Join Bill and Crystal Lee in a Thanksgiving special as they explore the intricacies of starting and managing a pet grooming business in the USA. This episode delves into essential topics such as tax planning, business structures, and the importance of proper accounting practices for groomers. Crystal shares her expertise on how to minimize tax liability through various deductions and strategic financial planning, emphasizing the significance of understanding tax obligations and business expenses. The discussion also highlights the difference between employees and independent contractors, addressing the challenges of misclassification in the grooming industry. With practical advice and insights, this episode aims to empower pet groomers to navigate their financial responsibilities and grow their businesses effectively.

Takeaways:

• Setting up the right business entity is crucial for liability protection and tax efficiency.
• Understanding the differences between employees and independent contractors can prevent costly misclassifications.
• Regular communication with your accountant is essential for informed financial decision-making.
• Utilizing deductions like professional development and equipment depreciation can significantly lower tax liabilities.
• A solid accounting system helps streamline finances, making tax season much less stressful.
• Exploring retirement options like SEP IRAs can provide tax advantages for business owners in the pet grooming industry.

As always, a big thank you to the podcast sponsor Lopay, the low-cost payment platform that helps you keep more of the money you earn! You can find out more and sign up for Lopay here: https://merchant.lopay.app/ref/PETPASSION2500, where listeners of this podcast get £2500 of fee-FREE transactions!

You can find out more about Crystal Lee on her social media:

Linkedin

Facebook

And of course, if you feel like you could benefit from Bill's business programs for the Pet Grooming industry, visit our website: https://petpassiontoprofit.com/

Welcome to the Pet Grooming Business Podcast with me, Bill Betts, where we give practical business advice to help you grow your pet grooming business.

This podcast is sponsored by Low Pay, the low rate payment app that gives you more.

So without further ado, let's get going.

Welcome.

Okay, everyone, welcome to the next episode of the podcast.

This one is a special one recorded just for our guests in the United States.

I know there's people listening in the United States.

I see it on the stat.

So I'm welcome.

I'm joined by Crystal.

Crystal, welcome.

How are you?

Thank you, Bill.

Thank you.

How are you doing?

I'm well.

I'm well.

Thank you for having me on.

Yeah, very good.

I love.

I love this Zoom and being able to connect with people all over the world to have a chat and help businesses.

It's pretty awesome, isn't it?

It is, yeah.

I've talked to a lot of people over zoom, so, yeah, I appreciate it.

Excellent.

So let's start off.

I reached out to you because I saw that you're now in the big Facebook group and you're accounting, aren't you?

You're in accounting.

So I reached out to you to find out a bit more about accounting in the United States.

So perhaps you can give us a little introduction to who you are and what you do.

Sure, sure.

So my name is Crystal Lee, and I'm the owner of Premier Tax and Accounting.

And I recently opened a branch of Premier Tax and Accounting, and it is called the Pet Biz Advisors.

So I decided this last year to go specifically and help those in the pet industry, specifically starting out with pet groomers.

The reason I did is because I had a lot of groomers on my books, so I just already did.

It was a natural progression for me.

And so I really enjoy working with the groomers, working with that niche, and so I decided to just kind of stick in that market.

But I do have about 20 years experience in accounting.

I guess I'm aging myself a little bit here, and I have specifically about 16 years in public accounting and taxation.

So in Premier Tax, we do everything from bookkeeping, accounting, payroll taxation.

What sets us apart a little bit is that I am also a licensed.

A certified professional coach, so I also do business coaching, so that I find that that's really important for a lot of our.

Our.

A lot of our clients too.

So.

Yeah.

And you.

Something we also spoke about is that you're a great believer and fan of profit first as well.

I am, yeah.

Yeah.

Working with Mike in the gang over at Profit first they are.

Aw.

So I was introduced to them.

I just happened to find them doing some researching about some local accounting firms is.

I was just trying to.

Actually, I was trying to create my website is how it started.

And so I started doing local accounting firms and I noticed that there was a firm in Milwaukee, Wisconsin, because I'm actually from Wisconsin specifically.

And don't let the accent fool you, I'm originally from Tennessee, so that's why I have this southern accent.

Um, so, so basically I did the research and I found this website that had profit first on there.

And I was like, wait, what is that?

I've never heard of it.

And so I just did a deep dive and I was sort of researching profit first and then the next thing I know, I'm signing up.

I'm like, this is amazing because technique and process is amazing.

But yeah, they are.

They have a great team over there.

They really know what they're doing.

Mike and them.

And if you guys have not ever looked into First, I strongly recommend it is a book.

