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WENDY BARLIN BUSINESS UNVEILED

How to Save Money on Taxes

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How to Save Money on Taxes

What is the one thing that business owners can do to maximize tax deductions? How do we know when we should incorporate? Should we work with a CPA? All important questions to ask when you are a savvy business owner! In this episode, I chat with Wendy Barlin, Tax Advisor and Business Strategist of About Profit all about tax deductions, questions to ask your advisors and who you need on your team!

MAIN TOPICS
  • The one thing business owners can do to maximize their tax deduction
  • How to know when to incorporate and what kind of entity to choose
  • How to work with a CPA
KEY TAKEAWAYS

What makes an expense a tax deduction

Questions to ask advisors

Who you need on your team

MORE ABOUT THIS GUEST

Wendy Barlin is a Certified Public Accountant with 25 years experience spanning diverse industries such as entertainment, professional services, hospitality, real estate and medical groups. Wendy is originally from South Africa and after a year traveling abroad, fell in love with the sparkle of the City of Angels and decided to make Los Angeles her home. Wendy is a member of the AICPA and CAlCPA societies.

EPISODE TRANSCRIBED

Hey, y'all, it's Angela, I'm back for another episode of Business Unveiled. And we are going to talk all about some really amazing fun stuff that you are going to want to know and things that you're going to want to listen. Because if you own a business, and you're an entrepreneur, and you're paying your taxes, you're going to want to know some of these myths that we're going to talk about today. Continue Reading

Angela Proffitt:
So I'm going to bring on author and small business tax strategist, now don't be afraid when I say tax or strategist, because she's totally normal, she's totally fun, and we're going to be talking all about how you can minimize your income taxes. And again, I know it's not fun, but how would you feel if I told you that she's going to tell us how we can keep more of our hard earned cash. And so she's going to debunk some of those myths today. So Wendy Barlin, welcome to the podcast.

Wendy Barlin:
Thank you. It's wonderful to be here. I can almost feel the prickle when you say tax, but you know what? We really can make it fun.

Angela Proffitt:
Even though you're a tax advisor, and then a business strategist, we all on this podcast care about profit and anyone listening. Sometimes I run into especially women, they think that it's wrong to do something they love doing, and they're passionate about doing it, and they think there's something wrong with making a profit off of it. And I'm like, what is wrong with you?

Wendy Barlin:
Right. Well, I would say that profit is not a dirty word.

Angela Proffitt:
No.

Wendy Barlin:
You can do so much with profit. First, you take care of yourself, but then you can take care of others. And it is charitable to make a profit and then share it.

Angela Proffitt:
Yeah, and that's why I say money is always a tool. And the more money you have, the more you can help people, and you can use it as a tool to get to other places. Places, meaning helping people. And so today, you're going to share with us five ways that we can save money on taxes. And I'm so excited because it's around tax season. Because of all that's going on in the world right now, it's going to be an abnormal tax year with deadlines, which that's fun. But, not really.

Angela Proffitt:
But I'm just wondering, before we jump into all of that, take us back to where your journey began as, how did you know you loved numbers? And how did you know that you wanted to help people understand and strategize about their taxes?

Automated:
Welcome to Business Unveiled, the podcast designed to help you thrive in the creative community. Here's your host, events and productivity consultant, Angela Proffitt.

Angela Proffitt:
What's up GSD Leaders? Thank you so much for tuning in to another episode of Business Unveiled, where we share expert tips and secrets from top creative industry professionals. We're going to take you behind the scenes of our experiences, share with you what we've learned from them, and how it's made us stronger. Because no one said it's easy owning a business, right? But it's a lot more fun when you've got a strong support team around you, and that's exactly what we do at GSD Creative. We're right there by your side. And I'm so excited that you've chosen this podcast to take the first step and growing a productive, profitable and successful, wildly successful business within the hospitality and creative industry.

Angela Proffitt:
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Wendy Barlin:
So I grew up in South Africa in a very traditional home where my mother didn't work only my dad did, and he was not an easy man to live with. And I remember being 12 or 13, and my dad just yelling at my mom about something ridiculous. Like she put the cup in the wrong place, or she hadn't stood his tea correctly. And I said to her, can we just leave? Why don't we just go? Why do you let him talk to you like this? And she said to me, we have nowhere to go. I have no choice. I can't take care of us. We have to stay. And I think while I didn't grow up wanting to be an accountant, I wanted to be Cinderella, like everybody else.

Wendy Barlin:
I think that moment for me was the moment that said, all right, I get how this goes. This is not going to be me. And I said about choosing a career and choosing a path that would always mean I could take care of me, and a child and children if I needed to, and that I was never going to be in that position. And I think that's why I chose accounting. That's why I do what I do today. And in working with my clients, both men and women, I am always teaching them to have choices, that money is going to buy them choices. And that's the place I came to.

