Joe Casabona: Hey, there. Before we get started, I just wanted to give you a quick heads up that this show is going on a 2-week summer vacation after this episode, so you'll hear today and then it will be back on August 12th. There might be a bonus episode here or there, but, in the meantime, you can check out my other podcast, Podcast Workflows, and I'll see you back here on August 12th.
“If you're showing sales of over $100,000 or profit of over 60,000, you wanna make the election to be an S Corp because on your Schedule C, the big thing is on your Schedule C, all of that profit, it does not matter if you left that money in the bank. If you never transferred anything to yourself personally and you just worked, worked, worked, and you did not do anything, you are taxed on that profit like it all went into your pocket.” - Rachel Stas
Joe Casabona: That was Rachel Stas, my current accountant an absolute lifesaver. When I first started my business, a web design business where I basically made websites for my friend's parents, I was 14 years old. My income was pretty light, and my expenses were even lighter. I didn't even pay for web hosting. I hosted my first few client websites on a web server in my bedroom (But please don't tell my old Internet service provider that) But even then, I knew the importance of keeping track of my income and expenses, which I did in an Excel sheet.
I always had an interest in Accounting. It was a little bit nerdy. I like looking over my books and doing projections and things like that. And I feel like that really served me well. But then I hired Rachel. She made some fantastic changes to my business that ended up saving me money and lowering my tax bill. And while everyone is different, something that Rachel says a lot throughout this episode, I know the advice she gives today will be great for any solopreneur.
Look for these top takeaways:
1. Forming an LLC does not provide tax benefits. While incorporation is an important aspect of running a business, you also need to file the right type of entity, like an S Corp, to help lighten your tax load.
2. You should track all business income and expenses from Say 1 in a spreadsheet or in a separate bank account. Don't rely on memory or especially don't mix business and personal finances. That's called piercing the corporate veil, and it could spell trouble for you with the IRS and legally.
3. Don't deduct for the sake of deducting. You should be cautious with what you deduct. Some things like a home office might offer short-term gains for long-term pain.
4. I believe that investing time upfront to properly track finances and get professional accounting help pays off in the long run in taxes saved and peace of mind. It was something that I'm glad I did but wish I had done sooner.
5. Hiring an accountant is something I recommend every business owner do. It's one of those must-hires no matter what business you're in.
I know you're gonna love this episode. Rachel offers fantastic advice. If you wanna hear a longer ad-free version of this episode where Rachel and I talk about my business and I ask her specific questions about my books, you can become a member at [streamlined.fm/join]. You can find all of the show notes for this episode over at [streamlined.fm/428].
And before we get into the intro and then the interview, I do want to give a quick disclaimer that this episode and anything Rachel or I say should not be taken as personalized financial or legal advice. You should talk to your accountant and or lawyer about your specific situation. Okay. With that, let's get into the intro and then the interview.
Intro: Welcome to the Streamlined Solopreneur. A show for busy solopreneurs to help you improve your systems and processes so you can build a business while spending your time the way you want. I know you're busy, so let's get started.
All right. I am here with Rachel Stas, CPA, owns a tax firm in Fort Worth, Texas, and is my accountant, both personally and for my business. Rachel, so excited to talk to you today. How are you?
Rachel Stas: I’m doing well. Thanks for having me.
Joe Casabona: So, I just wanted to level set there for the listeners that, like, Rachel knows her stuff and is an Accountant to me and many of my friends and former guests of this show. So, really excited to talk to you today.
Rachel Stas: Awesome. I'm happy to help.
Joe Casabona: Awesome. Okay. So, let's start at the beginning, right, with kind of Taxes 101. What are maybe some of the mistakes you and, I guess the audience here is solopreneurs. Right? So most people running their own business probably don't have employees. They're maybe working with contractors. What are some of the mistakes that you usually see with, let's say, solopreneurs and small business owners?
Rachel Stas: Yeah. One of the first ones I see is when people first start out their business or they're not exactly sure, you know, like, oh, I have this great idea and I'm gonna do a business. And so they immediately incorporate, and they're like, I'm an LLC, so that's gonna help with taxes.
