Albert Einstein said, “The hardest thing in the world to understand is the income tax.” But does it have to be that hard? In this episode of The ABMP Podcast, Kristin speaks with CPA and tax coach Kenesha Coleman about what business owners need to know before filing, advice for practitioners who are feeling overwhelmed or stressed during tax season, and why bookkeeping year-round will benefit you greatly before you file.
Anatomy Trains: www.anatomytrains.com
Precision Neuromuscular Therapy: www.pnmt.org
Anatomy Trains is a global leader in online anatomy education and also provides in-classroom certification programs for structural integration in the US, Canada, Australia, Europe, Japan, and China, as well as fresh-tissue cadaver dissection labs and weekend courses. The work of Anatomy Trains originated with founder Tom Myers, who mapped the human body into 13 myofascial meridians in his original book, currently in its fourth edition and translated into 12 languages. The principles of Anatomy Trains are used by osteopaths, physical therapists, bodyworkers, massage therapists, personal trainers, yoga, Pilates, Gyrotonics, and other body-minded manual therapists and movement professionals. Anatomy Trains inspires these practitioners to work with holistic anatomy in treating system-wide patterns to provide improved client outcomes in terms of structure and function.
Therapists who are drawn to Precision Neuromuscular Therapy are problem-solvers who want to learn new approaches, but also understand the “why” behind the “what”. This desire resonates with our emphasis on the problem-solving process, rather than the teaching of a singular technique or approach. Led by founder Douglas Nelson, each PNMT instructor is a busy clinician with decades of practical experience.
We have taught hundreds of hands-on live seminars for more than twenty years, emphasizing precise palpation and assessment skills. PNMT online courses are another rich source of discovery and deeper understanding. Also available is a video resource library (PNMT Portal) with hundreds of videos of treatment, assessment, pathology, and practice pearls.
Learn more at www.pnmt.org
AnatomySCAPES—created by and for hands-on professionals.
As therapists, we want more than labeled charts of muscles, nerves, and bones. We crave anatomy education that informs our touch, and we want the know-how for working with the “stuff” in between. We want the whole story.
Led by AnatomySCAPES co-directors, and ABMP Massage & Bodywork magazine columnists, Rachelle Clauson (FRS Fascial Net Plastination Project) and Nicole Trombley (Equilibrio Massage), our in-person lab workshops are in sunny San Diego, not far from the ocean. We teach you what the tissues look like, feel like, how they move, and how they relate to their surroundings.
Your eyes and hands learn to “see” what they could not see before. Come join us in the lab in 2023!
0:00:00.0 Kristin Coverly: Are you passionate about massage and love learning about the human body? Take your palpation skills to the next level with Anatomy Scapes Dissection Lab workshops, designed specially for touch therapists. This March 8th and 9th, or May 3rd and 4th, you can journey into the matrix with Anatomy Scapes co-directors, Rachelle Clauson and Nicole Trombley as they take you on a profound journey through the human fascial system. Rooted in current scientific research, Anatomy Scapes dynamic trainings help you see, feel, and understand what lies beneath the surface. Visit anatomyscapes.com/abmp to learn more.
0:00:53.6 KC: Hello and welcome to the ABMP Podcast. I'm Kristin Coverly, my co-host Darren Buford is enjoying some well deserved time off. So I'm having a one-on-one tax in biz pod today with Kenesha Coleman. Kenesha is an award-winning CPA, certified tax coach and IRS enrolled agent. She founded Coleman Tax, an accounting firm that specializes in helping ambitious and driven wellness and beauty entrepreneurs save money by optimizing their tax and financial lives. Learn more at colemantaxllc.com. Welcome to the ABMP Podcast, Kenesha.
0:01:27.7 Kenesha Coleman: Thank you. Welcome. Thank you for having me.
