Year End Tax Planning with Jamie Trull - Alternate title: Make your kid a millionaire!
Are your year-end tax preparations causing you sleepless nights? What if I told you there are strategies to transform this dreaded task into a source of growth for your business? Today, we are joined by the brilliant Jamie Troull, a financial literacy coach, and profit strategist who shares her journey from a corporate CPA to becoming a champion of financial education for small businesses.
We navigated through the process of tax planning, not just as a compliance practice but a strategic tool for business growth. She shared her unique experience on how the pandemic led to a strategic pivot in her business, causing the exponential growth of her Facebook group from 5,000 to 30,000 members.
Jamie offered practical tips on how to maximize write-offs, understanding deductions and the brilliant strategy of hiring your kids. 🏆
Towards the end, we dissected the significance of understanding business books and write-offs. Jamie's insights on how to use documents like profit and loss statements and balance sheets to make informed decisions were spot on.
Also, we played a little game of tax deductions for subscription box businesses, from the importance of having a business bank account to the best way to document expenses.
Whether you're just starting out or running a successful subscription box business, this episode is packed with nuggets of wisdom that will empower you to take control of your financial future. Tune in, and let's conquer those tax fears together!
Links:
Some of the links above may be affiliate links.
Get all the details and your ticket at SubSummit.com, THE conference for sub box businesses. We'll see you in Dallas this June!
Year End Tax Planning with Jamie Trull - Alternate title: Make your kid a millionaire!
Are your year-end tax preparations causing you sleepless nights? What if I told you there are strategies to transform this dreaded task into a source of growth for your business? Today, we are joined by the brilliant Jamie Troull, a financial literacy coach, and profit strategist who shares her journey from a corporate CPA to becoming a champion of financial education for small businesses.
We navigated through the process of tax planning, not just as a compliance practice but a strategic tool for business growth. She shared her unique experience on how the pandemic led to a strategic pivot in her business, causing the exponential growth of her Facebook group from 5,000 to 30,000 members.
Jamie offered practical tips on how to maximize write-offs, understanding deductions and the brilliant strategy of hiring your kids. 🏆
Towards the end, we dissected the significance of understanding business books and write-offs. Jamie's insights on how to use documents like profit and loss statements and balance sheets to make informed decisions were spot on.
Also, we played a little game of tax deductions for subscription box businesses, from the importance of having a business bank account to the best way to document expenses.
Whether you're just starting out or running a successful subscription box business, this episode is packed with nuggets of wisdom that will empower you to take control of your financial future. Tune in, and let's conquer those tax fears together!
Links:
Some of the links above may be affiliate links.
Get all the details and your ticket at SubSummit.com, THE conference for sub box businesses. We'll see you in Dallas this June!
So you want to launch a subscription box and don't know where to start? Girl, you are in the right place. I'm Julie Ball and I'm Renee Gonzalez, your host here at Subscription Box Basics, a podcast for new and aspiring subscription box entrepreneurs wanting to avoid overwhelm. So grab a coffee, some pen and paper and let's have some fun. Hey everybody, and welcome back to Subscription Box Basics.
Speaker 1:Today I have a special guest, my friend Jamie Troll, who is a financial literacy coach and profit strategist. I know that's a mouthful, but she has got so much good advice for you. So listen up, grab your pen and paper, because we're going to talk about end of year tax planning. So sexy, I know, jamie. Welcome to the podcast. Thanks, I think everybody just tuned out. They were like no, not for me, I'm going to skip this one. Stay around, do not skip this one Like this one could have major implications in your business. Real quick story before we start.
Speaker 1:I remember the first year in my subscription box business. I did not have someone like you in my corner and I was actually in the process of switching accountants and a lot of things fell through the cracks during that time and, for the first time ever, I had a decently large tax bill to pay. It was five thousand dollars, and I was like I don't have five thousand dollars in my back pocket. So that's why it's so important to plan ahead and to get yourself organized, and that's why Jamie's here. All right, jamie. So some of our listeners will be meeting you for the first time, so why don't you give them a little bit of background?
Speaker 1:So I'm Jamie Troll. I was a CPA in what I consider a former life. I'm still a CPA, but I don't practice and I don't usually like throwing around the letters. I like financial or profit strategist is my favorite title that I like to go by now, but I worked in the corporate world for a long time for Coca Cola, one of the biggest brands in the world, and after having kids and going through that whole rigmarole that maybe a lot of your listeners had as well, I discovered that the corporate life wasn't right for me and decided to strike out on my own, and I'd love to say that I had some grand plan for what this business was going to be, but let me tell you I had literally no idea. This is 2017 and I'm like I don't know what I'm going to do, but I just started working with some small businesses in my area and then that grew and grew and I found that I loved kind of the strategic side of finances a little bit more than the CPA boring stuff, and so I switched my business to being just CFO services and then eventually ended up down the line of becoming an educator, because I realized that there's just a hole in education. I really think, with really accessible financial education for small business owners. There's just not a lot of it, right, and so I think it leaves a lot of people just feeling confused, feeling overwhelmed, feeling like they're missing something Right, and that's what I really wanted to feel. And it also helped me to be able to stay at home with my two kiddos, who are currently nine and six, and that was really important to me too. So it really has become something I never could have dreamed of. I've been able to grow my team and this business has just really evolved over time to become it's a labor of love.