Wendy Barlin:
I came to America in 1997, with a bag of dirty clothes, moving to America, dream. But I really believe in the dream because I've bought and sold businesses and bought and sold houses and being divorced and paid off debt, and you name it, I have lived the American life. And I'm teaching others what I've learned along the way, but always with the eye on money gets you choices.

Angela Proffitt:
Mm-hmm (affirmative). Absolutely. And I know that when we were just chatting before I started the recording, you're a horrible person. It's more than just about being an accountant. And I love how you say it, you can give people not just choices, but better choices on how they're going to manage not only their financial operations from a personal strategy, but then when you put business on top of personal it can get so not clear, so gray, gray water.

Wendy Barlin:
Because business is personal, too. We're all people. Even the IRS are just people. So we're all people and I get the same marketing emails you do about deals, the discount, apply now or loose this opportunity. And I have those same choices every day, and I'm faced with the same credit card debt that everybody else is. I have financial training, which helps, and it gives me clarity, but I'm faced with the same choices you are every day. And so I'm with you in that we are learning together strategies to do better. I can do better, we can all do better.

Angela Proffitt:
So what's the first thing that we can do as business owners to really keep more of the money in our pocket that we work so hard for?

Wendy Barlin:
Number one, and this is for business and personal is to have a good system. You've got to have a good system to keep track of your money. Going to the ATM and pulling out a receipt, that is not a system. So it doesn't have to be something as sophisticated as QuickBooks, there are so many different apps out there that allow you to track your money, track your money in and track your money out. And I'll tell you I have clients, three lovely young women who decided to get into the real estate business. So flipping houses, and they came to me with a beautiful Excel spreadsheet of all the money they'd taken in and all the money they'd spent. And they said, oh, we have $40,000 in profit, we're going to owe tax. And I said, I don't trust Excel spreadsheets. I've been doing this a long time. How about I take this data, and I put it into QuickBooks? If I come up with a better number than you do, then you pay for your tax return. If your number is better than mine, I will do your tax return for free.

Angela Proffitt:
Wow.

Wendy Barlin:
There were enough. I put all the data in. It turns out they actually had a $10,000 loss, and they didn't owe any tax at all. And you know why?

Angela Proffitt:
Wow. Why?

Wendy Barlin:
It was a formula era in one of their line items in Excel. One era in Excel.

Angela Proffitt:
Wow.

Wendy Barlin:
And so the story I tell you is please don't short circuit your record keeping system. It's not fun. Nobody loves keeping track of their dollars in and dollars out. But when you do, you will find additional deductions. So I don't mind what system you use, but please don't use a pen and paper. Please don't wait until December, and add up all your receipts. I literally guarantee you the price of a tax return that you will be leaving money on the table that way. So what I really recommend is find a system you like, QuickBooks, Wave, Mint, you name it, and do it religiously every single Friday. Every Friday is money day in my life, and in my office, and every Friday, we put our data into the system and run our reports. That way, you know where every dollar is that you are able to deduct.

Angela Proffitt:
Well, and also too for me, I mean, there were so many years where I wasn't paying attention, and I had an accountant, and they were kind of paying attention. But one thing that it helped us do, we do it the first of every month, and I think weekly would be even better. But we caught a lot of fraud, unfortunately. And when you don't catch it quick enough, and all of a sudden, it's like these hackers, they're smart. They'll take a little bit and a little bit and a little bit, but not like a whole lot at one time. And it's almost like they're testing to see how much they can get from you before you realize, oh, shit, somebody stole my card. And when you're running a business, and you're busy, and you have multiple accounts that go into multiple things, it's very easy to get hacked, unfortunately.

Angela Proffitt:
So for me, that's one thing that really helped me understand like, oh, my gosh, I need to keep up with this. What are your thoughts on rules, and don't they change so frequently? As an accountant and advising people on their taxes, how do you recommend people keep up with all of those changes?

Wendy Barlin:
That's a great question. And my favorite piece about that is to stay in your lane. So I work with a very narrow niche of clients. I only work with people in the US, I only work with people who are in service-based businesses largely in production, entertainment, and the data services. So when it comes to keeping my knowledge updated, there are only a couple of journals that I have to read every day to stay updated on knowledge. Nobody knows everything. And if your accountant or whoever's advising you is a generalist, they know a little about a little. And so it's really important to stay in your lane and know what you know.