An LLC impacts your taxes in no way by itself that didn't, you did nothing. And so beyond giving yourself some liability protection, possibly, if you need it, talk to a lawyer on that. So that isn't going to be nearly as helpful as just keeping track of all the expenses and all the income that you're bringing in from the beginning and stuff. So, it's like, you've gotta keep track of, like, okay. Well, I'm starting this business. I put $5,000 of my own money in. Write it down. I paid for a consultation with an accountant. Write that down. Like, write it down or have a separate bank account or something. But all these expenses that you think you're going to remember, like, you're not like no one does. You're not gonna remember the one coffee that you paid for, you know, two months ago.
And so if you're not keeping track of your expenses and your income on a regular basis, you're losing money because you're definitely missing expenses and, like, not getting your best result when it comes to a tax return if you qualify to, like, need to file it as a business. So, that's usually the first, like, well, a couple of rounds of they either incorporate too fast or they just don't keep track of, like, what they need to keep track of from the beginning. Those are my two big ones.
Joe Casabona: Yeah. That's really good. Right? Because I mean, okay. I started freelancing when I was like, 14. And so, like, pretty low stakes right when I was making money, like, living in my parents' house. But I learned, like, maybe a couple of years in, like, I set up like an Excel sheet to (this was before Google Sheets because I'm very old) an Excel sheet to like, keep track of things like that. And so that's really interesting because it is way more fun to do, like, the shiny, like, I'm gonna pick a name and incorporate and design a logo. I guess the follow-up point or question I wanna ask here is, what is, like a spreadsheet, a good way to do it? Should people set up a separate bank account, like or is that like, too much in the beginning?
Rachel Stas: Absolutely. A spreadsheet is amazing. Like, I have clients and new clients that come in and stuff, They're like, I'm so embarrassed that, like, this is my Excel sheet or my Google sheet that I use, and this is what I'm keeping track of. And I don't know why they're embarrassed because it looks, it has everything we need. It's, you'd need the date that something happened, and stuff. So when you made the money or when you spent the money, like, have the date on it because we need to make sure it was in the right year and stuff, and then what it was for. And, like, as long as that's there and you're keeping track, that's all we need as accountants and stuff. We can manipulate Excel into the pretty things that like, to like, get your financials from.
But at the beginning, I would 100% say just having an Excel and writing everything down. But if you are, you know, been part-time or you sort of been doing your business and you know you're going to like, this is going to be the real business, absolutely. Get a segregated bank account, credit card, or something like that.
The IRS doesn't really care if it's a “business account”. It has to be segregated. So you don't want to have a bunch of blended, oh, this income is personal income, and this is personal expenses and stuff like that. That doesn't really help us. If you were to ever get audited and people are looking at it if you have a bank statement that says, you know, Office Depot and, like, all of these things, and I only use this for business and I can prove that all of these expenses are for business and they have that support, then that's typically enough support to like get to reality and they're not gonna be a big deal. But, if everything's blended, it's not helpful. Because then, like, well, then how do you know?
Joe Casabona: This is mind-blowing to me is that the IRS doesn't really care if it's a business account. I guess that's more like the banking institution. They wanna know. Right? Like, if you need to maybe delegate multiple cards to other people or they can upsell you on their business financing stuff, which has been, I think, the main feature of my bank, my business bank account. So, that’s what I really know.
Rachel Stas: And really, I mean, no one writes checks anymore but, if you wrote checks, like, you would have to have the business bank account to be able to have the business name on it, and so that's kind of part of it. It wouldn't be a bad idea to have I mean, anything that has your business name on it does help, like, support the case. But if you can make it, you know, if all of your revenue for the business is coming through Stripe and all the Stripe payments are hitting this one account, and then it's like pretty standard dues and subscriptions that are like, going out. And you can make a case, like, this is clearly the segregated bank account like, that's not the part where they're gonna get hung up on things.
Joe Casabona: Okay. So that's really interesting, to me at least. Awesome. Okay. So, incorporating as an LLC doesn't help with taxes. The next thing right? I just, I wrote the word shoebox up here, maybe to try to give you PTSD maybe. But that was mostly, like, I when I hired my first accountant, he was a family friend, and I messed with him by saying, like, oh, yeah. I just, I have a shoebox full of receipts. And he, like, turned white, and I'm like, I'm just kidding. But it's nice to know that that deeply it's nice to know that joke landed the way I thought it would.
Rachel Stas: 100%. Yes. We've all had the shoe boxes.
Joe Casabona: Yeah. Don't keep all of your receipts in a shoe box. Use a spreadsheet. Well, do keep it yeah.