0:01:31.7 KC: We're so excited and this is really important. We're in the middle of tax time. So first of all, thank you for taking time out of your very busy tax time schedule to talk with us. I really love the line from your bio, "Helping entrepreneurs save money by optimizing their tax and financial lives." So let's do some of that today and let's get started by talking about your story. How did you become a CPA who specializes in helping entrepreneurs in the wellness and beauty field?
0:01:57.8 KC: Absolutely. So I remember when I first started out, as running my own accounting firm, I will be honest, I took any and everybody with a penny 'cause I was just trying to start up and build. But then I found that this work, tax and accounting work, is way more enjoyable if you're actually into the industries and the type of entrepreneurs that you serve. And so I knew it was time for me to kind of hunker down and buckle in on one industry. How I ended up choosing beauty and wellness was I had to kind of take inventory of my own life, where was I spending my personal money? Where was I spending my personal time? What was I always thinking about and doing in my spare time, when I'm taking care of myself and my hobbies? And for me that was beauty and wellness. It was massages, it was yoga, it was skincare, it was hair, it was nails. It was all of those things that made me feel good inside and out. I looked around in the industry for others that was doing the same thing. I didn't see a lot, I didn't see a lot. And so along with me identifying that's what I was organically interested in by way of time and money, it was also, I found to be an industry that was in need for a finance person solely dedicated to serving them in their industry. And so the two ideas married together and I haven't looked back since. I haven't regretted now, one second. I love working with beauty and wellness entrepreneurs.
0:03:44.5 KC: Well, we love to hear that because we need you. [chuckle] So let's get into sharing some really good information with our listeners. Today we're gonna cover some of the questions that Kenesha gets asked most frequently, over and over again, which means that there're really hot buttons out there that we wanna make sure that everyone has the information that they need. So we're gonna start with one that listeners might be experiencing right now since we are smack dab in the middle of tax season. I've "forgotten" to do bookkeeping all year, now what? So Kenesha, this happens. People just kind of turn their head the other way, pretend bookkeeping isn't happening and then tax time comes and uh-oh, right?
0:04:21.0 KC: Absolutely. So I can get on my soapbox forever about bookkeeping. Okay? I can go on and on, but I will not for the sake of time today. If you have not done bookkeeping all year, there are some remedies. There are some kind of fixes that you can do in order to be ready to file a tax return this year. Hopefully, although you haven't done bookkeeping, hopefully all of you have a separate business banking account. I hope you are not co-mingling funds. If you do have a separate business account, you have made this task of getting all cut up so much easier for yourself, 'cause you can leverage the data that's within your business checking account to compile a profit and loss statement for purposes of filing your tax return. Okay? So start there. Go to... Hopefully all of you have decent online banking portals for which you can go and get statements and pull down transactional data and start there and going... You're not gonna like to hear this, but you may have to go line by line. You know what I'm saying? You may have to go line by line, but it leads us all there in one spot. You ain't gotta go searching for receipts or anything like that. So start with your business banking account information for sure.
0:05:44.3 KC: Gotcha. Okay, so let's jump in with a little tip going forward. So, okay, people are gonna maybe scramble to get it together for this tax season, but now, if we're gonna have the lesson learned moment from this pod, what are some suggestions that they can do going forward for their day-to-day bookkeeping?
0:06:02.5 KC: Absolutely. So again, if you don't wanna be in the same position a year from now, do your future self a favor and just start bookkeeping now. There are two methods in which you can book keep. You can go old school and just keep you in Excel spreadsheet. I don't discourage from that because, do whatever works for you if you're gonna go to that spreadsheet every week. But secondly, the other second option for you to do is to do a cloud-based bookkeeping system such as a QuickBooks or a Xero. And there are many others out there like it. Literally they basically all do the same functionality, but the reason why I prefer a cloud-based bookkeeping system is 'cause you can connect it to that business bank account I just mentioned, and that system will do a lot of that work for you. It'll do a lot of that work for you and your books will stay up to date almost real time as long as you are consistently reviewing it. Okay? So please do your future selves a favor and start bookkeeping now.