Wendy Barlin:
That being said, I'm going to save you all four years of accounting school and tell you, the piece of the law that has never changed is that any expenses deductible, as long as it is ordinary and necessary for your business. That's actually what the tax law says. Any expenses deductible, as long as it is ordinary and necessary for your business. That has never changed. And so I want everybody to write that down. Because as you leave here today, every time you spend $1, you're going to say to yourself, was this expense ordinary and necessary for my business? And if yes, it was deductible. There are a few caveats of, no, like the gym and clothing. It wouldn't be IRS if they weren't some nos. But in general, in the big scheme of things, ordinary and necessary, and that has not changed.

Angela Proffitt:
I love that. Do you ever have people which I know like, at Starbucks, and if I have a coffee meeting, or a dinner meeting with someone talking about it's like, is it really necessary to go spend $100 on a steak when I could just have eaten a hamburger? When people say that to me, it's like, do you really have to go to these nice places? It's like, listen, if I'm going to be servicing a certain type of client with certain types of expectations, then I have to meet them where they are. And I'm not asking them to come down, if I just want a cheat meal. If they're used to eating a specific type of meal, then we're going to have what they want, because they're our client.

Angela Proffitt:
So I feel like through the years, I feel like the rules have changed, where when I started a business almost 20 years ago, I could write-off everything in terms of food and eating with my team and my clients, and then it changed. And so is that across the board for every, I guess, would you say doesn't matter if you're in entertainment or you're in health care, is that the same thing?

Wendy Barlin:
I think it does matter, Angela. I think it does matter. I think the piece of the law that you're alluding to is the entertainment piece. So you can still deduct all your meals. The piece that you can no longer deduct is the entertainment part. So if you take clients to a football game and buy tickets or buy tickets to the theater, that level of entertainment is no longer deductible, but meals certainly are. And what I will say is yes, that's why you need to be working with a professional that understands your industry.

Wendy Barlin:
So I work with a lot of bloggers. And if you're a food blogger, then yes, that's all considered research. If you're a travel blogger, and you travel the world, that's research. And so it's really important to understand the industry that you're in, and the norms within that industry.

Angela Proffitt:
… Yeah, because it's different it seems for every industry.

Wendy Barlin:
Correct.

Angela Proffitt:
So what is the second thing that we should do to keep money in our pocket?

Wendy Barlin:
The second thing is, if you do, in fact, work from home, please take the home office deduction. There are five million Americans taking a home office deduction. When I came here in 1997, the IRS used to show up with a badge and say, please show me your office. But if you've ever cold over there, especially now, there's no one there. So they're not coming. A home office deduction is absolutely legitimate. And when people come into my office and say, oh, my accountant said, if you take a home office, you're going to get audited. That couldn't be further from the truth.

Wendy Barlin:
Those accountants are people who have not continued their education in 20 years. It does not mean you'll get audited. The only thing is to understand that it really needs to be your primary office. So you can't have two offices and deduct them both. It needs to be your primary office. If you really do work from home, then please take that deduction. So for example, I have a co-working suite, but I don't have an office in a high rise building with my name on the door. It somewhere that the mail goes, and I use a conference room, because I primarily work from home. So I take a home office deduction. So please don't be shy to ask your accountant, why are we not taking the home office deduction? It absolutely does not mean you'll get audited.

Angela Proffitt:
It's like people make up the funniest shit sometimes.

Wendy Barlin:
I know, right?

Angela Proffitt:
Who told you this? Literally someone hears parts and pieces of what one person says, and then they make up the rest in their head. My mother does it all the time. We'll be driving somewhere, in the middle of nowhere. This happened recently, and we were literally driving around a mountain going to a gym meet before all the COVID crap, and she saw all this falling rock, and there were all these nets up for safety. And she's like, I bet you anything. Somebody was driving by here and a rock fell, and it probably got on their car and killed everyone. And I'm like, mom, why are you making that up? Who told you that?

Angela Proffitt:
And she makes up these stories in her head. I mean, it's very entertaining. But sometimes I'm like, what are you thinking in that head? And so sometimes I feel like entrepreneurs make things up in their head where it creates more anxiety for them. I don't know why. But yeah, it's crazy.

Wendy Barlin:
Sometimes it's your neighbor who made it up and then tells you because a lot of times, I'll tell you Monday morning in my office is crazy. The phone rings off the hook on Monday morning. So people calling saying, I was talking to a friend on the weekend, and she said, okay, now I've got to hear what this friend read on Google, and piece together as apparently tax law. And so that's really often where it just makes me cringe. But I'm just as susceptible to it as you are.

Wendy Barlin:
My daughter was having some stomach pains, and I thought the doctor's diagnosis didn't really make sense. So I went to WebMD, did some research, and then I heard myself on the phone saying to the doctor, well, I was researching on the internet, and I found and I thought oh, no. I've become one of those people.