Rachel Stas: Well and, I mean, I get that question a lot. What? Yeah. What receipts should I keep and stuff? And so, if you have your own bank, your segregated bank account, if you have support for those expenses and stuff already, you're probably fine getting rid of the little ones. But if you are going to, like, Walmart or Target or, you know, some big box store and you're buying a computer for your business there, but, like, it could be for personal stuff and that's a pretty high dollar per purchase. It's a good idea to save, like, those where you know, oh, no. I have the receipt for this one and stuff because that is where they might, like if they were really going through now the likelihood of an audit is, like, wildly low just to be clear, like, this you know, operating under the, like, fear of that forever is not useful.
But, if you really like, which receipts do I keep? It's the ones that could possibly be, you know, personal versus business where you wouldn't be able to tell without the detail. But worse like worst case scenario, you're talking about like, maybe a 30%, like, tax burden on it. So, it doesn't matter like, you know, a $5 receipt. Well, like, if they disallowed it, then, oh, no. You don't get a dollar 50, you know, of your tax. So, it's like the dollar amount, what matters to you on top of it is up. So that's kind of where it's like, okay. Save that for you. Your accountant doesn't need to see it like, if you have your spreadsheet and you know everything's there or you have your bank statements and you have that, like, you need to save it for you. Because if you're gonna, if the IRS asks for something, it's up to you to tell, to show them, not your accountant.
Joe Casabona: Gotcha. Okay. So here's a really good example before we move on to our quick sponsor break and then, like, the next part of the interview. I am a cigar smoker. I will put cigars on my business card when I know I'm going to an event, like a networking event or a conference where I give them out, which I believe we've been filing under meals and entertainment. Right?
Rachel Stas: Or we've been calling them gifts.
Joe Casabona: We've been calling them gifts. Okay. Good to know. Great. So, see, this is why I had you. I would have been like meals and entertainment, and then that's like, only half write offable. Right? Or half…
Rachel Stas: Exactly.
Joe Casabona: I can write off half of it. Yeah. Because I also make purchases on my personal card when I'm not giving these cigars out at events. It sounds like I have pretty clear proof of when I would, you know, hey. I buy my personal cigars on this card and my gifts on this card.
Rachel Stas: Absolutely. And that actually brings up another good point, for, like, support and that the IRS would want is keeping your calendar. And so if you are buying, you know, the cigars one week before you leave, and then you can show on your calendar, this is where I was, you know, at this event, blah blah blah. Like, that helps too. It also helps with your travel expenses because you can see when that's coming out and, like, where you're going. And we haven't got talked about mileage, but, like, mileage works that well, that way too. And so, yeah, having your business calendar, downloading it or printing it or what or, like, having it on file and stuff for the previous year is definitely something I would recommend keeping and stuff, because that would add to, like, just that support as well. But, yeah. The gifts, exactly. They're going to be expenses that you do in your personal life and that you can use for business, and it's like keeping that segregated and different cards, wildly helpful.
Joe Casabona: Awesome. Awesome. Okay. Cool. So this has already been super helpful. Thanks. I mean, based on what we've talked about, some people might be wondering if they need to hire an accountant anyway, but we're going to get to that right after we have a quick break from our sponsors.
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Joe Casabona: And we're back. Okay. So I teased this a little bit before the break. With everything you've just told us, like, can I just use TurboTax for my taxes and avoid having to pay an accountant however much I'd have to pay them?
Rachel Stas: Sure. It really depends on, I mean, the flat answer is, yes. You can do it yourself if you want to. My professional opinion on it is depending on the amount of income that you have coming in, really triggers whether or not you should hire someone.
If you just started a project, you're trying it out, you got paid $800. You know? If you get paid more than $400, $400-$600, officially, it's 400, but 600 is when you get it to 99. It would trigger you needing to file a tax return for that business, you can probably do that one by yourself. Like, that's a pretty low risk, you know, assessment on it.
I have only dealt with one audit as being my own boss. I did not do the tax return. It was somebody who did their own tax return on a TurboTax-like system, and their husband brought in about $113,000 of income that year. And by the end of it, they were getting like, a $25,000 refund, and they had not paid taxes, like, estimated taxes. And like, I mean, dealing with that audit, everything you could have done wrong, she did. So they like, yeah. Okay. So they saved maybe a couple of grand not paying for an account and ended up paying the IRS, you know, 33,000 at the end of the day. Like, it's so, it's just not, it's kind of how risk-averse you are.