You can read it, you can download it, and it is a really good cash management system that sits on top of your financial system.

So it basically helps you keep more money in the bank.

And we all love that, right?

Yeah, yeah, definitely.

And it's a change in our mindset, but we're not going to go into that today because I think people need to watch out for part two of our.

Of our talk, which will come at time and, and we're going to.

And part two, we're going to really sort of dive into profit first and the strategies and what you learned from it and how you help your customers using that system.

But because otherwise we won't get done what we want to get done today.

Will we here for hours?

Yeah, that's it.

That's it.

So maybe people can go and read the book or maybe download it on Audible or Kindle or whatever and listen or read the book first.

And then maybe our podcast can perhaps complement the book.

Maybe.

Or maybe the podcast will encourage people to go and read the book whichever way around.

But it's something for people to look out for.

Is net profit first.

Yeah, yeah.

Cool.

So it's great to find someone in the States to do with accounting because obviously I'm in the UK and we do a lot of.

We give a lot of the groomers here help around the UK accounts and tax system.

But we're going to be talking to people in the States and you're going to guide us through starting a business.

How to lessen the tax liability and tax planning and stuff like that.

So hopefully it's going to be really helpful and I'm really interested, actually, to see what sort of what similarities and what differences there are from the UK system.

I always think that, you know, bit like mentorship and business.

As a country, we should be looking at other countries to see how they do things and see whether that's a good way or a bad way of doing it, if there's such a thing.

Yeah, yeah.

And honestly, I'm also on the same boat that you are.

I think it's fascinating to see how other countries handle things.

And I'm like.

Because here in the, in the States we know that our tax code is super complex.

It's like a tax code book is about like this, about like that big.

It's huge.

It's like at least a foot thick.

And so.

And it changes on a daily basis.

And I know there are my fellow accountants out there, like, yep, it can get a little complex.

But that's also the importance of making sure you have an accountant on your team that knows what they're doing.

So.

Yeah, so I suppose so I'll take it an American citizen can do their own taxes or they can employ an accountant to do it.

Yep, exactly.

And there's a lot of different ways that a lot of people will do their own taxes.

I'm not sure if you guys heard of TurboTax.

That seems to be a very popular one here in the States and it's ran by Intuit, the same people that do QuickBooks, but they offer a tax software called TurboTax.

And for the more simple tax returns.

Yeah, it's no problem.

But the thing is, once you start getting into businesses, start getting into retirement planning and things, it's not as simple as it seems.

And so people make a lot of mistakes, unfortunately.

But, you know, it's just one of the many options they have, though.

Yeah.

Like the government over here in the UK have a saying or there's an advert.

I don't know if it's government saying or whether it's like QuickBooks saying.

I can't remember.

But it's basically tax shouldn't be taxing.

But how wrong is that?

Taxing.

Taxes are really taxing, isn't it?

It's a real.

So many people.

So many people don't.

Don't understand it and are scared of it.

So let's dive into this and see if we can help them.

So let's look at starting a business first.

So you go through some of the key points that someone in the states need to know when starting their pet grooming business.

What they.

Sure, yeah.

So obviously we're all in the business to make money.

Right.

That's why we wanted to start the business for ourselves, our family, and even the community as well.

But ultimately you're not going to have a business unless you're making money.

Well, the IRS and the state tax agencies understand this too, and they want their cut, obviously.

But our jobs as accountants is to make sure that you're not paying them more than what you have to or what you need to at this point.

So we really always come from a standpoint of how can we save you money, how can we save you on your tax liability?

And the very first step is going to be to make sure that your entity or your business is set up correctly to begin with.

There's four different entity types here in the states that we have.

Sole proprietors, partnerships, LLCs and corporations.

So those are the four main types that you can choose to be.

Now the sole proprietor is the simplest to set up.

You basically are just using your name, your Social Security number.

Now you can get a tax ID number if you want the like, you can just start it up with your name and social.

It's that easy.

And you set up a business bank account and you can start taking money and it's that quick to do.

Now the next step is a general partnership.

If you want to actually work with someone, you can have either one partner or multiple partners in that and therefore you all share that share of the liability based on the percentage of ownership that you have.

And so, but those sole proprietor in the general partnership, I, even though they are business entities and they're legal legit business entities, I don't recommend them because you don't have a liability protection.

You as a, as an individual are fully responsible.

So if something happens for, let's just say an example, you start a dog grooming business and the pet gets hurt somewhere in your care and someone gets, I guess sue happy is what I would call it, they decide to take out a lawyer and take out legal action against your business, you would be held responsible for it personally at that point.

If you're a sole proprietor and they can come out to your personal house, your car, your bank accounts, your retirement.

