparation company)
Pros: The cheery green and white balloons you’re greeted with.
OK, seriously. I must admit I’ve previously disparaged this option because I believed H&R Block to be mostly staffed by intermittent near-minimum wage employees. But I’ve changed my perspective over the past few years. I’ve had the opportunity to work with a long-time H&R Block tax preparer who knows her stuff and has handled one of my clients with some complexities very well. H&R Block also has a solid training and review process in place. If you don’t have the time or inclination to use Turbo Tax and have a typical tax situation, H&R is a smart and economical choice. (Many tax accountants will disagree with me, but that’s my opinion based on years of listening to others experience.)
Cons: Most of their storefronts close for over half the year. If you’re a business owner, I believe there’s great value in checking in with your tax accountant a couple of times throughout the year. That’s not possible when they aren’t there.
Enrolled Agents, Certified Public Accountants and Tax Attorneys:
There is a wide gamut of professional options to getting your taxes completed. They can run anywhere from $50 per hour to $500 per hour, and more. I’ve seen really good ones in each of the categories and really bad ones. There are some qualities that are important to find in your tax preparer:
- For wage earners: do they talk to you and teach you about your options, do they ask questions about your life that might impact your return, do they return your calls and do they finish your return in a timely manner? How long have they been in business? If all they do is have you fill out a form and don’t have any meaningful conversation with you, find someone else.
- For business owners: All of the above questions, with a much greater emphasis on education. Do they walk you through the honest decisions involved in corporate or sole proprietor status, or do they automatically tell you to incorporate…always a red flag. Do they connect with you a few times throughout the year to see if your profitability has significantly increased or decreased; a trigger that could potentially change your need to squirrel money away for a large tax bill on April 15th.
- For high wage earners, individuals who own multiple businesses, and any other complex tax situation: The more complex your tax situation, the more you’ll benefit from a more experienced, more licensed professional. Decisions for this group are beyond the scope of this blog, but what I will say is, by hiring the right professional, you will almost always see a definite return on investment from the tax planning you receive. Joel Stein wrote a humorous article Joel Stein Has Four Accountants on Bloomberg Businessweek last week and he said it well: “What a higher-end accountant does is look a my financial situation holistically and think long-term.”
In the research for his article, he discovered that not all tax preparation options are equal. His remaining taxes due/refund ranged from $4,544 due, to $2,387 due to a refund of $469. That’s not including the $119,554 refund he calculated from TaxSlayer.com, surely an operator error.
What he clearly points out is that all the options are not equal, and who does your taxes can be an important decision. Over the years I’ve seen some horrible outcomes from some ‘great accountants.’ If your neighbor or colleague tells you about their really great tax guy (or gal) that always gets them a refund but they’re not really sure how, think twice before you bite. The after effects of tax accountants that push the envelope too far can be devastating. While the chances of you being audited are miniscule, the chances of one of the tax preparer’s many clients being audited are much greater. When the IRS sees a pattern with a tax preparer, they swoop in and look at the returns of his or her other clients. I’ve seen perfectly upstanding, ethical business owners have back tax bills as a result of tax audits of this type, sometimes to the tune of thousands of dollars. And the tax accountants they used were seemingly ethical. They weren’t outright frauds; they just pushed the envelope way too far. And it’s the tax payer who is ultimately liable.
The final piece of advice I have, no matter who does your return: read it. It may read like Greek to you, but read it anyway. Every year, you’ll learn just a little more.
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Stacey Powell builds financial muscles at TheFinanceGym.com and shows off Financial Art at Facebook.
The Secret of 1,000,000 Followers: Karen Hutton’s
Apr 5th
Photo Taken by Scott Jarvie
- I would be thrilled for any client to reach 1,000,000 followers, but it has been exceptionally thrilling watching photographer
- reach the 1,000,000 follower milestone on Google+. While it is a great accomplishment, that’s not what has made it thrilling. The thrill has been that she reached the 1,000,000 mark without seemingly trying. It’s not your typical story, but not much about Karen is typical.
- What does it take to reach 1,000,000 followers?
Most of the entrepreneurs I know believe that it takes the right investment, the right guru, the right system that will firmly place them on the path to entrepreneurial success. Most have invested tens of thousands of dollars into marketing, consultants and coaches. They’ve spent hundreds of hours of time implementing strategies, launching ideas and working, working, working very hard. Karen, much like her photography, has taken a different approach.