Speaker 1:I feel the aren't all small businesses. I swear they really are. Yeah, they are. I've been following you for years now, but we tell the quick story of I feel like a lot of subscription boxes or just small businesses happen by accident, like something just happens, where it's like this either light bulb moment or based off of something that we are going through as the business owner. Now take us back to the pandemic and the whirlwind of things happening. And you started a Facebook group. Tell that quick story. Yeah, so that was crazy. And that's when the trajectory just went off the charts, which at the time I was not at all ready for. Remember, we talked about this and you were just like this is going out of control. It was like it was drinking out of a fire hose.
Speaker 1:When the whole world was shut down, I felt like I was in overdrive, but I had already. I had started teaching and I actually just finished up my first course launch and I was like, ok, I'm going to take a little bit of time to regroup a little bit. And then the world shut down. I'm like, ok, well, maybe I'll do some like organizational projects. And I had already offloaded most of my one to one clients at that point because I knew I really wanted to pursue just the education, courses, tools, things like that, resources for small business owners.
Speaker 1:And then Everything shut down and then all the new things coming out from the federal government around the cares act and the PPP loans and the idea loans and all these acronyms that didn't exist Three years ago, right, are now a part of our daily vernacular. And at that point in time I got a lot of questions. I had started a Facebook group, probably about nine months earlier. That was pretty engaged, but nobody wanted to hear about profit strategy anymore, right. When your business is closed, you're not like, oh, let me hear about how to increase my profit margins. I don't have profit margins, I am not making any money right now, right, and I really just leaned into the moment. And I think that's one of the big learnings I had is, sometimes you just have to lean into the moment and just say, ok, what does this require of me right now? And so I was live pretty much daily for about six months.
Speaker 1:As things were changing so quickly and there wasn't a lot of information, you couldn't go to YouTube and search up anything about PPP loans. I was like, well, I'll just start a YouTube channel. And so it just grew really fast and we ended up growing. I think my Facebook group had maybe 5,000 members in it before the pandemic and we hit 30,000 within a couple of months, and that was by no marketing, no advertising. It was just people inviting friends, and we grew a YouTube channel from zero to like 20,000 followers in a month and a half. So it just people were responding, so I just kept showing up and doing that.
Speaker 1:It feels like a little bit of a fever dream now looking. That's funny. Well, all of COVID feels that way. You were providing really good information and you're really relatable. You were very helpful and those are the things that any small business owner needs to do. Now, from a timing perspective, the education that you were providing the live videos and stuff was very timely. People needed this information quickly and so I think you did such a great job. But here we are several years later and you're still a course creator and teacher and you're helping small businesses. So I love your kind of story behind the scenes. It almost feels like an accident that you started this business and grew it to where you're at now, but I'm super proud of you. I know I just love to see this growth.
Speaker 1:So let's dive into some tax planning stuff Now. Before we jumped on this podcast episode, you and I were chatting and you said I like to look at tax planning in two different perspectives. Let's tell everyone that. So they wrap their heads around that, yeah, absolutely, and I think oftentimes it. And when we first are starting a business, too, we think of taxes as really this compliance exercise, ie the thing that we have to do, right that, oh my gosh, I have to get my books ready for taxes, I have to figure out my revenue and my expenses and my deductions and do all of this work and make sure that I've tracked everything and that I'm not going to get in trouble with the IRS. That's usually like our big concern and that's one way to look at our numbers in our business is we have to do this for tax purposes because we don't want to get in trouble.
Speaker 1:But then the other side of things and this is what I love to teach on the most is the strategy part of it, which is really the things you get to do, the information that your numbers give you. If you have your numbers, if you're keeping up with them, not only are you going to be ready for taxes, but you're also going to have the information to know, like how is my business really doing? What changes do I need to make? You're going to have real-time information to make those decisions, to know what your profit margins are, which in a subscription box business, is perhaps a freaking, lutely critical right. It's very easy I'm sure Julie knows this. It's very easy to work for no money or less than no money right To lose money in the business, and so you have to be so on top of things. But that's more the strategy side. So I think all of that, in order to be successful both on the compliance side and the strategy side, it means having your numbers together and organized in a way that you can look at them and understand what they're telling you and make decisions right. So that's a good segue into let's give them some good advice here.