So therefore you are fully exposed.

So that's why I do not really like the idea of sole proprietors or general partnerships because you don't have that liability protection.

Yeah.

And so the next set that we look at are LLC incorporations, now those do have liability protections.

Of course they're also a little bit harder to set up, but not a whole lot.

So it's not, it's just a couple of extra small steps.

So the llc, it stands for the limited liability company.

A lot of people get confused.

I think it's a corporation, but it's not.

It's limited liability company and it is a pass through entity onto your personal tax return.

So therefore you can take out all income and expenses on your personal tax return.

So it's still fairly easy to run this business.

You can take owner's draws.

You don't have to be on payroll if that's, you're not on payroll.

If you're an LLC and it's still easy for you to be able to report it on the tax return, you don't have to file a separate business tax return with that.

It's just the easier one to get involved with and still have the liability protection.

Now with both the LLCs and corporations, you will be filing with your state entity to file for that to make sure you have the LLC and corporation protection.

So that's the one extra small step.

You really have to pay.

You have to file for and with corporations.

Not only do you register with the state, but you also have to be on payroll as the business owner.

This is the biggest adjustment for people and that is whether you are a C corp or an S Corp.

You have to be on payroll as a business owner.

And so I typically tell people you need to make sure that you have a really good plan as far as like your revenue and idea of your revenue streams, how much money you're going to make whenever you know, if you know you're going to have several clients that are coming.

I've already have a book of clients that you're bringing on.

So you know you're going to start making money pretty quickly.

You might want to look into actually just going through and doing the corporation because that way you can have a little bit more wriggle room as you start expanding and you have that increased revenue as you go.

Because right now if you are a pass through entity, you are taxed at your personal individual tax level.

Whereas corporations specifically the C Corp is there two different types.

The C Corp itself, your tax right now, this is as of this date, as of July 9th.

Right now we are at 21% for the business income tax rate and it doesn't adjust.

So so therefore if you're going to make over a certain amount of money, I would suggest the corporation.

This podcast is sponsored by Low Pay.

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So, and just a little caveat about what an S Corp is, a S Corp actually is not a separate entity.

It is a tax election that you choose.

And you can be an LLC or you can be a corporation and be an escort.

So it's just a filing that you file with the irs, with the Internal Revenue Service, that I want to be taxed as an S Corp, but if you are, you still have to go on payroll as the business owner.

So I know that's probably as clear as mud, so.

Well, I have some questions.

Yeah, there.

There are some.

There are some.

There are a lot of benefits.

There's pros and cons to each.

But I didn't put all those on there because that would.

Again, we would be here all day, period.

So.

So I take it like a sole proprietor.

Do you pay your tax at the end of the year as a limited liability company?

Do you pay it monthly, end of the year, that sort of thing?

Okay, great question.

So, so with this, we do have here in the States what are called quarterly tax estimates.

So the IRS in the States wants you to pay in quarterly.

And so what you'll do is you calculate, you have to kind of annualize, basically, or guesstimate how much in taxes you think you are going to owe based on the amount of net income you're going to have at the end of the year.

And so you have to pay in every quarter.

Now, those quarters are April 15, June 15, September 15 and January 15.

So therefore they're not true quarters.

Which kind of, I guess, semantics, I guess it kind of drives me, that's the column quarterly.

But I'm like, those are not true quarters.

But that's okay.

That's just when they're due.

And so, but we'll have to discuss that.

And so let's say you have, you have like 10,000 or so that you're going to owe and they'll have to pay in $2,500 each quarter, roughly for that for the IRS.

And I see there that we talk about QuickBooks and Xero and Wave and Sage does it.

Because the government want their tax every quarter.

And this is actually coming in into the UK where they're not going to be.

I don't think they're going to be asking for the money every quarter at the moment, but they are going to be starting to ask for your figures every quarter so they know right from where you're at.

Does it when you open a business or do you have to go on to the systems like Xero and QuickBooks and Sage and stuff?

Do you have to?

No, you do not.

It's not a requirement from the government, but it is strongly, strongly advised.

Like you can, you can even do Excel spreadsheets if you're good at.

If you're a spreadsheet king or queen and you want to do that, that's fine as long as you can keep up with that.

Now I do highly recommend though, doing wave QuickBooks online in Sage accounting because what it does is it keeps it all nice and neat in one place.

It keeps all of your charter accounts and your general ledgers in one place.

And all you have to do is as long as everything is entered and reconciled in that financial system, then all you have to do is hit print and you can have a nice profit loss statement and that's what you're going to use to pay your taxes on.