Angela Proffitt:
So when I worked in health care, I mean, still to this day. It's like they all laugh because some people will say, well, Google said. And now with all of this, stay home and stay safe and stay healthy, telemedicine has become really big. You reach us on your computer and you have a consult with the doctor and they write a script. If they feel like they could diagnose it through the computer or they send you in home test kit and they talk you through how to properly use it. And I mean, I'm not going to lie, I'm okay with that, especially if it keeps me safer and healthy from having to go to a hospital with a bunch of sick people. It's like going to make me susceptible to get something way worse than just a common cold or something.

Angela Proffitt:
So I love technology and where it can take us. Yeah, so I know that you-

Wendy Barlin:
But it has its limitations, and that's why I wrote my book last year because I was so tired of people turning to Google for tax advice, and then calling me and I can't help everybody as much as I'd like. I can't help everybody. And it just broke my heart that all these small business owners had nowhere to turn to get the very most basic tax questions answered, and Google was leading them astray.

Angela Proffitt:
… Yeah, I love your book. It's called, That's Deductible!. And for those of you listening, you've got to go see the front of the book, it's so cute. It's this lady, and she's like, give me my money. And this man's sitting there with a brown paper bag with the money, literally spilling over. And it's like, Simple Tips and Tricks to Find More Business Tax Deductions. And I will also say to that, you just hit it on the head a minute ago when you said, using accountants that don't keep up with what is happening in the industry. And I can tell when, I mean, even my accountant was my accountant for about 15 years. And over the past five years, things have really changed for us in terms of where our revenue is coming from, from online businesses. And if that accountant is stuck in their old ways, and as you grow as a business, if you completely pivot and change to an online business, which oh my god, it's happening right now.

Angela Proffitt:
We're planning more online events and experiences for clients than we ever have. And I'm learning new platforms, and I'm having to invest in new software, which when it comes tax time next year, I can write all that off. But if the accountant isn't keeping up, then I'm going to have to find a new accountant, because they aren't keeping up with what's going on. I know that you have a team, and you have people that advice people, you also do the accounting and the bookkeeping, and the tax compliance. So do you really consider yourself full agency for someone who needs all of that?

Wendy Barlin:
We're really focused on the people we absolutely can help, and we don't work with everybody for that reason. Yes, we do the bookkeeping, and we do the tax returns. But the biggest value that, and people like us offer is, we're here to answer your questions. And I think that's also the difference between old-style accountants and more current-type accountants where we charge a subscription type model, which allows you unlimited access to us.

Wendy Barlin:
So you email or call and someone gets back to you same day, either via text or email. And you don't have to worry about somebody waiting three days to get back to you, and then charging you to have the discussion. So when I say to you, Angela, how was your vacation? You can actually tell me without being worried that we are incurring a bill.

Angela Proffitt:
Yep. Yeah. I mean, it's so true.

Wendy Barlin:
And it makes for a nicer relationship, because then we're in the relationship business.

Angela Proffitt:
… Gotcha. Yeah. I love that. And relationships will take you a long way. When you are completely there for your client. And I feel like the more questions you have, and the more answers you provide, you provide almost a sense of peace and clarity for the clients that are over there worrying about something, so.

Wendy Barlin:
There's so much to worry about. The other thing I want to make sure we cover today, while you were talking about it is receipts. And there's this misnomer out there that a credit card statement is proof of payment, but it's not. According to IRS law, you must have an actual itemized receipt. So just because your credit card statement says Best Buy or Marriott, that does not make for a deduction and under audit that will be thrown out. You actually have to have a real receipt. Now it doesn't have to be a piece of paper. It can be a PDF that you have saved or it can be a photograph that you've taken with your phone, but you actually have to have a receipt.

Wendy Barlin:
So a bank statement and a credit card statement are not receipts. When you travel, you need to have a boarding pass to show it was you who got on that plane. When you leave a hotel, you need the long formed folio that shows room service charge movie, fee dine in fee, you actually need that for receipts. The only way out of that is if you spent less than $25. For any expenses less than $25, you do not need a receipt. But I cannot stress how important this is.

Wendy Barlin:
A couple of years ago, I took on a new client, they came from another CPA who went to jail, horrifying, I should have known them.

Angela Proffitt:
Oh, my god.

Wendy Barlin:
… But two young guys, and they spent a lot of money on meals in bars. And they got audited because their accountant went to jail. They pulled all his clients and audited them. So I went along with them to the audit, and the lady said to the first young man, his name was Jason. She said, Jason, do you have receipts? And I kicked him under the table. I said, yes, ma'am. Of course, we have receipts. And she checked the box. And she said, okay, thanks very much. And off we went.