Speaker 1:Let's talk about organizing. I feel like every year I always have a meeting with my accountant in Q4, and then she waits for me to send all my tax documents and all my information, and I always feel like I carve out a day and then I pull everything together and put it in a pretty little bow for her and I send it off, and then I hold my breath and I'm like let the head ins wait to see what she has to say, and I remember years and years where I would take a picture of my tax day like my tax organizing day, and I just had papers everywhere, all over the floor and I'd have post-it notes and I kept thinking to myself there's got to be a better way to do this. So give us some of your tips on year-end tax planning and getting organized for it. And I first want to humanize and say literally no one is fully organized. So if you're in that place of, I never feel organized. I always feel like things are crazy. Even the best of us who do this for a job my own taxes I still have scramble days. Most of the time I have the things I need in place, but I still am like, oh shoot, I got to pull those receipts and make sure that I have those ready and handy. So don't ever.
Speaker 1:I always want to make sure people don't feel that shame, because shame keeps us from making change right. It sometimes allows us. Well, I don't want to feel that, so I'll just hide my head in the sand a little bit and maybe it'll go away. And unfortunately, with taxes, as much as I wish one day we would wake up and they weren't on a thing, they are always going to be a thing and for small business owners they are always going to be a thorn in the side, even if you are organized and prepared. But what we can do right is not let perfect be the enemy of good. Don't think I need it's perfect system. That's going to make it just autopilot and easy. There are things we can do to make it easier. That's the goal is easier.
Speaker 1:So I think, if you're in this is coming out towards the end of the year, that this is the time. The big thing to wait, one of the big things for organization is don't wait until January, february, march, april. My friends yeah, I was going to say the day before they're due To start this process because again, it's going to make it less of. We want to make it not so much of a tizzy. You're going to miss things. You're going to miss things. If it's a tizzy. You're going to miss deductions. You're going to miss important documents that you need. That's just the way the world works, right, when we're rushing on something, it's not going to be as good of quality as if we take our time with it a little bit.
Speaker 1:I also think we're walking into planning season for the next year If we look at getting our tax. If you're just looking at it, I got to do this for taxes. You might wait till April, right? But if you're looking at this, as this is really helpful information for me to be able to plan a successful next year, then use that as the motivation to get started getting things together. That is going to be a much more powerful motivation. That is way more exciting. That's what I do. I have to trick myself psychologically and say no, no, I'm doing this because I want to plan next year's best year ever Our goals and everyone loves doing goals and high level things but we also need to start.
Speaker 1:You can't walk in to do goal setting until you've looked at the past year. You want to jump into next year and be like let's not think about this year, let's go to next year. But there's so much gold and incredible information in your numbers for this year. Even if you don't know exactly what you're looking at, you're going to be able to draw and things from it. You're going to be able to have some aha moments, as we call them, where you'll be like, oh, I didn't think about that or oh, I want to dig into this more. That's going to really help you to see, okay, what's going well, what do I need to change? Reflecting back on okay, say, april was a really good month, but why? You wouldn't even know April was a good month unless you look back at those numbers, and that's another thing.
Speaker 1:For Texas, you only need annual numbers. For making strategic decisions. Those monthly numbers are so critical. So I always have a monthly P&L that I'm looking at, because that's the thing. If you're looking at numbers in a vacuum, they don't mean anything. But when you're comparing them, when you have that comparative period to say, okay, I'm comparing this time versus last month, or this month versus the same month last year, that's going to give you way more information. You're going to be able to draw a lot more thoughts and things to dig into from that and get a lot more useful observations. So again, I think people are like I don't know what I'm looking at when I'm looking at my P&L, but I don't even know what I'm looking at. Well, if you just look at it compared to another one, it'll give you a lot of those oh wait a second, why were expenses up here? Why was revenue up here? What was going on then? And you could see and really draw those conclusions. So I do think that reflecting time period is so critical to being able to walk forward and truly plan a year and have some actual meat and potatoes behind what you're doing and not just have these airy. We made $200,000 last year but we're going to make $2 million next year, right, well, how are you going to get there? Wow, yeah, exactly.
Speaker 1:And I think, as it relates to subscription boxes, unless you have a replenishment style box where you're sending the same thing every month, you can look at your product budget each month. You're curating a unique set of products almost every month or every quarter, whatever your cadence is. And so if you could look back and be like I was really profitable in January because I nailed my product budget, but in February I put in one more item because I felt like I needed to put more in there and you busted your product budget. You over-purchased too much stuff. That'll be clear in those numbers. But unless you take a minute to look back at that stuff, then it's pie in the sky.
Speaker 1:Like you said, you can't just throw a goal out there and not have a plan to get it. What do they say? Plan the work, work the plan. Okay, let's continue organizing, keep us going. Yeah, I think if you need to get organized, there's so many different ways to do that. I just want to give people permission to find a way that works for them.
Speaker 1:A lot of people will push their software their thing or whatever, and for some people, something like QuickBooks Online is a great thing. For some people, that is absolutely not. For some people, getting a bookkeeper makes sense, especially as you are growing. If you know that's something you're going to put off right. If you know it, then getting a bookkeeper who can handle this stuff, that you will just be able to get the output right, like the information you can use for strategic purposes, and you don't have to worry about all the compliance stuff right, the categorizing expenses and dealing with invoices all of that they are handling that can be a great thing for some people, especially as you grow.
