Episode 308 Summary: 6 Steps to Stay on Top of Your Taxes (and Finances!) with Danielle Hayden

In Episode 308 of "This Can't Be That Hard", host Annemie Tonken engages in a transformative conversation with Danielle Hayden from Kickstart Accounting Inc. Together, they delve into six essential steps tailored to help photographers master their taxes and overall financial health. Danielle's expertise provides actionable insights, demystifying the often daunting realm of business finances for creative professionals.

1. Maintain Accurate and Organized Bookkeeping

Danielle Hayden emphasizes that accurate and organized bookkeeping is the cornerstone of financial stability. She states, “You really don’t need to be doing this. In fact, you shouldn’t be doing this. You should be getting someone who knows what they’re doing to help you with this” [06:37].

Annemie resonates with this by sharing personal challenges with deferred bookkeeping, highlighting the stress of reconciling expenses months later: “...you could end up with a huge job, hunting around in receipts and emails trying to figure everything out” [11:21].

Key Takeaways:

• Consistent Tracking: Bookkeeping should be a monthly, if not weekly, activity to ensure accuracy.
• Tax Reserve: Danielle advises setting aside 25% of net income as a tax reserve to prepare for tax obligations proactively [10:17].
• Professional Assistance: Leveraging professional bookkeepers can prevent errors and save time, ultimately benefiting the business financially [16:42].

2. Separate Business and Personal Finances

Danielle underscores the necessity of keeping business and personal finances distinct: “If you are a sole proprietor or an LLC, you are taking money from your business account and transferring it to your personal account so that you have those owner’s draws that can then fund your personal life” [20:58].

Annemie adds that this separation not only simplifies financial management but also protects legal boundaries: “Having separate accounts makes it much easier, especially when dealing with your bookkeeper... it becomes so much cleaner” [20:58].

Key Takeaways:

• Dedicated Accounts: Maintain separate business checking accounts and credit cards to avoid commingling funds.
• Legal Protection: Proper separation helps preserve the corporate veil, safeguarding personal assets from business liabilities [20:58].
• Simplified Bookkeeping: Clear distinctions between accounts streamline financial tracking and reporting [21:23].

3. Implement an Accountable Plan for S Corporations

For those operating as S Corporations, Danielle introduces the concept of an Accountable Plan: “The Accountable Plan allows us to move cash from our business account to our personal account throughout the year without paying taxes on it” [24:46].

Key Takeaways:

• Tax Efficiency: An Accountable Plan reduces overall taxes by allowing the transfer of funds without incurring additional tax liabilities.
• Documentation: Proper documentation is crucial to validate expenses and comply with IRS regulations [25:11].
• CPA Collaboration: Working with a CPA ensures that the Accountable Plan is correctly implemented and beneficial [26:34].

4. Utilize Uniforms and Branded Equipment as Tax Deductions

Danielle offers creative strategies to maximize tax deductions through business-related apparel and equipment: “If you are going to purchase clothes that you are only wearing for, for work, you can simply add your logo to those pieces of clothing” [27:02].

Annemie seeks clarification on implementation: “Can it be something pretty subtle somewhere?” Danielle confirms the possibility of subtle branding while advising professionalism to ensure IRS compliance [28:05].

Key Takeaways:

• Branded Apparel: Adding company logos to work-specific clothing can qualify them as business expenses.
• Client and Employee Gifts: Transforming gifts into branded equipment like iPads can convert non-deductible gifts into allowable business expenses [30:58].
• IRS Compliance: Ensure that branding is professional to withstand potential IRS scrutiny [28:42].

5. Equip Yourself with the Right Tax Team and Tools

The conversation highlights the importance of assembling a competent tax team. Danielle advocates for engaging with tax professionals who are willing to collaborate and communicate effectively: “You need to find someone that is willing to have a conversation with you... so that they can put those investigative goggles on” [34:42].

Annemie praises Danielle's approach of using visual tools like Loom videos to enhance understanding: “If you send them a two-minute video... that information will be received and retained 10 times better” [35:32].

Key Takeaways:

• Active Collaboration: Regular interactions with your tax team can uncover additional deductions and optimize financial strategies.
• Educational Tools: Utilizing multimedia tools can improve comprehension of complex tax information [35:20].
• Responsibility Ownership: While professionals handle the heavy lifting, business owners must engage actively to understand their financial standing [36:09].

6. Engage in Ongoing Tax Strategy Conversations

Danielle recommends maintaining regular dialogues with tax professionals beyond the annual tax season. She introduces the concept of mid-year check-ins to reassess and adjust financial strategies: “Our mid-year tax check-in is really important to continue the conversation with our CPAs” [37:13].

Key Takeaways:

• Proactive Adjustments: Regular reviews allow businesses to adapt to growth and changing financial landscapes, preventing surprises during tax season.
• Strategic Planning: Mid-year evaluations help in making informed decisions about entity types, tax contributions, and retirement planning [37:27].
• Continuous Improvement: Ongoing conversations ensure that businesses stay aligned with their financial goals and tax obligations [38:49].

Notable Quotes

• Danielle Hayden: “You really don’t need to be doing this. In fact, you shouldn’t be doing this. You should be getting someone who knows what they’re doing to help you with this” [06:37].

• Danielle Hayden: “The IRS doesn't care if you’re a creative. I know this is harsh, but your job is to know your numbers” [13:43].

• Danielle Hayden: “Can you really afford not to? Because we're paying that money one way or another” [19:21].

• Danielle Hayden: “You need someone that is willing to have a conversation with you so that they can put those investigative goggles on” [34:42].

• Annemie Tonken: “Running a photography business doesn't have to be that hard. You can do it, and I can show you how” [00:00].

Conclusion

Episode 308 serves as an invaluable guide for photographers striving to achieve financial mastery within their businesses. Through Danielle Hayden's expert advice, listeners gain a clear roadmap on maintaining accurate bookkeeping, segregating finances, leveraging tax-efficient strategies, and collaborating effectively with tax professionals. Annemie Tonken's engaging hosting ensures that these complex topics are accessible and actionable, empowering creative entrepreneurs to build profitable and sustainable photography businesses they love.

For more detailed strategies and resources, listeners are encouraged to visit Kickstart Accounting Inc. to download Danielle's Top 10 Tax Deductions and explore relevant podcast episodes.