Wendy Barlin:
The next young guy came in, and she said, do you have receipts? And before I could even get his attention. He said, oh, no. I don't have. I just have my credit card statements, is that good? Well, she pulled out a long form piece of paper, $8,000 later in taxes, because he did not have receipts. So it's really, really, really critical that you keep receipts because in the event of an audit, you will be asked to produce them.

Angela Proffitt:
I just I don't understand because nowadays with the QuickBooks app, with Expensify, with Evernote, I mean, I call it potty train my brain to be funny, but for real, because everybody in some point in their life has experienced some form of potty training, if you don't have kids, most people have dogs or cats or birds or something. And so it's like when we leave a restaurant, or I'm shopping, which most of the time I'm shopping online now and it sends me a receipt, then it goes right into that folder. But we take a picture of every single thing and the great thing about Evernote, we use Evernote for a long time because anything with handwritten notes on it at the top, if it was like dinner with Charlie and fiance about wedding, all of that was searchable. And then QuickBooks came out with the app where you could just scan the receipts and then it does it by month for you. And so-

Wendy Barlin:
And it's so easy, isn't it?

Angela Proffitt:
… Yes.

Wendy Barlin:
I mean, really easy.

Angela Proffitt:
Yes, and people still don't do it. I don't understand.

Wendy Barlin:
I know. I don't either. I really don't understand either. But I think it's one of those, where are we have a block. We just have a block against certain things. And when I say to people, how much do you spend on clothing? The goal? No, nothing. And I have to tell you, I'm guilty of that. I would have told you that I don't spend any money on clothing because I never go to the mall. I hate mall. I think it's full of stupid people, so I never go.

Wendy Barlin:
So I would tell you that I am not a shopper. But when I run my Quicken reports at the end of the year, I shop at night on my phone. And so that kind of doesn't count because I don't drive anywhere. And it's the same kind of thing where we all have black holes, we all have areas that we kind of choose to ignore in our lives, and I think for a lot of people, the capturing of the receipts just feels like such drudgery that even though it is relatively easy to do today, I think a lot of people just don't want to do it. Almost like, I don't want a budget, stop telling me what to do. But I'll tell you, it will save you thousands if heaven forbid you get audited.

Angela Proffitt:
Yeah. Have you gone through a ton of audits in your experience that have just been a complete nightmare?

Wendy Barlin:
In 25 years?

Angela Proffitt:
Yeah.

Wendy Barlin:
In 25 years, I have. And I will say that most of them are actually really not a problem because the IRS are people too. And if you can be humble, and polite, and honest, they will help you. The only time we have trouble is when clients want to hire a lawyer and they want to fight or they come in with an attitude. But for the most part, these are people too just trying to do their job. I've really found that.

Wendy Barlin:
I will also say that the highest audit rates we see are on unincorporated businesses. So sole proprietors are across the country, the highest rate of audit. And so I always tell my clients, if you want to be very aggressive for taxes, if you want to play in the gray area, then go and get a corporation, at least do it behind a corporate veil. When you do it on your own personal tax return, you're opening yourself up for a world of hurt.

Angela Proffitt:
Absolutely. And I was going to ask you, for people listening today and if they're thinking should I incorporate or what's the different type of entity? I know I started out as a sole proprietor because it was just for fun. It was a side hustle. And then after a few years, it was actually my accountant who said, you're actually dealing with a lot of money now, and you're dealing with clients that if something were to happen to their wedding or their event, I mean, some of these people spend more than what my house and car would ever be worth.

Angela Proffitt:
And so he's like, you really need to be an LLC, and let's separate your personal assets. And, at the time, I was just kind of like, okay, I'll do whatever you say, because whatever is best. I didn't understand. And so he introduced me to an attorney, and it's a couple $1000 or whatever, but now being drugged to court multiple times because of crazy people, not because me, but I was painted. I'm so thankful when I was a young business owner, that he looked at me and said, we need to do this, this is the right thing to do. So if someone doesn't have that person in their life, how would they know when they should incorporate?

Wendy Barlin:
Yeah, I think it will pay for itself, when you're making $100,000. That's kind of the easy place I tell people. If you're making $100,000 or more, you need to have that conversation with a professional and see if it's a good fit for you. When you're making less than $100,000, there are reasons to incorporate that are not necessarily financial. So it won't necessarily save you tax money. But it will, like you say offer a level of protection, a level of separation from your life, it'll make you feel like you're grown up. But it also comes with a lot of paperwork, and a lot of headache.

Wendy Barlin:
So I have some clients who make millions of dollars, and they still don't incorporate. They understand that they may very well be overpaying their taxes, but they don't want the headache, they want to keep life really simple. And by carrying really good liability insurance, they're fine. So I really mean, it's a very personal choice for your life, but I think it's an important discussion to have, and it's important discussion to have with a professional. Please don't turn to the internet for this.