Speaker 1:Okay, before you move on, there's a lot of newbies listening. What does it mean when someone says I have to do my books? Yes, okay. So the biggest thing with doing your books is really. I like to think of it more from an output perspective, because that's what you want is on backside of things, what you're going to want to have is a profit and loss statement that shows you and really all the profit and loss statement. I think it sounds fancy, but all it really is showing you what money came in and what money went in. And yes, there are some like weird fancy adjustments that accountants will do for tax purposes only, but honestly, it really jibes with how you think about your business and there can be some timing things and stuff, but ultimately I like to just think about it. At least my P&L is mostly just cash that came in, minus cash that went out. Related to the business equals my total profit. That's the most important thing to be getting out of doing your books right, and ultimately you want to ensure the accuracy of that, and so what a bookkeeper will also do is make sure they're reconciling your bank accounts right, and that just means that, okay, that gives me more confidence that my P&L is correct, I'm not missing anything, I'm not doubling revenue somehow, I'm not messing that up.
Speaker 1:And then depending and in this kind of business you likely would have a balance sheet as well that would be part of your books, but that's not something that actually gets filed for taxes. It's really more for you to have that's if you have significant assets in your business, if you have significant liabilities, assets being potentially inventory. Right, it's inventory. Yeah, if you're keeping inventory, that's a balance sheet item. That's not something. Ultimately, you can't write that off until you sell it technically, and so that's why it just sits on this balance sheet with just like purgatory I like to think of it as P&L purgatory like it's not quite there yet. We're just going to sit it over here and eventually it'll probably make its way to the P&L at some point. So that's how I like to think about when we're talking about what is doing your books. It's really just making sure that you have an accurate profit and loss statement and then potentially also an accurate balance sheet.
Speaker 1:Okay, perfect, that's so super helpful, because you hear that thrown around all the time and it took me a while starting my business to really know what that means. And then, when I was ready to hire out anytime I hire out I want to know the basics of how to do what I'm hiring you to do. Yes, I totally agree, because you don't know if they're doing it a good job unless you've at least done it yourself for a little bit. Right, exactly, yeah, I learned a little bit of that. I think I want to give permission to people to start easy right, and one example of that is you can use a spreadsheet at the beginning of your business.
Speaker 1:Now, eventually, you're probably going to want something that has a little bit more capabilities and it'll also give you better reports and things like that to help you make decisions. But in the beginning, if you've got expenses, make sure you're tracking those, and that might just be on a spreadsheet, right, and I even have one. I'll have Julie link to it down below but you don't have to buy QuickBooks for 40 bucks a month At this point in time. You can buy a cheap spreadsheet and use it for as long as you want to, until it becomes time that, okay, now I need a more fulsome system, but that'll give you a profit and loss statement right. There are tools that allow you to do that. You know what I like about manually using a spreadsheet, too, is that you're looking at the numbers, you're typing in the numbers, and so it helps you get a finger on the pulse of your business, which I think is important at the beginning, especially because you need to understand what's going in, what's coming out.
Speaker 1:Now I did end up getting QuickBooks online and I did hire an accountant and her team to help me with that stuff, but not that first year. I was in there on a weekly basis updating that so that I knew In my boot camp. I've got a planning spreadsheet that helps you stick to your product budget, each box and stuff like that, and it gives you a big picture overview. But I tracked it on a very basic P&L spreadsheet to start with. Yeah, and I'm a spreadsheet nerd, I love a good spreadsheet. It's one of the things we make a lot of worksheets in our programs and also that we just sell kind of one off because they're really helpful. But I love to create something you can create. Our P&L template has dashboards that you put the. It'll take 15 minutes a month to do this one right and then you have a monthly P&L. Now you have dashboards with like a graph of your top five expenses. You have all of that so that you can see it and really be able to make decisions right. But you don't need to have a fancy software for that. I love it Like Excel does all of these things. We'll put that link in the show notes then.
Speaker 1:Yes, yes, okay, perfect, should we move on to everyone's favorite topic write-offs. Let's do it. Yes, this is the most fun part. Okay, talk about what are write-offs, and I think the technical term is deductions, right? Yes, yeah, tell us what those are and then give us some tips and strategy around that. It always makes me think about the Schitt's Creek that, seeing it with David, and they're like it's a red dog, right, I feel like I use for it. So I think that the important thing to know when we're talking about tax deductions is and I think one of the things in our heads and I even do this as a business I'm like I don't make decisions the same way when they're business deductions, I'm like, oh, it's a deduction, oh, it's a deduction, right, but it's free money, I'm sure. Right, I know it's important to know. Right, don't go on a shopping spree. Yeah, right, and I do it.
