One of the things about being a tax attorney is that folks automatically assume that my financial house is always in order, that I always make the right tax elections and decisions and that I file on time, every time.
Wrong, wrong, wrong.
Running my own business? At the same time as raising a family? It is often pure chaos.
That said, I try to make the best decisions that I can for my business and my family. That’s all anyone can ask. And each year, my husband and I (yes, we practice law together, crazy, huh?) evaluate where we are and where we want to be and we make some decisions. Here’s where we landed this year:
1, We’re keeping our current entity structure. This sounds like a no-brainer, but I would advise you to consult with a tax professional from time to time and see if your choice of entity makes sense. Tax laws are changing and the business world is changing. New hybrid entities or combinations of entities are often created that make better sense for your company. In our case, our financial picture changed – when we first started, we didn’t see much of a profit, so registering as “professional corporation” made sense for us. This year, we needed to tweak that a little bit to avoid a huge tax bite.
2, We’re adding a payroll company. I hate to spend money. And I can file a 941 on my own, thank you very much. But payroll taxes take a LOT of time to do and the rules are constantly shifting on the state and local level to require you to pay at different times. At first, I figured I’d eat the penalties for being a few days late – but the dollars started to add up.
3, We’ve hired a CPA. People look at me funny when I say that someone else does my taxes, but it’s true. Yes, I could sit down and do it myself. I know the software in and out, and I can do an 1120 by hand. But I don’t have to. A professional and reputable tax preparer is not expensive and will stick with you, unlike those big boxes that conveniently close for 9 months out of the year.
4, Take advantage of tax savings plans. Our medical insurance will increase another 20% this year (don’t even get me started). After sifting through the “savings folder” (call it what you what, big insurance company, you’re just trying to confuse us into spending more money), we decided to keep our current insurance scheme and create a medical savings account at the office. We can use pre-tax dollars to pay for co-pays, meds and more. This didn’t make too much sense when it was just my hubby and myself – we were rarely sick and take no regular medications. But one nasty stretch in November with three kids and rotavirus convinced us differently.
5, Remember why you started your business. Every year, we have to remind ourselves of this. We didn’t start our business to get bogged down in administrative nightmares. It’s stressful and it takes way too much our time. We are (slowly but surely) learning to offload those burdens onto other people. That’s the best advice that I can give to you. Whether you freelance, own a business or just run your family’s finances, don’t feel like you have to do it all yourself. Consult with people who do this for a living and let them help you out… the taxgirl does!
Great article, Kelly, on things to think about…how all small businesses can adjust to varying situations each year.
An added tip…
Many times professional advisors have unique affinity or referral relationships that provide additional discounting to the end user. For example, many Payroll Companies have a special rate structure for businesses referred from their CPAs (I know at least two that discount to my clients), or bank services that can make some arrangements that ease the step into more efficiency and time-savings services.
And though perhaps not as jolly when sending folks to another professional as Edmund Gwynn in Miracle on 34th Street, professionals, like attorneys and CPAs, will refer a client whebn the need is outside the practitioners expertise, and may include some professional courtesy discount as well.
So think aloud with your professional advisor and see what copmes of it — thanks Kelly! 🙂
love that you use a cpa… I’d be lost without mine, but I’m a writer… no one expects me to add and subtract reliably 😉