So it's just, it's just kind of does the hard work for you in sorting it.

Does these systems talk to the government?

They talk to the IRS as well?

No, no, they, they will not.

No.

It's specifically, it's just more for your internal accounting purposes and that's what you will use then to put onto your tax return.

And that's what tells the IRS and the government how much you're going to.

That's interesting.

That's a little bit different.

We have a value added tax here, VAT and we can talk to the government with Xero QuickBooks and submit our return straight into the government and then obviously we just pay them later.

So it's different, isn't it?

It's good.

How about bank accounts?

Now we've got some Challenger bank accounts over here called Starling and Monza Revolut, I think you got Revolut in the States, but they're, they're challenging the, the banking industry and the fact that they don't have physical branches, they're all online, all via apps and stuff like that.

But they're making business banking free, which I think is a really good thing for us.

Do you have the similar over there?

Do you, do you have to have a business bank account?

We.

Well, yes, over here it is highly recommended because if you don't actually have a business bank account, then the IRS or the state governments can come back and say, well, you're not a viable business if you don't actually have a separate business bank account.

And the other thing that's very very important here for your listeners to understand that if you are one of these companies like an LLC or a corporation, if you have your accounts intermingled let's say you just use your personal bank account it's not going to number one secondly separated out.

But number two they could come back and say well you're not a bible business and you are using your quote business bank account as a personal account.

And it's what's called piercing the corporate veil.

So therefore they can nullify your LLC or your corporation status.

So you never want to intermingle personal and business.

And lawyers are trained to know how to do this.

Now full disclosure, I am not not a lawyer.

I do not give legal advice here.

So I do highly recommend anyone in the state to go make sure they talk with a lawyer that has provides legal counsel for business setups.

Yeah yeah.

So they kind of frown upon it saying that you're trying to manipulate the system I suppose and use the taxes in a different way.

But as a business coach, you know separating your personal and your business is makes real sense anyway, doesn't it?

So you know exactly where everything's at anyway.

So yeah, it just makes it cleaner.

It makes a cleaner bring you too.

I spoke to a bookkeeper a while ago in the UK and she kind of said because as a sole trader or like a sole proprietor in the UK you don't have to have a business bank account.

But she said if she's charging to do someone's books she does it per volume of transactions.

So if there's personal and business mixed in then the cost is going to be a lot higher.

So that was a top tip anyway.

It will be and I have done that myself here in the States where people or trying to fix what they started and I've done a lot of cleanup work in fact I'm doing some for someone right now and where they have intermingled business and personal or they'll use a personal credit card for businesses and until they can get their credit built up enough to actually get a credit card and that's fine is for that if you use a personal credit card for business but then you want to make sure you separate out those transactions and you can record it correctly in the system as an owner's contribution into that software.

So that way we don't actually have a card sitting in the system.

We'll just pull his transactions over that only are business related to keep it.

Clean all Very messy.

Yeah, it can be very messy.

Exactly.

So talk to us about what kind of insurance.

If we are setting up a dog boom business in the U.S.

what kind of insurance do we need to look at?

Absolutely, that's very important.

So we have a few major ones which are general liability and that's, you know, protection against bodily injury or property damage within the company.

And then you also have commercial property which is protecting your equipment as the groomer.

So if you have commercial property, say a table got messed up or you needed to, or you had some equipment that got damaged that would cover your personal property.

And then there's a couple of other things that people may not have even heard about.

And one is called animal bailey coverage and that is animal injury or loss.

Basically that helps cover vet bills and it's something pet is lost.

And this is specifically more I guess for dog walkers and things like that, aborters.

If a pet is lost, it will actually help cover rewards to find the pet.

And so that's a real good one to have if you're in that industry.

And obviously if you're a mill groomer, you'll have a commercial auto that you'll need for that.

And then if you have employees, you'll need workers compensation insurance to cover them.

What does that, what does that cover?

Workers compensation?

Workers compensation covers basically if an employee gets injured on the job.

In fact I'm doing, I'm doing a report right now for somebody for workers compensation.

I help Cindy because sometimes I'll help fill out the forms that they need.

And so if someone, if their employee gets injured on the job and helps cover their memorable expenses and their time off.

So it sounds like all insurance often sounds quite scary, doesn't it?

Money wise?

Is this kind of stuff like a lot of money or.

It really just depends.

It depends on the number of employees you have.

It depends on the size it depends on.

It's also a lot of this insurance is based on your revenue sales.

That's how they determine the size of your business.

So if you have a lot in revenue sales, we'll say like over $1 million.

Yeah, obviously yours is going to be much more expensive but hopefully by that point you can afford that more premium, you know, higher range of the insurance coverage.