Speaker 1:It's more akin to getting, let's say, 20% off or 25% off of something, right, that's what I would think of a deduction as, because what it's doing is it's reducing the amount that you need to pay taxes on. So you're paying taxes, not on the amount that comes into your business. Thankfully, because there are business expenses and the IRS knows that. So what you're really paying taxes on is that revenue minus those deductible business expenses which, truth be told, for the vast majority of expenses that truly relate to your business, they are deductible. There's only a few handful of things that maybe there's special rules around.
Speaker 1:But if you're truly doing something for your business, it's probably a deduction, or you could make the case for it to be a deduction. Okay, and so that profit amount is what you're taxed on. So when you have a tax deduction, it's reducing the profit amount that you're being taxed on, right? So if it's not like you just get the money back in taxes, but a portion of it you get back, it reduces your taxes. So I like to call it like 20 to 25% discount is more the way to think about deductions. But again, the other thing to think about with deductions is okay, is this really something that's going to help me? Is this going to be an investment? So I think a lot of times towards the end of the year we get a little deduction happy, typically when we know especially for any year business where we've generated maybe more than we thought, maybe we haven't paid it into doing our quarterly estimated taxes the way that we should and we know we have a big tax bill, like Julie you were talking about. Oh my gosh, I owe $5,000.
Speaker 1:That typically happens in the first year of like, when your business kind of has that big trajectory upward Right, because in the past, like the first year, you may have to really worry about taxes because your deductions may match your revenue, right, and so we're not worried about it. And then we just don't think about it. And then the first year that you see that increase in profit and you haven't really thought about the tax impact, that's when it comes back and it happens to, I would say, 80% of business owners. I talk to have this like oh my gosh, you make it feel better. Yeah, it really is, because you're like oh my gosh, I knew what taxes, but I didn't really think about it. But if you're listening to this, it's not going to happen to you because you have all this bad attitude, exactly, so it doesn't matter where you are. Yeah, well, after that first time, you I mean I only have to learn the hard way one time when it comes to something like that.
Speaker 1:After that, every single month, I had a business checking or a business savings account that I would just drop some money in there, based off of what our profit was that month Exactly, and that's exactly what I recommend to do. I have a whole profit plan where, basically, it's just taking the profit in your business and allocating it into different buckets. Some people use like profit first. We have our own kind of methodology for that but ultimately you need to be putting aside money all year long for taxes and either paying your estimated taxes or even if you wait until the end of the year, like you are going to want to have that money readily available because otherwise you're going to be like, well, that money's long gone. Where am I supposed to come up with this? And it happens so often with business owners. So I want to make sure that people really think about that and they're being mindful of what that looks like. Even if you're early on your business and you're like I don't have to worry about this yet you will, and so I don't want you to have to like learn the hard way, right, just start putting that money aside. And the great thing is here's. What I love about doing is so I tend to over put money aside, like I will put a little bit more than I think I actually need and you can work with a CPA if you want to get really close to that. Or you can pick a percentage and that will depend on a lot of different factors, but I typically say 20 to 30% in your business is a good amount of profit, not revenue profit to put aside If you're in a high tax area like California, new York, maybe a little more than that.
Speaker 1:I'm in a state with no income tax, so mine's on the lower end, so it really depends on that. But the great thing is when you go to file your taxes and you're like okay, sometimes I do have a big bill right, I might have a bill that's $5,000. And I'm like but I had seven in that account and so it feels like getting a refund even though I'm paying $5,000,. I'm like you know what I'm gonna get to now release that $2,000 or roll it in next year or something. But it feels like you're getting an instant refund when you have it prepared and sitting there. It's just it's such a psychological game You're paying the same amount as you would otherwise, but you're thinking about it completely differently. I agree, when I can, I do the same thing and I like to think of it as a moving target Because a lot of different things happen throughout the year.
Speaker 1:We can look back at the COVID years and see all the different things. We didn't know there was going to be PPP loans. We didn't know there was going to be other opportunities. Again, it's a moving target. And then for the subscription box world, for the majority of our students and the boxes that I've seen and known along through the years, like May, june, july, especially June and July man, it's such a it's we call it the summer slump. You're just not going to experience as much revenue or profit in the summer months unless you sell some sort of like summer product, yes, like the natural kind of seasonality, yeah, the seasonality of it. And so that's why I like to think of it as a moving target.
Speaker 1:I don't, I didn't put in the same amount every single month. It was based off of okay, how much profit did we make this month Exactly? And that's how you should do it. And that's also one of the things that I have people save for, especially in a seasonal business like that. Mine is the same way. We have a couple of launches that bring in more than half of our revenue in a year, right in two months, but I can't just say, well, I'm just going to pay myself a whole bunch more because I have a team now and I don't want to get to July and not have enough money sitting for payroll. Right, that will never happen. My team will never not have payroll. I'm never going to be in that situation. So that means that I also put a lot of money aside, and there are different bank accounts you can use for this in case like.