I will say that okay, again, audit is not, there is not a lot of audit period. It's about 3% of any tax returns filed. But out of that 3%, if you have a Schedule C which is where you report your business income after you've, you know, started your, under your name, under your social, maybe you have your own EIN. But if you just did an LLC, you didn't make any other elections, that's where it is. It's all on your personal return.
If you have a Schedule C on your personal return, those are the ones that get audited. So because they know that people squeeze in some personal expenses. And, oh, yeah. I do have a home office that happens to be half of my house, and it's like, really, though? Is that exclusive use and stuff? And it's just the tax laws change every single year. On top of, like, being in charge of your own business, do you really wanna be in charge of, like, what all tax laws have changed every year? And, I mean, it took 5 years of schooling for me to know the baseline to get there anyway. Like so it's really like, the time value of money on doing your own tax return, yeah, you can do it. But if it's taking you four hours, how much money are you, like, losing instead of when you could be working on your stuff or just having free time?
So, it's kind of a balancing act. I do think that the TurboTaxes and stuff like that are a little where they kinda can trip people up who don't have the baseline just knowledge of how taxes work or stuff is that they don't show the force. They very specifically ask questions. So it's like, oh, did you buy any office supplies for the tax year or fixed assets? Those would be like, computers and blah blah blah. And you're like, oh, yeah. I bought a computer. So you put that in. Okay.
Well, then you have your office supplies. And, like, oh, well, that computer, that was office supplies. So you put that in. And by the end of it, you've claimed this computer like, 3 times and stuff. Or, like, the way the woman who ended up getting audited did like, they claimed their mortgage interest, like, 3 times and stuff. And it's just like, because you're not seeing the whole picture and they were not in the finance industry at all and stuff. And so it's like, I don't blame her for not knowing but, at a certain point, it's like, but you like, this was outside your scope. And so recognizing, like, where your shortcomings are is helpful.
The IRS really looks at that form the most because if you show a loss on that and you have W-2 wages and stuff, it increases your refund, and so they know people wanna show that loss over and over and over again. For the record, you can only show that loss 2, out of the last 5 years, or you end up being a hobby. So, like, be careful with that kind of attitude because it's, yeah, it's definitely a really big red flag.
Joe Casabona: Yeah. That's some unofficial advice I got when I went out on my own. It was like, you can report a loss for basically two years in a row before you create any red flags for your business. And I'm like, all right. Good to know. And, I mean, this is the truth. Right? Like, sure. You can represent yourself in court but, you also need to be familiar with the laws dictating the state or the federal court that you're in. Right? So, like, it's probably good to hire a lawyer. And we'll talk, we won't talk, like, real real numbers. Right? This will depend on my level and your comfort level. But we'll talk a little bit more specifically in Streamlined Solopreneur Accelerated. So if you wanna become a member and get ad-free extended episodes of this and every interview, you can head over to [streamlined.fm/428]. All the show notes will be there, and a link for you to become a member will be there as well. So, Rachel and I will continue talking after we sign off here for members only.
But I'll say the amount of money I've gotten in refunds if I'm doing quick Math has always amounted to more than what I have paid you. I'm pretty sure that's true. And I know that it's different for everybody, and I know that, like, a couple years in a row, you know, we've welcomed new children that have increased our refund. But, you know, if we look at the scoreboard, I've saved hours. I am not worried. I'm like I used to be very worried about getting audited. Definitely the best thing I pay for in my business, like, no joke.
Rachel Stas: Thank you.
Joe Casabona: So Schedule C is basically how I did it. I think until about a year after I hired you, we talked about arranging my taxes a different way. And like, you specifically mentioned that, like, LLC doesn't help with taxes, but I think we file my taxes as an S Corp? Right?
Rachel Stas: Yes. As an S Corp. So, you do have to be incorporated to be an S Corp. So an LLC is a step on the way to having some beneficial tax, choices, and stuff, but it's the first step. And so if you do an LLC and then you don't do anything else, it didn't do anything. It's just showing up on your Schedule C. After you've started you know, your business is going and stuff, if you're showing sales of over $100,000 or profit of over $60,000, you wanna make the election to be an S Corp, because of your Schedule C. The big thing is on your Schedule C.