Wendy Barlin:
I have so many people coming into my office with an entity that they chose based on research they did on Google, and it is completely the wrong entity for them. There are so many different kinds of entities, there are so many different choices, some might work for you and others might not. So the first step is, do I even need a watch to incorporate? And then if you do, which is the right entity type for you?

Angela Proffitt:
So the first thing is, if you're making over a certain amount of money, you should definitely look into doing that, or just entertain it?

Wendy Barlin:
Yes. No, you should definitely look into doing it. If you're making $100,000 or more, you should absolutely look into doing it. If you're making less, but you'd still like to do it and find out about it and learn, then I highly recommend pay for an hour or two of a professional's time and get yourself educated.

Angela Proffitt:
Yeah, it makes me think back to when I was doing a trademark for a company. And I remember googling it and looking at it online. I'm like, oh, I can pay $300 and file this, or I can pay $2500 to a trademark attorney to actually go through it all. And I gave my client the choice. I'm like, do you want me to just follow it online? Or do you want to go through the attorney? And now looking back, I was such an idiot. I'm like, why did I even ask them? I'm like, I always need to go through the attorney. That brand ended up being a huge brand. And went on to not only serving people in the United States, but serving people globally, which was way over my head. And that is worth way more than just filing an application and paying $300. I'm not a trademark attorney. So yeah, I've learned my lesson.

Wendy Barlin:
I'm with you. I really think it's so important for all of us to know what we know. And people come to me, oh, well, my accountant files legal forms for me, why won't you? I'm not a lawyer. Could I file the forms just like you're saying? I'm sure I could probably figure it out. But it's not my zone of genius. Why would I go there? So I'm a really big believer in know what you know, and no, what you don't.

Angela Proffitt:
Yeah, stay in your lane. Stay in your lane. So I know that you grew up in Cape Town, which I'm so sad because I was supposed to be there right now for a conference.

Wendy Barlin:
Oh, no.

Angela Proffitt:
And I was so excited to go because I've never been and there were some amazing locations that I was going to get to tour for like weddings and events and just honeymoons for clients and so I don't know when I'll be able to go. But how did you get from Cape Town to LA? How did you get to the US? Are you decided to move to the US?

Wendy Barlin:
Yeah, it was always a dream of mine to live in the US. I grew up watching US TV and Coca Cola and Nike, and this is where I wanted to be. But I backpacked around the world for a year. And one of the places I landed was Los Angeles, and I just fell in love with the city. People think I'm crazy. But it really is a city of such fire and energy, where everybody has a dream. Everybody has a dream.

Wendy Barlin:
I've lived in other parts of the country, and as wonderful as they all for whatever reason, they are wonderful. The sense of I can be and do anything I want to do, I felt that the most in LA. So I was really fortunate, and I ended up being offered a job because they needed accountants here in LA. We were on the approved list. So I was able to get a green card and come and work and I never looked back. But I literally came with a bag of dirty clothes.

Angela Proffitt:
That is such a great story, though. It's like something out of a book or a movie.

Wendy Barlin:
Really. One day, right? One day.

Angela Proffitt:
Really? So how do you help your clients understand cash flow strategies?

Wendy Barlin:
I think the best solution I have found, and nobody realized they were going to get homework today, right? But everybody's getting homework. Your homework for today is to read the book Profit First by Mike Michalowicz or listen to the audible. The audible is actually fabulous.

Angela Proffitt:
Profit First. I'll have to look it up.

Wendy Barlin:
Mm-hmm (affirmative). I found Profit First about three years ago, and it has changed my life, and it has changed my clients lives. In 25 years of being an accountant, it is the only system I've come across that intuitively makes sense, and is simple enough to follow in teaching us how to manage our cash. This isn't about financial statements, this isn't about accounting principles, this is about green money. When it comes in, what do I do with it? How do I save taxes? How do I know what I can afford to spend on marketing? These are the questions that people would ask me, and we kind of made it up and went along. But this Profit First system is the simplest way to answer the question, what can I afford? Have I set enough money aside for taxes? And it always wants to know what you can spend. It really has changed my life.

Angela Proffitt:
That's awesome. I'm going to go listen to it. I've never listened to it. But I love Audible. So, that's amazing.

Wendy Barlin:
Yeah, the audible is better because it's actually Mike himself. And he tells a lot of his personal stories in the audible that didn't make the book.

Angela Proffitt:
Oh, gotcha. Okay, good to know, good to know. If people were making a list to go hire and work with a CPA, what questions should people be asking when they're choosing to work with a CPA?

