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On this episode, we welcome Kenesha Coleman, The Beauty CPA! She owns Coleman Tax and exclusively supports beauty professionals. Listen to find out more about Kenesha’s background and experience!
Today, we dive into tax planning! Here is the key, tax planning should be throughout the entire year to avoid people scrambling for their documents. Plus, any deductions that you are trying to receive must take place during the year. You can’t earn more deductions once the year is complete.
There are several things you should be doing, but we are diving into the top 3!
These three things all work together throughout the year!
Let’s dive into bookkeeping. What exactly is it? This means using an accounting software to track inflow and outflow of transactions that are categorized. Also, make sure you have a separate business account. Everything should be separate for tracking and potential auditing.
Quote: You cannot manage what you don’t track!
Second tip is setting aside money for taxes. Just because you charge $100 for a service, that doesn’t mean it is all yours. Some covers expenses and some covers taxes. The best policy is to set aside 25-30% of your income in a separate bank account. Best part is, once taxes are due, you won’t need to have a payment plan. By doing this, you will have a stack of cash that is available to cover that bill. Make sure you listen to this section—so many good tips and info about setting this up and what can happen without doing it!
The third tip is maximizing tax deductions. Most people are missing out here and it blows my mind! There are some simple questions about your business that can earn you some extra deductions. Mileage is a big one! We discredit how much those small trips add up to.
We need to flip our mindset on deductions. It is a smaller list to view things that you can’t deduct, rather than what you can deduct. Plus, there is no penalty for making a deduction that maybe shouldn’t be there when you file. This is where bookkeeping comes into play. Track and account for EVERYTHING. An accurate record allows you to take a deduction or credit for it.
Homework for you is to get your three steps set and get caught up! Make sure you get Kenesha’s guide on tax deductions!