I know a few people here in the States, they use Hartford insurance for example, not a paper motion, just just to kind of give them an idea who to maybe go to to look for to get a quote.

Would be, would be a good place to start because they have a specialized pet industry Branch within Hartford Insurance.

So I take it like you're in one state and you're an accountant, bookkeeper, and people from all over the US Use you.

Or is it.

I have, I have customers all over the United States from California to New York to Texas to Florida.

So I have people from one, from west coast to the east coast.

So.

So that's the same with the insurance companies and anyone else that offers services across.

Most, most insurance companies, they have to be licensed in their specific states for insurance, but most obviously these bigger ones are licensed in all 50 states.

So it's, it's not a problem for them.

Yeah.

And what about medical.

Do you have to offer employees medical.

Care and cover right now?

Right now?

No, you know, it's, it's a, it's a premium.

You don't have to offer it medical care where we're not at that point that they force us to offer medical care.

I did know at one point, if you've had over, I believe it was like 50 employees, there were some benefits that you would have to offer.

I don't think any of our listeners probably are at that range to have to worry about if they had 50 more employees.

Most of them are smaller, smaller groom shops.

So I think he'll be fine.

So we're going to talk about contractors and, and employees in a bit because I find that really, really interesting how it all looks over in the States.

So obviously I'm a big believer in paying our taxes.

It's an important part of government.

You know, like you said, part of business is making money and part of making money is paying taxes.

It's a fact of life, isn't it?

You can't really get.

There's.

There's ways.

Sorry, I was also gonna say death and taxes.

Those are the two main things you can count on.

That's it.

And we're contributing to the country, aren't we?

And helping.

I.

Obviously we'd love to have a bit more choice of how they spend our taxes, but we are contributing to the, to the country.

It gives us the right to moan if things aren't going right, doesn't it as well?

Yeah.

So taxes can be quite confusing, as we, as we said, and quite worrying for people.

But I always sort of say knowledge is power.

So what are some of the ways that a groomer can lessen their tax liability?

Yeah, great question.

Okay, so the first thing you want to do as a groomer is to make sure that within your financial system systems and in your bookkeeping, you are taking out the Deductions that you are allowed to take out.

A lot of deductions are commonly missed and some of them are like professional development, continuing education.

You can do conferences and meetings, subscription fees to magazines and online resources, panel club memberships and professional associations.

That's a really big one within this industry.

You can have multiple full of those memberships.

Those are deductible within the business uniforms.

Now there's a caveat for uniforms here because there is a, I guess kind of a litmus test.

The uniform has to have your company logo on there somewhere.

It cannot just be street clothes.

Like it can't just be a set of scrubs, for example.

They don't even consider that a uniform anymore because that can actually be worn outside side of the place of business.

The reason I tell that to people is because there was an actual IRS case that was heard and where a, a news reporter who is on TV every single night was trying to write off her business suits, her hair, makeup, because that's part of her job.

She has to present herself that way.

And she lost the case and owed thousands of dollars in tax liability for back taxes.

So clearly if she can't win, that's part of her job.

And we can't just buy regular clothes and then expect to write them off.

So you have to be really careful about that.

Does that look, I mean, could she have had like CNN sort of logoed on there maybe?

I mean, with that.

Yeah, it's like I would put like a.

Yes, some kind of like embroidered something on there if I work for cnn.

But yeah, it was very interesting.

And so, and of course they sometimes.

And again, I'm not trying to make anyone afraid of the IRS or the state because typically as long as you communicate with them, they will work with you on stuff.

And it's just with them it's mostly about intent.

It's like, what is your intent?

If you just genuinely didn't know, they will typically work with you and they'll forgive you for just a one off.

Oh, you didn't file something, right?

Most of the time they'll give you one and they'll forgive the penalties for you.

And so that's kind of a nice thing they have built in here to the system because everyone we know, everyone lists mistakes sometimes, so that helps.

But also going back to the deductions with the cell phones, business usage on cell phones, people don't realize that they're like, oh yeah, I pay for my own cell phone, but you can run off a certain percentage of that for business Use and grooming competition expenses, travel to those grooming competitions.

Depreciation is another one for grooming equipment.

So if you have larger amounts for the tables, for the tubs, you can write that off or depreciate that as well.

And then mileage for if you're going traveling a lot to go pick up supplies, if you go to, I guess to a client's house and he has to do an in house screen for maybe a sick animal, then you can do that as well.

And then any out of pocket expenses.

And this is the one that catches a lot of my clients.

