Tax filing for entrepreneurs can be an absolute nightmare if you’re unprepared. In the new and early-stages of business, it’s common to feel intimidated by the filing, reporting, and amounts due. Without balanced books, the struggle can lead to harsh financial penalties and IRS troubles. Many fear the possibility of a tax audit, but only 1-2% of small businesses actually get selected for the daunting process.
Managing finances and filing on your own can be time consuming, and a costly mistake if you aren’t careful. Yet, it takes a lot of trust to have a third party manage your money, and sometimes a hefty investment. But the opportunity to become CFO-ish™ is making the process a relief.
Pam Bell is the CPA responsible for the timely solution providing financial management for businesses in need. In an industry where her demographic accounts for less than 2% of CPAs, the expert developed a framework that is changing the financial trajectory for entrepreneurs.
What’s CFO-ish™?
In her 16 year career, the Flint, Michigan native has saved small businesses, public universities, and Fortune 500 companies over $1,000,000 in taxes. Today, her firm Viking CPA Group works closely with individuals and businesses for professional business consulting and accounting services.
“Accounting is the language of business, but it’s also like a foreign language that’s not easily understood. Without having clean and accurate books, it’s almost impossible to have great insight on how to operate your business for growth”
PAM BELL, CPA
Hiring a CPA for taxes and accounting clean up can cost small businesses upwards to $3,000. But Bell’s DIY method runs for a small fraction of the cost. Her CFO-ish™ intensive teaches how to use QuickBooks Online to set up effective financial controls and see profits from their operations.
“I wanted to teach business owners the foundational information on managing their business finances on their own, until they get to a point where they can outsource an accounting team,” explained Bell.
Choosing the Best Accounting Software
QuickBooks is one of the world’s most utilized platforms for accounting. Their Self-Employed option is typically used by small businesses and entrepreneurs. But Bell recommends a different product from the company.
“QuickBooks Self-Employed is a good start for people who are just dabbling in a side hustle with no intention of growing. But if you’re launching a business, do it with the end in mind. The Self-Employed software is very limiting and doesn’t provide the proper reporting and functionality. QuickBooks Online has the capability to grow with your business because of its enhanced features.”
Bell is an advocate for accounting systems with detailed reporting options, and it’s not just because of her CPA responsibilities. One lesson many new entrepreneurs learn down the line is how much those reports play a role in business funding.
“Do you remember the PPP era?!” Bell chuckled. “Many people missed out on funding because they didn’t have an accounting system or a method for producing financial reports. Any legit organization that is giving away money will want to review reports. This shows the strength of the company to obtain funding and the risk if they can’t repay. Financial reports are crucial to a business looking to get funding, certifications, and grants.”
Tax Forms for Filing
Before filing on your own, it’s wise to know which forms you’ll need to complete ahead of time. Bell offered a simple breakdown of forms for three of the most common entities created by entrepreneurs.
“Sole Proprietor and LLCs should be filed in conjunction with your normal 1040 individual personal tax return. Business activity should be reported on a Schedule C. You can’t separate it, the filing has to be done together,” she explained.
“S-Corps fill out an 1120-S form to report all business activities, including income, expenses, assets and liabilities. Owners would get a Schedule K-1 to report net income or loss that would flow through to your tax return. Your S-Corp is taxed at the individual level in the K-1.”
Tax Write Offs for Entrepreneurs
Once a fiscal year ends, it’s typically too late to make attempts to cut down your tax bill. But you can always prepare for write offs in the next tax season. It’s a conversation the accountant says happens frequently once filing begins.
“A lot of tax professionals always create this exhaustive list of things you can write off. But I’ll tell you what you can’t write off,” shared Bell. “Most people aren’t aware that you can’t write off payments on loans or credit cards. So if you have loans or mortgage in your business name, or business credit cards, when you pay on bills or principals, it’s not tax deductible. You’re just paying down a liability. However, you can deduct the interest portion of your loan or credit card. So download a statement that shows what you’ve paid off on both principal and interest.”
The season for processing 2022 tax returns officially underway, with a filing deadline of April 18th. If you haven’t started preparing, save yourself the time, money, and energy, and outsource help from a trusted accountant.
Lead Image Source: Ashley Nicole Photography
As a disclaimer, the information provided in this article is for general information purposes only and the advice given should be taken at your own risk. Readers of this article should contact their accountant or financial advisor to obtain advice with respect to any particular financial matter.