Karen’s path to 1,000,000 has been creative diligence and imaginative consistency. To be an amazing artist you have to be creative and imaginative, but there are thousands of amazing artists who never near critical or commercial success. To reach milestones of success in any field, diligence, persistence and consistency are qualities you must encompass. And it is just those qualities that have catapulted Karen on her path.
I’ve written a blog about Karen before: Creative Brain vs. Business Brain. It’s the story of how she ignited her long-smoldering passion for photography while bolstering her ‘real business’. The back-story is that, while her photography has catapulted her in the world of photography and Google+, it’s not her principle vocation. Karen is a well-known voice over professional: she’s the narrator of the Echoes of Creation film, the voice of the #1 GPS app, MotionX and she talks you through the world in Trey Ratcliff’s amazing Stuck in Customs iPad app.
Photo Taken by Karen Hutton
For the year of 2010, Karen made a strategic business decision to “live her life as an artist.” And while that may conjure up visions of a year of whimsy and impulse, to Karen it meant diligently, persistently and consistently enjoying, learning and growing her love of photography. Her goal wasn’t 1,000,000 followers. Her goal was to bring joy to her life through photography. And she met her goal with diligence, persistence and consistency. Twyla Tharpe’s inspiring book The Creative Habit tells you that creative success comes from doing exactly what Karen did.
She consistently stepped outdoors with her camera to connect with her creativity, she studied other photographers’ work and methods and she began amassing a large volume of work. When she joined Google+ she didn’t just join, she began diligently, consistently posting her photos coupled with her imaginative prose. She found joy in joining in the renaissance community of photographers that have convened on Google+, both online and traveling in person to the photowalks that have sprung from the online community. Admired photographers became friends, and then admirers of her work. The tipping point was when someone at Google noticed her body of work and added her to the Photography & Art interesting people to follow list.
The marketing gurus will tell you to do much of this: joint venture, build community, post regularly. The uniqueness, though, of Karen’s path was that she wasn’t seeking an outcome of 1,000,000 followers; she was using creativity to bolster her life. She was simply having fun.
Are you using creativity to bolster your life and your business?
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Stacey Powell builds financial muscles at TheFinanceGym.com and shows of Financial Art at Facebook.
Financial Accountability and the 21 Day Accountability Challenge
Mar 14th
Click image for larger view.
What could you accomplish in 21 days if you knew someone was watching you, checking in on you, facebooking and tweeting about you? Would the goals that you daydream about become clearer, more tangible? Would you be inspired to turn them into SMART goals (specific, measurable, attainable, realistic and timely)? Would you triumph under the magnifying glass of accountability?
21 days ago, my company, Creating Answers, launched the 21 Day Accountability Challenge. We asked people to send in their goals and we chose one lucky person to support, watch, Facebook and Tweet about his or her progress towards his goals. And the lucky winner was:
Kevin Knauss of Insure Me Kevin. Hands down he was the winner. He sent us nine goals and he was clearly excited and ready to hit the ground running. We were concerned that his nine goals were a bit lofty, so we did what we do. We sat down with him and helped him translate his goals into numbers.
3
“Make my website a wealth of information and the hub of my marketing efforts” became “Blog at least 3 times per week,”
100
“Expand my small group health insurance clients” became “Complete 100 direct mailings each week for the next 3 weeks,” and
1,500
“Expand and fine tune my social media marketing plan” became “Have 1,500 Twitter followers by March 14th.” As of March 13th, he’s at 1,300; go follow him @InsureMeKevin!
Being an entrepreneur requires a unique kind of willpower. There’s no one, in the short run, watching you every day and holding you accountable. You have to really want to do what you’re doing, and you have to follow through. In the long run, your customers will hold you accountable. If you don’t provide value, they won’t return and you’ll run out of money. That’s long term accountability. But in the short run, no one is paying attention to how you show up in your business. Kevin has made amazing progress in the past three weeks because he was willing to expose himself while propelling himself forward.