All of that profit, it does not matter if you left that money in the bank. f you never transferred anything to yourself personally, and you just worked, worked, worked, and you did not do anything, you are taxed on that profit like it all went into your pocket. So that profit is subject to your income tax rate. You can't do anything about that. But it is also subject to self-employment tax, so your Medicare and your Social Security, which you have not taken out all year long, and so you get one big bill at the end. And you don't get to deduct any of it because it's all personal taxes. So it's just, that's where that big hit is. So even if it was you only had a profit of like, 10,000, you've got your tax rate of maybe 10, 15,000, 15% and then another 15% of Social Security, Medicare. Now, you're paying $3 in taxes, and it's like harder when it's $100, and then 30,000.
If you do the S Corp, you can roll that business off of your Schedule C. Now, its own tax return, and so that is what causes, it doesn't pay its own tax, it still flows through to you personally. But now, that income, that same 10,000 or 100,000 that rolls into you personally is no longer subject to self-employment tax. So, you save that, like, 15%. It sounds amazing, and it is very helpful but, there is a lot of paper pushing that is required with it.
The owner is required to have W-2 wages if you are operating at a profit and stuff. So there's a lot of it has to you have to be like, have enough profit to make it worth it, which is where the 60,000 amount ish kinda comes in where it's like, okay. At this point, at least the S Corp will pay for itself and all the paper pushing, but that is like, the next step. Absolutely. do not do this on TurboTax. You have to hire an accountant when you get to this level. Please, please don't do it on any of the do-it-yourself tax programs.
Joe Casabona: Yeah. That gets pretty complicated. And to inform what we just talked about. Right? A lot of the return gains I saw were after we did this. Right? Because there's like the idea that like, self-employment tax is essentially like, double like, getting taxed twice.
Rachel Stas: Mhmm. Sort of. It's the same income being taxed twice. It's, but if it was a W-2-wage and stuff, you would only be paid half of it because your employer pays the other half, the 7.5%. And so that's where it's like, oh, but you're self-employed, so you're both, and so you're getting the 15% total there.
Joe Casabona: All the way.
Rachel Stas: Yeah. And you don't get to deduct the… Well, there's a sort of deduction for the employer side, but it's a better deduction if you're an S Corp. As the employer, you get to deduct some of those taxes that are already coming out and stuff, and you get to deduct paying yourself those W-2 wages and stuff. So, that's like, nice to be able to use that as an expense.
Joe Casabona: Yeah. That's crucial. Right? Like, when you're doing Schedule C, it's like owners draw or owners pay or whatever. Whereas, like, as a W-2 employee of my own business, my wage is a business expense.
Rachel Stas: Yes. And you can use it to even elevate, like, you wanna contribute to a SEP IRA or something like that. Now, you have employee benefits that you get to run through the company and stuff. So, it really opens up some of that availability and stuff once you're in the S Corp. But, again, if you're bringing in $1,000, 2,000 of income on your business, keep it, keep a spreadsheet, and file it on your Schedule C. That is not what the IRS is looking for, like, you're fine.
Joe Casabona: Another understanding of mine is that, like, when we bought our house, the lender was a little bit worried that I was self-employed. But because I was a W-2 employee of my business, we were able to get a really good loan amount because we were able to demonstrate, hey. I'm like bringing in half of our income. Right? Like, so…
Rachel Stas: Yes. W-2’s are way more stable. Yeah. They look at that as, like, okay. That's a stable income. If they've got it together enough to like, have W-2 wages, we're not as worried about the other part of the business.
Joe Casabona: Yeah. And this is something that I saw with, I won't name names but, an acquaintance, we'll say, who had been running their business, basically, shoebox style, right, for years making good money, constantly busy, went to buy a house, couldn't get a good loan because they didn't have a good record of like how much money they were making or how much they were paying themselves. And so the bank was like, this is high risk, like, we don't know what your income actually is.