Wendy Barlin:
I think it's the same questions you would ask in working with any professional, a doctor or a lawyer. Really, what you want is someone who's going to do most of the listening, and not most of the talking. It's critical that any professional really listens to you, listens to who you are, what you want, what your concerns are, and doesn't do most of the talking. The worst thing is for someone who spends an entire hour telling you how wonderful they are, how much money they're going to save you, and that really the best thing you could do for yourself is to work with them.

Wendy Barlin:
Let your stomach turn over and say to yourself, no, no, no, no, not a good person. You really want to go with someone who listens and someone you feel comfortable with. Because as we've been talking about today, this is a very personal conversation that you're going to be having with this person for the next 20 years of your life. You're going to go places you didn't think you were going to go. So I really recommend that you find comfort with this person, comfort to be able to ask anything and not feel judged.

Angela Proffitt:
Yeah, and that's so important. I know, like you mentioned earlier, we grow up to live this American dream, and I thought I didn't really have a lot of choices. And so I was married at a young age and then divorced at a young age. I'm like, I didn't sign up for this. And shit happens. I didn't know that when I was getting married I was incurring over $50,000 of student loan debt from someone else who had a basketball scholarship. How do you incur student loan debt when you're on scholarship. I didn't understand that until I got a little bit wiser. And then you go through a divorce, and then it's like, oh my gosh, because of you now this.

Angela Proffitt:
So it's like, you just have to take control. And I worked very hard, three jobs, because I just let it hung over, it was hanging over my head all the time. I was like, I need to pay this off, I need to pay this off, I need to pay this off. But again, I was so young, I didn't really understand how I was going to do it and what I was going to do it and then once I hired a real accountant, and he just explained it and mapped it out, and I slept better at night. As silly as it sounds I really did. And no one ever took me and sat down and said, like you said, here are your choices, and here are the things that we can do, and here are your refinancing options. And that's when I learned about interest rates and things just gave me a headache to think about, but it really is important to educate yourself on these things and to understand.

Wendy Barlin:
And to keep asking, and to keep asking. I've been in that place where we're embarrassed to ask because we don't want someone to think we're stupid. But you need to ask things, and that's why you need to work with an advisor who doesn't make you feel stupid. Where, it's okay to keep asking. I keep asking still. I work with financial advisors, people who pick stocks, I don't know anything about that. And I will ask over and over again, I'm sorry, I don't understand. Can you please explain again? Because we need to learn and these advisors need to use words when they explain that we understand and not words that they understand. That's their job is to explain to us and words we understand. I really think that's important.

Angela Proffitt:
Yes, I'm like English, please. I don't speak your language. So going back to those five ways that we're going to save money on taxes. So number one was have a system, number two is make sure that if you're working from home, write it off. Is number three, understanding the best way to either incorporate or what entity should you be? Is that your number three tip?

Wendy Barlin:
Actually, number three is to make sure you always have a receipt. Receipt is number three.

Angela Proffitt:
Oh, gotcha, gotcha.

Wendy Barlin:
Number three is receipts. Number four is understanding your entity choices, what's the best entity for you? And don't just pick one.

Angela Proffitt:
Gotcha, [inaudible 00:42:34].

Wendy Barlin:
Then the last one is about income tax planning.

Angela Proffitt:
Oh, tell us about that.

Wendy Barlin:
Yeah. So this is what most people also don't know. Taxes are cash-based. That means that when the year-end closes on December 31st, whatever you've put into your bank account, and what you've spent, that's what you're going to pay tax on at the end of the day. So no matter how smart your accountant is, if you do nothing and show up once a year with your records to get a tax return prepared, that accountant cannot do anything to help you. The best they can do is manipulate the numbers or move them around based on what you give them.

Wendy Barlin:
The real value of working with an advisor is in the last quarter of the year. So our December is our busiest month. I know, it's really miserable. I'm the only one that doesn't take a Christmas vacation. December is very busy for us because every client has to come in, and we do a tax plan where we say, how much have you deposited? How much have you spent? How much are you still going to deposit? Because what you want to make sure is that you stay within a tax bracket, that deposit in one more client check doesn't put you into a higher tax bracket, at which point you pay more tax, may lose some deductions, may lose some credits.

Wendy Barlin:
So you want to be really clear about how much you'll owe, and what your tax bracket is. And the best strategy going into the year-end, very often people say I need a new computer, should I buy it in December or should I buy it in January? So rather than just, yes, we want to be strategic about that and say, all right, well, what is your tax burden look like for this year versus next year? Do you need the deduction now, or did you have a really bad year and you're actually going to need the deduction next year? So these are the strategies that we put in place in the last quarter of the year. And it's really, really, really important to do tax planning.