0:07:03.9 KC: [chuckle] I love it. Okay, another popular question or frequently asked question that you get is, which business expenses are tax deductible? And I know you like to be sure people know about not only the basics, but also expenses that are often overlooked. So tell us what we need to know about expenses.
0:07:22.9 KC: Absolutely. So I want you guys to think of a tax deductible expense. Think of this almost synonymous to your business expenses. Literally 98% of what you're spending money on in your business is going to be tax deductible, okay? You may treat it different ways, you may limit it, you know what I mean? But practically all of those expenses are tax deductible, okay? Now, the harder part is keeping track of all of it. So remember to deduct it. That goes back to bookkeeping. But again, I'll get off my soapbox about that. Okay? When it comes to business expenses, there are four elements that that business expense needs to meet before it should be tax deductible. It needs to be obviously business related. It has to be related to your business in some shape or form. It has to be necessary, and I don't mean necessary like how we think of food, shelter, water.
0:08:21.5 KC: It just has to be what you feel is necessary to maintain the business you want to run. Okay? It needs to be ordinary, meaning that it's not super weird for you to be doing for your industry. It's reasonable. And then it cannot be lavish, it cannot be like Rolls Royce Bentley level lavish, okay? But as long as it meets those four elements, sure enough it is gonna be tax deductible, all right? Some of the ones that I see wellness and beauty entrepreneurs missing out on every single year is, number one, the home office deduction. Number one, the home office deduction. I know a lot of you have been told maybe you can't take it, but you definitely can because here's the thing, you're not gonna do all your CEO management type things in your salon or spa, normally you don't, you're not gonna do it on your bed where you do your massages, you're gonna do it at some space within your home.
0:09:23.4 KC: So for that reason, yes, you definitely can't take home office. The second most overlooked, that is kind of attached to home office, is deductible commuting miles. As soon as you establish a home office, now you have two places of business and so the miles you travel in between those two places are tax deductible. Round trip. So I'm talking from home to work and from work to home, you can take those. Okay? And there's just so many others. I wanna say this. I wanna bring out just a high level way of thinking. Anytime you use anything that you own personally for business, remember to take the portion you use for business on your tax return, okay? 'Cause we lose a lot of things, we use our home, we use our cars, we use our telephones, our cell phones. I know you probably use most of that for business actually, so don't be shy about taking advantage of those items.
0:10:27.8 KC: And for those type of things like a cell phone, you would kind of guess to your best guesstimate of the estimate percentage you use it for business and the percentage you use it for personal, is that right?
0:10:36.7 KC: Absolutely. And I mentioned don't be shy about it, 'cause a lot of people wanna say, "Oh, I use it 30% for business." No, let's think about this. When you're in a grocery store in line, you're probably scrolling on social media doing some research for your business. When you're just out and about on the weekend, you're probably taking pictures for content for your business. You're probably "checking out the competition," maybe, [chuckle] on their social media feed. There are so many things that you do with that cell phone that's connected to your business. So don't be shy about it, if it ends up being 50%, 80% even, that's just what it is. And make sure you claim that on your tax return and get the benefit from it.
0:11:19.3 KC: We talked at the beginning of the pod about how you specialize in helping massage therapists and wellness entrepreneurs. There are some expenses that we have in our field that others definitely don't, like laundry expense and that type of thing, where it really does help for you to really have an in-depth knowledge of who we are as business owners and what we do. Yeah.
0:11:37.6 KC: Yep. No, absolutely. Absolutely. And I would say even with, like I mentioned before, that home office deduction, the way that that's done, actually a lot of other professions can't do that. That's why I think wellness professionals believe they can't because so many other professionals can't. It's very, very unique, because you can't do, again, your CEO management CFO type things in your workspace because of the type of work that you do. You know what I mean? It's not admin in nature. So that's a great example.