Speaker 1:One thing I also want to say and this might be a good time to plug it is make sure you have a business bank account, even if it's just expenses, like you can put your own money in and pay expenses out of it, but it's going to help you stay more organized. So I highly recommend that there's one like Novo and Relay, which are great. They're free and they allow you this opportunity to put money into different buckets. So that's what I really like. Yeah, they have reserve accounts where you can put money into those different buckets. I have one of each Novo, and they're both banking platforms, so they partner with an FDIC and Shared Bank, but they have this great ability where you can put money aside for taxes. You can put money aside for your rainy day fund. You can put money aside to reinvest later into your business.
Speaker 1:You have all these kind of different, almost like the envelope method for business, right? Oh, I love that, yeah, and it makes it so much easier because you can just put it away and you're like okay, now I won't spend that because it's not in my like spendable balance, right, like it allows us to really budget, not on like a line item basis, because I hate that, but on an overall basis. We have a, we know how much money we have and we know what we can afford, which is so helpful, I think, too Super smart. Yeah, make sure you do that if you don't have a business bank account. We're coming up to the end of the year. It's really good to get started a new year with a business bank account.
Speaker 1:And then, even at the other thing I wanted to say on the deductions piece, a lot of people early on in business, they have expenses before they have revenue and they don't. They're like what am I supposed to do with this for taxes, right? What do I do? Well, you can still write those off for the most part, right? So you and that can offset any other income that you have, right? So if you have a job, or your spouse has a job or something, the expenses in your business, even if you're not making revenue yet, can offset some of those charges. So that's something to know is don't just be like, oh, never mind, I'm just not going to worry about it, right? If you get $2,000 worth of expenses, you can deduct that as startup costs typically from your business and you don't. That's, that's an extra. Using 25%, that's a $500 tax savings because you didn't just like, say no thanks, I'm not going to deal with it, right? So, even if you're a part of Julie's membership, right, that's something that you can write off.
Speaker 1:I'm just going to say that let's play a game. I'm going to name an expense in a subscription box business and you say yes or no if it's a write off and then if it's a gray area, just give us a little bit of context around that and I will go. Disclaimer here I am a CPA, but I'm not your CPA. Perfect To all listening. Disclaimer Check with your CPA for specific details because it can vary. But go ahead, julie, let's do it. So, in general, ok, the physical boxes that you're going to send Absolutely yeah A plastic and sold Postage? Yep, absolutely OK. Crankle cut yeah, ok. Anything you're putting in that box, it's going to be a deduction, ok.
Speaker 1:Laptop, yes, I would say with a laptop, one of the things to keep in mind is you may be able to deduct it all in one year. You may put it on your balance sheet as an asset and depreciate it, but in general, if you're using it primarily for work, usually, yes, you do want to document that With anything, especially something that could be gray area could be deduction. It could be personal making sure you have a documentation either within your QuickBooks or just it can be literally a Word document that you save on your computer and you remember where it is and you save it in your taxes file so you have an explanation of what those are. Yep, ok, a template like your P&L template, for sure. A course like Subscription Box, bootcamp, for sure. If it's related to what you're trying to do, then that is definitely.
Speaker 1:That's considered education, and one of the things I'll say here is the words the IRS uses for deductions are ordinary and necessary, but interestingly, the necessary is the piece that feels like really well, is this really necessary? The way that they define necessary is do most business. Is this normal for the business, right? So it's not like necessary, like I have to have this or my business can't run, and I think that's where people get confused. I don't know Got it. It's like the IRS doesn't actually know the definition of necessary because they make up their own and I'm like maybe it's a different word, we have a whole dictionary for that. But in general, if we can just say this is normal in our business, it's related to our business, here's how it's related, and if it is something that is in the middle and all having that documentation can be really helpful. I've gone to conferences. That was my next one. Conferences, yeah, conferences are one that are really important to document, to have something to say keep the agenda, maybe have some notes in there about how you're planning to use some of this in your business, because in general and nothing's ever a guarantee the IRS can always come back and say, no, I don't agree with you and you'll be like, ok, well, fine, but I think that a lot of times there's more that can qualify than we think. And so I would say just really be thinking about.
Speaker 1:There's a portion of your cell phone bill most of the time is going to be, and you don't have to get. Obviously cell phone bills aren't the way they used to be, where you were charged per call and you could go through. The laws are written so weird as if we're supposed to know what percentage. We use our phone for business purposes. No, I'm moving the hell nose, but as long as you come up with some kind of reasonable methodology, they're going to be like OK, seems correct, I deduct a portion of our internet bill. I want to mileage on your car that you're using for business. If you're driving back and forth to that post office track, that Love that.
Speaker 1:What about your office? Yes, your home office can count too, and that one gets a little tricky sometimes because there's a couple different ways to come up with a home office deduction and you do need to make sure it's used exclusively for business. So if you're working out of your living room, and that's not going to count, but if you have a specific place that is used for your business and your business only, then that is going to be a write off and, depending on how you get to, that number can depend on do you rent, do you buy and there can be some complications there. To talk to your cat yeah, talk to your cat on that. And don't believe the fact that there's this weird I don't know where this rumor came from.