If they use the wrong card, for example, they pull their personal card instead of the business and they forget to put that onto their business deductions.

And so any, what we call out of pocket expenses are very, very important for that.

Yeah.

What catches me out is they put, you're sitting in a coffee shop and they put in the, the amount on the card machine.

And you know you can, you only have to get so close to that machine, your card, you know, when you're paying with your phone.

Yeah.

You get so close you got the wrong card off and you're like, ah, it's taking the money.

And it's like it.

Yep.

Yeah, it takes the money at the wrong car.

Damn it.

And what I was going to ask with that, things like card fees.

So if you take payment via card machine over here, it's illegal to pass those fees onto our clients.

So we have, we put them through the tax as a, as a, as a business.

Is that the same thing yourself?

Yeah, it's pretty much the same.

I mean some places you can, there's a certain percentage and forget, I don't know off the top of my head what the percentage is you can pass on to it.

But it pays up to a certain very small percent as far as how much you can pass on.

But most of us will take the business deduction.

I label that as merchant fees or credit card fees on my, on my books.

And so you will just take a deduction off the top.

Yeah.

So as part of it as well.

And then I take it if you're buying a laptop or an iPad for your business to run your, your grooming software on, that's all like this normal.

Taxable deductions from your depreciation typically.

And it depends on the amount.

So if it's, if it's just a couple of hundred dollars, you write it off as an office expense completely just depreciating the whole thing in one shot.

If you, if it's something that costs no.

2 to $3,000.

You'll have to depreciate that for the life of the.

Of the item.

So let's say it's a computer, for example.

Typically those are depreciated for five years.

And so you can do.

You can do what's called a straight line depreciation.

And you just take the total cost of the machine and you just equal payments for the years will be for the next five years.

So you'll get an equal amount of deduction for that.

Now they set rules around that.

Set by the irs.

Yes, yes.

As far as how the life of a certain equipment or machine, I mean, they even set life on like if you have leasehold improvements.

So say you're making leasehold improvements to your shop.

That type of thing is also depreciable.

And typically that's based on the length of the lease that you have.

So there's a lot of little caveats to there.

So you have to be able to know exactly what you're doing with that.

Now, I bet a sole proprietor that's doing their own tax return every year or quarter, I bet they do not even look at depreciation.

That's a big one.

That's typically, that's typically missed.

The other one that's typically with that is if we go and look at the rental.

So say, say you have a lease for a rental for your shop.

Some will also try to take a home office deduction, but IRS doesn't let you do that.

It's either, or either you do home office deduction if you have a space at home or you do the rental shop.

So a lot of people will kind of what they call double dip in that.

And that's also not allowed.

So he has to be able to look out for that too.

They're meanies.

We've got a shop, but they also allow us to do work from home.

Oh, that's nice.

That's nice.

We're a little more strict than that.

Yeah, it's not a lot of money.

How about if you're working from home, are you allowed to put a percentage of your electricity, gas and stuff through your books?

Yep.

On your personal.

If you're sole proprietor working from home and you can actually do that and you include either your interest rate on your mortgage and taxes on your house, or if you rent and do your rent payments in your utilities, your insurance, if you have homeowners insurance, you can write that off.

I kind of push it a little bit.

And I also allow for any kind.

If you have a cleaning service that comes in to help you, you can write percentage of that off.

Cable, Internet expenses, security, alarm systems could also be written off with that if you have one for your home.

So yeah, so it's, and it's calculated based on the total square footage of your rental space of your home office space compared to the total amount of square footage of your home.

So you'll get a percentage based on that and then that's how much you can take off of your utilities of your and you have a home phone line if you have the security systems.

So yeah, so you can take it off based on that number.

So you can take, you can reclaim money off your mortgage interest.

Yes.

I think they got rid of that ages ago with us.

Did they?

It was like, yeah.

How about like a big argument over here is people want to put osteopaths and you know, physiotherapists and stuff because pet grooming is a very physical job and arms and shoulders and necks wear out.

And so some of the older groomers like to have a massage of the probably every week to get to keep them going.

And there's always been a big argument that that should be put through as a business expense because without that you wouldn't be able to work.

But HMRC and trust me, you know, if you listen to this going yes, you can, apparently you can't HMRC don't like that over here because it's benefiting your whole body which you use for all day, everyday use.

Are you allowed to do that in.

The US we are not.

We are the same way.

And I can completely agree with you on that.

I think if you have a physically demanding job where you're having to sit a certain way or doing repeat functions a certain way, you're clearly your body is going to break down.

I even have dental hygienists that have tried, you know, to do that.

And I explained to them, I said I completely get it because the way that they're leaning over and having to work on people, their backs just really give out.