0:12:15.4 KC: Let's take a short break to hear a word from our sponsors.
0:12:18.3 KC: Anatomy Trains is excited to invite you to our latest in-person fascial dissection workshop. April 10th through 14th 2023 in Boulder, Colorado. Join Anatomy Trains author Tom Myers and Master Dissector Todd Garcia on this voyage of discovery. Visit anatomytrains.com for more information. Are you a massage therapist who loves to problem solve? Do you seek clients with challenging musculoskeletal issues? If so, then studying precision neuromuscular therapy will help to sharpen your decision making skills and achieve better client outcomes. Our emphasis is on the problem solving process rather than the teaching of a singular technique or approach. Led by founder Douglas Nelson, each PNMT instructor is a busy clinician with decades of practical experience. Visit pnmt.org to explore our offerings of live seminars, online courses or the video resource library, the PNMT portal, that's pnmt.org.
0:13:33.4 KC: Let's get back to our conversation. Okay. Another FAQ that Kenesha gets all the time is, once business owners have the data together, so they've gotten on the bookkeeping train, they know the expenses that they need to track, they've been doing that, it comes tax time and they ask you, how do I file, where do I put the data? And they're a little bit lost, especially if it's their first time, maybe newly opened their practice. This is the first time they have to file taxes for both personal and business. So what advice do you have for someone in that spot?
0:14:03.0 KC: For how you file the data is dependent on the way your business is organized. Okay? And I can... I'm gonna run through that real quick for you. So as far as how your business is organized, I'm gonna refer to that as your business entity structure or your business entity type. So if you just woke up one day and you're like, you know what, I'm in business. You didn't do anything further than going to the Secretary of State at all. You are likely a sole proprietor, okay? Let's even say you did go to the Secretary of State, you got an LLC. Those two types, they file on Schedule C of your form 1040 that you're already... You're already used to this form 1040. Schedule C is just another form that you'll report your business activity on, okay? If you are more than one owner, you are either a partnership or if you went to the Secretary of State and got a LLC, you're a multi-member LLC, you're gonna file your business on form 1065, which is the partnership tax return. And then if you went and got an elected S corporation status, you're gonna file one in 1120S and then if you are a C corporation, you're gonna file on 1120. Okay? So again, just remember it's all dependent on how your business entity is structured and then once you identify that, then you know the applicable form to file the data on.
0:15:32.0 KC: Okay, this is a perfect time to take a little deviation from tax talk, but it's another FAQ that you get all the time. When we talk about the different business structures and all the options someone has, what recommendations do you have? People ask you a lot, should I form an LLC, stay a sole proprietor? What advice do you have for someone?
0:15:51.3 KC: I always encourage the LLC. I always encourage LLC and that again is very specific to the industry. If you all were just selling t-shirts, I probably wouldn't say go get an LLC. However, because you are dealing with the personal care of other people and because a lot of you have your own physical space that someone can walk into, that's why I say get the LLC. Remember the LLC is not about taxes. The LLC is about protecting your personal assets. So if anyone were to come into your space and slip and fall, they could not sue you for anything outside of the business. They can't go after your home you own or your personal savings account or your 401K, which I hope all of you have. [chuckle] They can't go after anything personal. They would have to stick to what's in that business. So because of the nature of the work, because we're dealing with people, because we have work, just all the risk associated with the industry, that's why I say get the LLC to make sure we're protecting our assets.
0:16:55.9 KC: Love it. Great advice. And also of course I have to, mandatory side note, ABMP members, included with your membership is your professional liability insurance coverage, which is absolutely critical as well. So had to put that in there. I could not keep moving forward without me saying that. [laughter] Okay, so let's pivot back to taxes. So whether someone has done their taxes themselves through a program maybe like TurboTax or they've hired an accountant like you who specializes, who can really help them navigate everything that's happening, you have a critical piece of advice that they need to do before actually filing. Tell us all about it.