Speaker 1:If you take the home office deduction, it's an audit red flag. That is not true at all. But no, yeah, so don't worry that. Oh, and they're going to audit me If I have a home office deduction. First of all, audit isn't the worst thing in the world. I think there's just that scary ooh audit. But second of all, it really doesn't. That's a very normal deduction to take, so don't feel like you can't, and definitely talk to a CPA on that one. So, buying cars and home office deduction, those are good topics to talk to a CPA on before you do anything with them, because there can be longer term consequences to whatever you decide to do this year. But yeah, so just that those are good to have conversations to get the full picture. But overall, yes, those would be deductible business expenses.
Speaker 1:Every year my accountant asks me OK, where did you do your business this year? Where did you run it out of exclusively? And so I would give her the square footage of my office and then, when we were running our warehouse from home. We ran it out of a two car garage, but we didn't use it for anything else, we didn't use it for cars, it was exclusively for the business. So I would give her the square footage of that as well. So, yeah, that's a really yeah, ok, a couple more.
Speaker 1:You hire a contract worker to do your social media for you? Definitely OK. What about if you hire an accountant? Absolutely, that's all right, absolutely Right. Yep, now I will say in theory well, I'll say this In theory your accountant, if they're also doing your personal taxes, only a portion would be deductible there.
Speaker 1:But I argue typically because now, especially because we don't have outside jobs, all of our personal taxes are pretty much our business. Again, there's some of that gray area. And if you wanted to deduct the whole thing and just be like, no, I'm not going to deal with pulling this apart, a lot of people do that, I'll say that, and this is a donut, but a lot of people do that, and this is a good place to put that disclaimer again. Ask your accountant, because your accountant, different accountants, have different levels of comfortability too. Right, they're very conservative accountants and they're very Maybe it is liberal, not politically, but just in terms of what they're comfortable with, and so asking the person prepping your taxes what they think is really helpful.
Speaker 1:Okay, okay, that was a fun game. Thank you for playing. I like it. That was fun. Let's wrap this up.
Speaker 1:I know you have a favorite tax strategy that so many of us mom entrepreneurs need to know about but often overlook. Will you tell us about that one? Absolutely, I think it's my absolute favorite and I finally got a chance to put this into practice this year myself. I love the tax strategy of hiring your kids and a lot of people. There's a lot of misinformation in this world of hiring your kids, but for most people own their business fully right. If you are a 100% owner in your business, most people can hire their children at any age to work in their business. Now they actually have to work right, and that work can be marketing related. My son comes on my YouTube channel and I pay him for that, and I pay him good money because he's making it. It's a video recording. It's marketing for me, so I can go out there and see okay, if my kid was going to be in a commercial, what would I pay them to be in that commercial and I pay him for different admin duties and things like that. But as long as you pay them, commiserate with what you would pay somebody else for the same level of work, right. And you can get that through a lot of different means, by searching online for job postings and things like that, and it's reasonable and you're tracking it.
Speaker 1:Well. You can pay your kids. You get the deduction for that right. Your kid on the other side has typically, depending on their age, but usually if they're under 18, they and you do it. You send it up correctly.
Speaker 1:I'll caveat that as well. They will have no taxes to pay, especially if they are making under the standard deduction. So I think it's 13,000, I shouldn't have looked at it up, but I think it's almost $14,000. So if you pay them less than $14,000 in a year, there will be no income taxes, no social security taxes, no Medicare taxes, no unemployment taxes, any of that. It changes as they get between 18 and 21. Some of that rolls off and then 21 and up, unfortunately, the benefits typically roll off, but you can pay them. They have no taxes. So you're basically shifting your income from your tax bracket to theirs and I know a lot of people that now, instead of they let their kids, then the money that they spend on their kids sports comes out of that money, right? Oh wow, so money you would otherwise be spending anyway, you could pay out of that money.
Speaker 1:So my son gets the majority. Well, he gets some of the money that I pay him, but he's nine. He doesn't need all that money right now. So what I do with it is I also use that money to put into a Roth IRA on his behalf. So that's the other great thing you can do. You have to have earned income to put money into a Roth IRA. And just putting a couple thousand dollars into his Roth IRA right Each and every year until he's 18, he will have on average, probably two to $3 million when he retires in that Roth IRA. Oh my gosh, yeah, so it's my.
Speaker 1:Make your kid a millionaire the easy way, right? It's all about the time value of money, and that is one of the lessons I learned when I was really young and when people ask me like, what's the lesson you want people to know is, the earlier you start, the better, and if you didn't, you can for your kid right, you can make that happen for your kid, where you let the time value of that money and you just even invest in index funds or something. Hashtag, not a financial advisor either, right. But as I pick up my jaw from the floor hearing those numbers, I can think of so many things that, as a subscription box business owner, your kids could help with a million helping packing the boxes, or even clean up after a box packing day, getting all the crinkle cut off the floor, or there's just so many things that your kid could participate in. And so you told me you have a YouTube video that kind of goes into this a little more in depth, right, yes, I do. Okay, so we'll definitely link that in the show notes, because this can be complicated. You can't just pay your kids under the table. Obviously, like you said, you have to set it up the right way for it to be like this strategic tax plan. So, yes, we'll definitely make sure we share those details.