Rachel Stas: Yeah. Absolutely. Well, and that's also one of those things where you have to weigh what the benefits of like, making decisions just for tax purposes. I don't typically recommend, like, oh, well, yes, buy this or, you know, have incur this expense just to avoid paying taxes. You're never gonna come out ahead on that. Except so, if you're buying equipment that you don't actually need, like, you're still out the money, and it only saved you maybe 20% in like, of that cost in taxes. So, like, is that a good use of your, like, funds and stuff? But on top of that, it's like, okay. Well, I wanna be super aggressive on all the expenses I'm gonna take on my tax return so that I don't have to, like, pay so much tax. Well, okay. But now the bank doesn't see that, like, well, you had quite a bit of money, though, and stuff. And so it reduced so it ups that risk. So, now you're paying more interest than you would have if you had just shown like the real income. And so that's a real balancing act, but it carries on throughout, yeah, throughout your entire career when you're self-employed, for sure.
Joe Casabona: Yeah. I mean, this was some advice you gave me pretty early on was, you know, Black Friday sales happen, and I think a lot of business owners are like, hey. I can get the business expense and whatever 50% discount on this thing. But, like, you basically said, like, hey. If you were going to buy this, then buy it and expense it. Right? But don't just buy it to expense it because even if you get 25% back in taxes, you still pay 75% of that out of your pocket.
Okay. So, as we wrap up here, I like to ask for actionable advice for the listeners. What can solopreneurs, do to help with accounting, or help with their taxes? Like, what are the main tips that you would give here?
Rachel Stas: For sure, either have a spreadsheet where you're keeping track of everything, or/and with a calendar, that would be excellent too, or have a segregated bank account, credit card something. What really can help is if you have a segregated bank account, you know everything rolled through that, and you don't have your books, you could give your bank statements to your accountant, and they could create books based on that. But, if there's a lot of blended, personal stuff in there, it is impossible. So, definitely do that.
Joe Casabona: I'll just chime in here as, like, a little bit of a horror story because I do have an Apple card that is blended. And so something I, the bonus is on me now to give Rachel and her team the unblended statement, basically. It took me a while to do that, the first time I had to do that. So, definitely have segregated accounts and statements.
Rachel Stas: Well, and it's a pain. I understand why people don't wanna go to the bank and do all that stuff because I was opening up a new bank account, and it's like, I have all the stuff. I know how to open up a bank account. I help clients do it all the time, and somehow it still takes 2 hours. And you're just like, come on. So, like, I get it that it's like annoying, but this is something that will definitely save, yeah, some heartache down the road. So that would be, I think, my first tip for sure.
Oh, don't give your accountant a shoebox full of receipts. It will be so expensive. Like, don't, don't, don't do it. You have to find a newbie at that point because like, no one at my level now would take they've absolutely not.
If you are thinking about hiring a CPA or an accountant of any kind, start now In the summer months or the fall, do not wait until the spring. They are full. So, if you plan ahead so that you can have a couple of options on that. But, yeah.
And if you're wanting someone who is, like, a partner with the business and not a partner, like, they actually have an ownership stake, but actually care about the business or aware of it, you're going to wanna go you don't go to, like, a big box tax preparer place because it doesn't matter. That's a walk-up thing. And, also, be a little cautious of those places. Regardless, you're not, you're dealing with people who took, like, a weekend class. They didn't go to school for as long as most of us have. So, especially with Schedule C's, yeah, you don't find a firm. When you get, if you're using someone and you're giving them your tax documents, give them everything they need at once. That's really helpful. It's when I've prepared a return, it's almost done, and they're like, oh, yeah. I forgot about this whole new bank account or something. It's like everything changes when that happens, which means everything takes more time, and we're redoing things. And it's like, well, now that bill is going to get higher, like because, you know, it's just, it's based on the time, typically, and complexity.
So having all of that there, if you're getting them everything, you know, March 12th and if you're an S Corp, because that deadline's March 15th, or if you're getting everything April 12th, like, you don't want them to file on time. You wanna have an extension and give them some time? You are not dealing with, like, your best accountant brain, the final weeks of a deadline. So be aware of that as well. Yeah.
Joe Casabona: Yeah. That's super interesting. I have one follow-up question on that. I know we're like a little bit overtime for the main show, but, generally, like, the deadline for companies to get you the W-9s. Right?
Rachel Stas: W-2’s. And 10.99’s. You blended them.
Joe Casabona: 10.99’s. That's the one I'm thinking of. W-9 is what I would send out. Right? To, like, a contractor. Yeah. Okay. The 10.99’s. Right? Like, there's a deadline of, let's just say, like, February 15th. I don't know.
Rachel Stas: It's supposed to be January 31st.
Joe Casabona: So could I reasonably give you everything on February 1st and you can…No? Okay.