And so, but there it's not, it's not technically allowed.

So you can try to run it through on if you itemize on the Schedule A on your personal.

But, but it typically you have to have so much money on, on the Schedule A to claim medical expenses.

It like you would have to be like basically in hospital for like a long time in order to be able to remotely get any benefit from that.

So, yeah, it's.

It stinks.

It's unfortunate, but.

But then my wife sort of said, well, if that were.

If we were allowed to do that, we'd obviously be.

We'd perhaps be allowed to claim back care fees because without the child care, I wouldn't be able to get off there because, like, where does it end?

Where does it.

Yeah, I was trying to think of any, like, unusual stuff.

So, you know, as you.

As you work with pet groomers, you must see some unusual things.

Like over here, we might put through a beekeeper's hat.

And that's to help with.

When they're doing the de.

Shedding and to keep the hair out.

Do you come across stuff and go, really?

I have, yeah.

So.

So basically there are some definitely, like, some specifically going back to the uniform things I have seen other things basically, like you said, personal hats, helmets almost that they use for that.

Yeah.

And so that type of thing, it's used for work.

So, yeah, it's a deduction.

You can absolutely deduct that.

And so.

And to kind of go back, if you ever have a question, of course, what's deductible?

It's not, you know, talk with your accountants.

You know, just say, hey, listen, I'm thinking about buying this could be a business expense, or do I need to put it on my personal account?

Because I really need this for the business, for X, Y and Z reasons.

And so just, Just chat with your accountant that they can pretty much tell you yes or no pretty quickly.

You might have to explain what you do and why.

Why you need it there, because they might not understand.

It might be like, well, wait a minute, why are you using a beekeeper's hat for a tech room?

But then when you explain it like he just did, it makes perfect sense.

Or, oh, yeah, but it's not getting all in your face, in your hair.

Yeah, yeah, yeah, absolutely.

Can you save money by paying your taxes promptly or upfront?

Actually, you can, yes.

And it is very much, actually is a requirement.

So we have going back to the idea of the tax estimates where you pay quarterly, they do require you to pay that.

And if you do not pay the proper amount quarterly, then you can be faced with penalties and interest for any part of it that you latched on.

And so that's why it's really good to make sure that you have a really clear idea of how much money you plan on making by the end of the year.

Now, these quarterly estimates are adjusted every single quarter.

So what I will do for my clients for example, if we start out with April 15's payment and obviously that's the beginning of the year and we have a lot of year left to be able to try to figure out how much money we're going to make.

Well, we also go by last year's numbers as well to kind of give us a benchmark.

Now if you are a brand new business and you have no idea, you're basically just having to do the best you can.

I recommend maybe even looking at it monthly at that point.

But the payment is due quarterly for that.

The good news is for those that are on payable, so say my S Corps and C Corp clients, they get paid in every time they get a payroll check because they're withholding automatically gets sent to the IRS into the state government if you have state withholding requirements.

Because not every state here in the US has a state income tax.

A lot of them, I think there is 11 that don't.

I believe it's the last number I looked at.

So not everyone does.

They don't have to pay in state income taxes, which is, it's not typically they have a higher sales tax rate.

So I guess it's kind of, you know, I'll give a little, take a little.

But yeah.

So at least I don't have that requirement to have to file.

But definitely look into tax estimates and the other option too.

If you are interested not only in the tax estimate but to also lessen your tax burden, I strongly recommend you working with an accountant to do a tax plan.

And tax planning is a little bit different than estimates.

Estimates only tell you based on right now with what you're making.

This is how much tax you're going to owe at the end of the year and this is your tax liability and then this is how much you need to pay.

That's what a tax estimate is.

A tax planet saying, okay, we know we're making this now what are some ways we can fix this in order to make our tax liability less?

So you know, do we need to contribute to a retirement?

Do we need to contribute to an hsa?

Do we need to actually take that LLC and make it an S Corp so we can lessen our tax burden?

Because there are tax benefits to that.

So therefore a tax plan is a really detailed set of information and tools that you can use that tells you here are some steps you can take to actually lessen the burden for you.

And so I highly recommend that especially if you're in a business and you're a tax accountant, can actually Tell you some sets to do that in order to decrease your tax load.

Knowledge is power, isn't it?

And one thing I was talking to my sister yesterday, was traveling back from, from France and we were talking, she runs a business and we were talking about taxes and how she could lower her taxes and using things like pensions will go on in a minute.

But one thing I said to her was whenever you get asked to pay something by your accountant, you know, ask them why, why, why do I have to.

Why is my tax the way it is?