Angela Proffitt:
That's really good. Yeah, that would make sense because in quarter four, you're right, my accountant would say, one year he's like, you needed a van, right? You need a new trailer? And I was like, what? I don't want another trailer. I just sold a bunch of shit. I actually don't want to haul anything and this was when I was doing full-on production and I was going to move and downsize. And I was going to get a smaller car so I would stop telling people I would haul their shit around. And I'm like, well, I do need a smaller car, and I so didn't get it. And he's like, no, I'm telling you, do you want to go invest in somethings or do you want to give your money to the IRS? I was like, oh, you're giving me choices or choices. A lot of choices, okay.

Angela Proffitt:
I have the dumb blonde moments where it just goes over my head, and he's just trying to like help. And so I did go buy a trailer, and now it became the family trailer where it's like, people use it every weekend I feel like. I mean that was a year ago, but it sits in my mother's barn now, because I don't use it. Yeah, so-

Wendy Barlin:
But that's an exactly perfect example. Exactly.

Angela Proffitt:
… Yeah.

Wendy Barlin:
And if you had done nothing, you would have paid all that extra money over to the government for no good reason other than you did your planning.

Angela Proffitt:
Yep. Yep. And that is, it's so strategic. That's so true. Is quarter four is so important. So, so, so important. This has been so helpful, and so much fun. If people want to reach out to you, what is the best way for them to find you?

Wendy Barlin:
Oh, thank you, Angela. Yes. So my website aboutprofit.com is the best way to reach me. You can actually book a 30-minute call with me right there for free on the website. My calendar is up there, pick a date that works for you. You can schedule a call, you can also download the first two chapters of my book for free at aboutprofit.com.

Angela Proffitt:
That's awesome. And we'll put everything in the show notes. It's P-R-O-F-I-T, it's the right way to spell profit.

Wendy Barlin:
Correct.

Angela Proffitt:
And then I want you guys to also check out her book, That's Deductible, because it seems so simple to read these tips and find out about these tricks, especially if you are new, and you're not sure if you're actually ready to take a leap and add someone on your team that is a CPA or an accountant, which I learned last year now going into this year, because some things have changed with our business and our revenue, we have a bookkeeper, and then we have our tax accountant and then they work together. So do you find that to be normal where people are having two different teams, or do you think that's just where some small companies only service certain things?

Wendy Barlin:
I think it really, it's a personal choice. Some of it is a function of budget. The issue I have with that is we need to know that the bookkeeper is doing a good job because the worst thing that can happen for me is that I have clients who have their own bookkeepers, and then the financials and the work comes to me so we can do the planning together, and it's not good. It's pretty ugly.

Angela Proffitt:
Gotcha.

Wendy Barlin:
Now, it's got to go back to the bookkeeper to be fixed. I can't do my job, I can't help you if we're looking at bad numbers. So I love that and it definitely works to have different people putting their heads together. The only downside of that is you have to make sure that the bookkeeper you're working with is doing a great job. Otherwise, you end up double paying, right? Because now they're going to pay me a whole lot more money to clean up this person's mess. It's all under one roof. Sometimes it's easier and cheaper. But we see it done a lot of different ways. And as you will know, I'm extremely honest, and I don't hold back. So I'll be the first to say Angela, your bookkeeper is horrible. Or if you have a good one, I'll say, they're fantastic. Can I have their number?

Angela Proffitt:
Yeah, I love it. I love it. Well, Wendy, thank you so much for being here today and for sharing your top five tips. And everybody that's listening, be sure to, if you don't have an accountant, or a CPA that you're working with, please reach out to Wendy and schedule that 30-minute call just to see how her and her team can help change your business. And Wendy, thank you for being here today.

Wendy Barlin:
Thank you so much, Angela. It's been a pleasure.

Angela Proffitt:
Awesome. And everyone that's listening. Thank you so, so much for your time today and be sure to tune in next week to another episode of Business Unveiled. Have a great day. Bye.

Angela Proffitt:
Now that you have all the tools you need to conquer the world in GSD, just share this with your friends and your fellow GSD leaders, and be sure you're a subscriber so you never miss the juicy details of Business Unveiled. And you can ask Siri to listen to the latest episode but you got to be a subscriber. Before I go, I have a huge favor to ask and it would mean the world to me. While you're listening snap a quick screenshot, post it to your Instagram story, tag me @GSDLeader_ and share with me your top takeaway from this episode and how it relates to you. Until next time remember, stay productive and profitable.

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You've been listening to Business Unveiled with Angela Proffitt. Join us next time as we share our experiences to help you be more productive and profitable in your creative business. For more great resources, visit angelaproffitt.com.

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