0:17:31.9 KC: Absolutely. My advice is I need all of you to review that tax return, review that tax return. My own little story here is I remember when we were just getting started and we would send out returns to be reviewed by our clients. They would sign that thing in 30 seconds and be backed. [laughter] And I would know like no, no way you reviewed the entire tax return. And so we've since mitigated that. However, the reason why this is important is because you are signing that return under perjury. Literally if you look at the sentence on the tax return, it says I understand, and it reads off this huge really legalese sentence that you fully have reviewed it, understand and agree with everything on that tax return to be true and honest. Okay? And so when you are agreeing to something like that, you best believe that you need to review it and make sure you understand how all of the information you gave your tax professional is flowing to the tax return and being reported and how it goes into computing, whatever tax you may owe. Okay?
0:18:39.6 KC: So that's the first very big reason is the legal reason. But number two, you kind of wanna, as a business owner, understand how this is affecting you tax wise. So if you made so much money during the year and then you took all the expenses and you have your net profit, I want you to understand how that affected now how much the IRS is saying you owe them. And if you don't understand, your tax professional should be able to give you very plain language explanations as to how the information flow and how it affected you tax wise. Only then will you be able to understand how you can lower the tax bill. We can't leave this solely up to the person that we hired to do this for you 'cause I'm gonna tell you, a lot of these tax professionals are not doing that, and we're not catching it 'cause we're not reviewing.
0:19:34.3 KC: That's great advice. And you're right, most people are like, "Phew, it's done," sign and go. They're just relieved to have it over. Which leads into my last question for you. Tax time, no matter how prepared someone is, can really equal stress time. For some reason they're intricately linked, stress and taxes. So what advice do you have for someone who's in the middle as we are right now, tax season, and is starting to feel stressed or a little bit overwhelmed about the whole tax process? What advice do you have for them?
0:20:02.6 KC: Absolutely. I say this, the IRS opens every year in January. You got until April to file. So I will break down the task of preparing and actually filing the tax return into chunks. That's how we handle our clients within our firm. We have different phases. So phase one is all about gathering the information. If we did the bookkeeping, we'll pull it from the bookkeeping system, but if not, again, remember to leverage that business banking account data and start from there. After we've done that, then we review the data and then we go ahead and we start preparing the actual tax return forms. That's our prep phase. Okay? Then after we've gotten a first draft, then now we're in review phase. And again we do heavy on the review. We gotta make sure you understand how the information flow and then two, what does that mean for your business?
0:21:04.6 KC: Remember guys, anytime you see a refund, you gotta see, did you get this refund 'cause you had a loss in your business this year and why did you have the loss? That's even more important. Okay? But then after we reviewed it and we filed the return, now how do we leverage the tax return we just filed to identify further tax planning opportunities for the rest of this year? Okay? And then again, if we didn't do bookkeeping, how are we gonna start bookkeeping? [laughter] How are we gonna start bookkeeping for the rest of the year so we don't be in this position the following year? So I'd say break the huge task of filling return, break it down into chunks. One very important phase per month. You have until April to do it. That's the deadline. And just again, take your time. This is not a sprint, it's more of a marathon when it comes to taxes.
0:21:53.6 KC: I love it. That's great advice. So marathon not a sprint, take a breath and take it step by step. I love that and I can attest Kenesha, this is great information. I taught business courses in massage schools for years and years and years and we had a tax section and these are exactly the questions that all the students have. And so I'm sure as they're transitioning from student to professional and that first time comes around, all these questions are bubbling back up. So this is perfect information. Thank you so much for sharing it with us. I wanna thank my guest, Kenesha Coleman. Visit colemantaxllc.com to learn more about everything Kenesha and Coleman Tax have to offer. Thanks so much for being with us Kenesha.
0:22:34.8 KC: Thank you. Thank you. It was very enjoyable and happy tax savings everybody.
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