Rachel Stas: I would say, I think February 15th is probably when everything that you were going to get on time, you're going to get. So the January 31st deadline for companies to send out W-2’s and 10.99’s and the 10.99's and all of that, that is basically to get in the mail.
And so you're dealing with the mail, and we don't know. Depends on what day the 31st falls on. So, if you're talking about a Sunday, then it will be the next day, you know, that kind of thing. The brokerage account statements, and they can, it's weird, but they can kinda file for an extension. So it might be March, you know before you get some of this stuff. This is where if you found a good accountant, use the same one because they have your prior year stuff. And so, like, when Joe sends me his stuff, I can look at it and go, okay. Yeah. Well, we got everything that you had last year. If you haven't changed anything, we're good and stuff. But if you brand new or something like that, you really don't have, like, that baseline of, oh, well, you're missing this, you know, kind of thing.
But that is the benefit also of, like, having your own accountant that you can kinda go to, that they're looking at that. They should have those policies in place to make sure that they're looking at the prior year and that things are aligning.
Joe Casabona: I was basically told by a former accountant that I look at the 10.99’s, and then I look at, you know, your income in your bank account for the year. And as long as that's higher than the 10.99’s, I just run with that. Is that, that's like a reasonable thing?
Rachel Stas: Absolutely. So your 10.99 is not as vital as your W-2. So, like, with a W, when we're putting in the W-2, we have to have the EIN. We have to have all the withholdings. There's a bun, the documents that show withholding those are really important documents because the IRS is going to want all the support that, like, you already paid that money in.
With the 10.99’s, what you're doing is having it telling you, like, this is how much I paid you this year and stuff. You definitely wanna look at them in case, you know, their accounting is off but, the big issue on that is, like, if I've been recording you know, I've been doing your books, and I don't have Joe's books in front of me, I'm making up numbers, and stuff. But if I show that he made $100,000 in revenue last year and then he has a 10.99 that says that they paid him a 150, then he's like, wait. Well, the IRS is expecting his return to say a 150, at least on it. And so we either need to figure out where, like, where we didn't record 50, or they did something wrong and we need them to amend the 10.99. So it's a double check to make sure that, like, it's all in the same spot that that's where a 10.99 is.
So if you're, but if you're like, oh, well, this one person hasn't 10.99, and I know they paid me $600 or more, but it's like, you know, 700. If you don't, that won't hold up your return. As long as you're recurring, recording your income, you can still file without that. So don't let that hold you up.
Joe Casabona: Yeah. Another reason I have a separate bank account. Right? Like, anything a client pays me goes into that one bank account.
Rachel Stas: Exactly.
Joe Casabona: But, yeah. A 10.99 is basically a company saying, like, hey. We're telling
Rachel Stas: The IRS.
Joe Casabona: The IRS that we paid you this much because we're writing it off.
Rachel Stas: Yes.
Joe Casabona: Right? Like, that's kind of…
Rachel Stas: 100%.
Joe Casabona: Yeah. So, like, you should report this because they're gonna know you got it. Right? Yes. Awesome.
All right. Rachel, this has been amazing. We're gonna chat more in the pro show, but if people wanna learn more about you, where can they find you?
Rachel Stas: I'm really boring. So I just have a website, [rachelstastax.com]. So you can see me and my little bio, and then my awesome team that works for me. They're great. There's even another Joe. So, it's all good.
Joe Casabona: Yes. There isn't. I speak frequently with Joe.
Rachel Stas: He's the best.
Joe Casabona: Your whole team, your whole team is great. I feel it's always a little nerve-wracking. Right? When, like, you work with, like, the main proprietor, and then you get passed off to a team, but, like
Rachel Stas: We're all entertaining.
Joe Casabona: You hire as well as you do taxes. Right? Like, so…
Rachel Stas: Yes.
Joe Casabona: Yeah. Awesome. I will include that and everything we talked about in the show notes, which you can find over at [streamlined.fm/428]. That's 428. You can also become a member. So if you want to hear this podcast ad-free and get longer versions where Rachel and I are gonna dive into my business a little bit more and maybe talk about acquisitions if there's time you can do that too.
But, Rachel, thanks so much for spending some time with us today.
Rachel Stas: My pleasure. Thank you so much for having me.
Joe Casabona: And thank you to our sponsors. Thanks for listening. And until next time, I'll see you out there.