Speaker 1:This whole conversation has been fascinating. I hope that our listeners have taken notes and that they've learned a lot from it too, because, again, this can be one of those topics that feels overwhelming, but you have to do it. This is part of running a business. Yeah, absolutely. And again, I think it can be that switch of okay I'm going to think about. I've been thinking about this from this compliance tax perspective and what if we make that mindset shift towards oh no, this is something that I get to do, I get to be strategic. It's going to help me meet those big goals I have for this business in the future if I can really understand this and dive in and feel more comfortable with the number side of my business, right, yeah, so if someone's listening and they're like all right, this is something I need to invest in. This is something that I need to learn more about. You've got a program that teaches this kind of stuff. Why don't you tell everybody about that?
Speaker 1:Yeah, for the hiring of kids specifically, and I like to make tools. I have some broader things about learning the basics of finances. That's something Julie can drop too. Yeah, all the way up to your own CFO strategy. But I also love to make really targeted products that are good for somebody who is trying to implement something. Yeah, but it's complicated and it's going to be thousands of dollars to talk to an accountant and get them to do it. They might not even be super familiar with this. Our hiring your kids toolkit is our most popular, actually this year new product that we've put out. People are loving it. I just got a sale while we were on this recording Because I think it's really resonating with a lot of people that are like, oh, I want to do this.
Speaker 1:I want to do it the right way so that I get the tax deductions. I don't want to do anything shady, right, I want to do it correctly. And so this gives all the checklists that you need, all the what you're going to need to be able to track it, so that you have that for the IRS if and when you ever are audited hopefully never, but you never know and it also has contracts to make it legit. And I think that's something that people miss in all of this is you don't want to just give your kid money and try to deduct it because you don't have a paper trail. So how do we make sure we have the paper trail? And that's also important if you decide you want to go that extra step to make your kid a millionaire and open that Roth IRA, which normally they wouldn't be able to do at their age, but because they have earned income from you they can. So you want to do it all the right way. You don't want to miss out.
Speaker 1:I've talked to so many people that did it the wrong way and they are missing out on so much in terms of tax savings or potential earnings in the future. So I really wanted people to have all the tools they needed to be able to do that themselves. The hiring a kids toolkit definitely check out the link Julie is going to put in there, because I'm so excited about this product and we've had so many kids that I love seeing pictures of these kids, that everybody's hiring and the work that they're doing in the business. We even give you ideas. For if you're wondering, like what is my kid actually going to be able to do, I can tell you. Even for young kids, there are things that they can do, especially in the areas of marketing. If you're taking pictures and putting them on social media for your business, you could pay them for that Nice, nice. So there's so many opportunities. This is just pure gold. I feel like that's what we should name the podcast episode Make your Kid a Millionaire. That's a lot sexier than like end of the tax plan. Oh, this conversation has been so great.
Speaker 1:Jamie. Thank you so much for not only being on the podcast today, but also for being so intentional about what you're teaching everyone, like making your kid a millionaire and the tax planning strategies and just demystifying a lot of this really scary stuff. It has such a huge ripple effect across lives. So, thank you, I really appreciate what you do. Well, thank you and Julie, I appreciate your support. You've been part of this whole squad for a long time.
Speaker 1:I remember meeting you a couple of years ago when we were in your town for our retreat, for our team your team retreats, yeah, and so I just appreciate you as well, and you were actually, I think, going in Spirkelhussel. Grow was one of the first things that I did. You reached out and you were like, do you want to be a part of this? And I was like, yeah, let's do it. So I loved like you really, I think, have been a part of this how this has evolved and changed over time, and so I'm so appreciative for you too and your friendship. Aw, what a little gush fest here we're having, I know right. So let's wrap it up, jamie, again thank you.
Speaker 1:We're going to make sure that we put all of the links in the show notes so people can check out your workshops, your course, your YouTube videos and all the things. But, real quick, where can they find you? On social media? Social media YouTube is if you want to go deeper into any of these topics that we've talked about. So it's just Jamie Troll on YouTube. It's Troll with a U, not an O Nice. And if you are on Instagram, again, I'm pretty much everywhere as Jamie Troll.
Speaker 1:And then also come on into our Facebook group. I was talking about that a little bit earlier. It's called Financial Literacy for Women Business Owners. It's a totally free group. A lot of great conversations around finances are over there as well. Yes, we'd love to see you in there. And well, that's a wrap. That is our end of year tax planning and MakerKid a millionaire episode. We are getting close to the end of the year here and this was the perfect timing to talk about something like this. If you're listening and you found this super helpful, go ahead and subscribe, rate and review the podcast. Make sure that you join Jamie's group. Again, the show notes will have all the links. Thank you so much for listening today and we'll see you in the next episode. Bye, bye, honey.