When it comes to managing our money, many of us have willpower issues. For those of us that are single, there is no one else giving us feedback about our financial decisions or asking us if we did what we said we were going to do. We have no one to be accountable to, no one to answer to when we spent twice what we said we would on eating out. Rarely does anyone ask us the question: “are you funding your retirement?” or “do you have 3 months of reserves in the bank?” Even for those of us in a relationship, the money is often handled by one person, and the other person doesn’t really want to know what’s happening. I’ve had many a client lament that his or her partner won’t even talk about financial decisions. They just want it handled.
How can you use accountability to propel yourself forward with your finances?
- Write your financial goals down and share them with a trusted friend. Check in once every few months and tell them how you’re doing.
- Work with a Certified Financial Planner that will ask the hard questions and be honest with you about your financial health.
- Join the online community at Get Rich Slowly’s Fiscal Fitness Journals.
- Become transparent and start a blog like Save Karyn’s Grand Debt Tally.
- Join a mastermind group that focuses on your money like Financial Boot Camp.
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Stacey Powell builds financial muscles at TheFinanceGym.com and shows off Financial Art at Facebook.
Growing Your Business Through Practicing Gratitude
Nov 23rd
It’s the time of year we all give thanks for our many blessings. It’s a good practice in our personal lives, and an equally good practice in our business lives.
On the Wednesday of Thanksgiving week it is my tradition to spend the day calling clients, past clients, colleagues who refer business to me and anyone else who has impacted my business over the past year. The calls aren’t sales calls, they’re gratitude calls. My intention is to thank those that have positively impacted my business’ growth as well my own personal happiness.
I’d like to say that I started this practice because I’m such a good person. But the truth is that I started it some years ago when I was scared to death to make sales and marketing calls. Picking up the phone and asking someone to become a client or refer business to me was terrifying. This gratitude concept that I began was a kinder, gentler (or perhaps spineless) approach.
The first year of the tradition I landed a big client. It was someone who I knew desperately needed my help. I hadn’t heard from him in months, and he was thrilled to hear from me. He was finally ready to face his financial issue and I called on just the right day. What I realized for the first time that day was that he needed my service more than I needed his money. The calls I was making weren’t about generating business, they were about serving others. After that experience, sales and marketing calls became much easier.
That was just the beginning of understanding of the role of gratitude and service in business. The more I began to weave it into my business, the more I recognized how gratitude was impacting other successful businesses I worked with.
- One very successful colleague writes her thank you notes every morning at the breakfast table with her husband. It’s a sweet practice, and I believe a cornerstone of her success.
- Another successful entrepreneur I know keeps a gratitude journal, writing in it each day that which she is grateful for.
- Sandra Yancey, the phenomenally successful entrepreneur who began eWomen Network says that behind her company’s motto “Give first, share always” is a sense of gratitude. She ensures from the top down in her company that gratitude is practiced amongst the members and with not-for-profit causes.
One of the business coaches that has most influenced my happiness as a business owner had me start our work together with a gratitude practice. I’m an accountant. Not a curmudgeonly one, but definitely not the first person to be open to the kind of advice that goes like this:
“Stacey, I want you to write down 25 things you’re grateful for every day.”
“25????”
“Yes, 25.”
I thought to myself….”that’s stupid.”
But I was unhappy at the time, and thus willing to try new things. 25 was a lot. After the obvious:
- my daughter,
- my cat,
- sunshine,
- my health,
I had no idea what the other 21 should be. But kept thinking and eventually I’d get the 25 down, and every day it got easier, and eventually I realized that the gratitude practice was helping me on a daily basis assess what it was I LOVED about my business, and what it was I dreaded.
Focusing on gratitude brought to the surface that I had been burning myself out spending time doing tasks and taking care of clients that I didn’t have a passion to serve. Focusing on gratitude, and really noticing on a daily basis which clients I was grateful for helped me become very clear about the mission of my business, and it was then I renamed the business Creating Answers and made a bold decision: I was only going to do work I loved, and I was only going to work with clients that I loved; ones that I felt grateful for.
I’m not always successful; I suppose no one is. But what I am is happy. Almost every day when I go to work, I am happy. And I attribute my business’ growth to that happiness, which grew from the gratitude practice.
What are you grateful for?
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Stacey Powell builds financial muscles at TheFinanceGym.com, creates financial clarity at CreatingAnswers.com, and shows off Financial Art at Facebook.