You know, why do I have to pay this amount?

Because when you start to understand this, then you can, like you said, you can start planning for it.

You can start looking at legal, not legal loopholes, but legal ways to reduce that tax bill, can't you?

And I think, I think sometimes there's a lot of assumed knowledge that accountants assume that as us business owners know what we're doing.

And there's a lot of trust, there's a lot of trust that goes the other way with the accountants as well.

But there's something that I try and speak to my clients about is just be curious and question, not be a, be a pain in the ass, but, you know, just question and be curious about it.

And instead of just going, oh, okay, I'll pay that, ask why, why do I have to pay that?

And is there anything I can do next time to make that right sort of thing.

Yeah, because that's really from our point of view as accountants.

Like we, we love it when clients ask us questions because it sometimes even pushes us to maybe, maybe like do a double take and like, well, maybe I need to like look into that a little bit more or maybe.

Yeah, I didn't realize that my account, my client didn't understand this.

So let me explain this a little bit further.

So that way, because as a business owner, the business owner is completely responsible, not the accountant.

So when, when the IRS sends a letter, they're going to submit to the owner, not the accountant.

Explanation.

So you definitely need to make sure you fully understand, like what's happening within the business finances.

I call the accountants our critical friend.

You know, any big decisions financially, I'm always on the phone to the accountant.

You know, what's the tax liability if I do this?

What's the pros and cons of doing that?

You know, bring them in as part of that, part of that decision making process.

Yeah, exactly, that's, that's.

And you need to do it from day one.

That's the thing.

I mean, people try to do it like get an accountant after the fact.

They really need to make an accountant a part of your partnership team is what you need to do.

Yeah.

When you try and work backwards by if they're, if you ask them to sort out your QuickBooks because you've made a big mess of it like I did, it gets very costly.

It's going to cost a lot more money in the long run.

Exactly.

Yeah, definitely.

So one thing I was talking to my sister about yesterday was using pensions to reduce the profit within the business which then lowers the.

What we have is corporation tax over here.

So are you able to pay into a pension in the States to reduce your tax life?

Yeah.

So what I also recommend doing just almost just as important as an accountant relationship is any business owner get a really good relationship with what's called a financial advisor.

And a financial advisor are the ones that work with just for example some Edward Jones for example off the top of my head.

And they can actually tell you what products that their company actually offers.

And that's why it's really important because every company can offer a different product for you and they invest in certain, certain stocks and certain bonds in certain markets.

So you'll need to actually sit down with them because they are typically a certified financial planner.

They have to take, you know, test licenses and to get certified with that.

So they're able to really sit down and break down with you in order to get you in that the best fit possible.

But one just for an example, one of the ones that I typically recommend my clients talk to their financial advisor about is a SEP IRA if they are S Corp.

So a SEP IRA basically where the company itself will pay in directly to retirement for you and you don't have to match with your personal funds, the company itself just pays for it for you.

And so that's a really good one especially if you are a sole owner in an S Corp.

So I typically will recommend that.

But again there are a lot of caveats there.

So I don't get too much into the complexities of that because I again I am not a cfp.

So definitely talk with a financial advisor about that though they do it for free.

So it takes about 30 minutes to an hour of your life and it'll be well worth it.

So for sure.

And do you have to offer employees pensions as well if you take employees on?

Yes.

So if you have employees, that's the other caveat that's part of it is if you offer whatever you offer for one included if it's Just for yourself.

Once you bring on employees, you have to offer it to them as well.

So just keep that in the back of your head.

Lots of think about, lots to think about.

So let's talk about employees then.

I don't know.

See over here people are either employed or self employed.

But I look at some of the posts that people put into the Facebook group about employees and percentages and pay rates and stuff, and I'm completely confused as to what the different statuses of employees or people are in the states.

Sure, we actually are very similar, it sounds like to you guys.

And so we do offer, we have an employee status which receives a W2 at the end of the year where the employer is responsible for withholding those federal and state taxes and it pays it on the employees for half.

And so, and therefore the other important key factors with being an employee is that you have benefits and coverage.

And I'm not talking about like insurance benefits, but I'm saying benefits in terms of the Labor Department offers protection.

You have to make a fair minimum wage, so you're covered that way.

So you're protected that way.

There is a really, really big gap here in the states and it sounds like it could be over in the UK as well where you have misclassifications.

So you have a lot of employers that are classifying what should be employees as independent contractors.

And in fact they call them independent contractor employees.

But that's, that's saying that's a hypocritical statement.

You're either independent contractor, which for your listeners, please understand that if you are labeled an independent contractor, you essentially are a business owner.

They're labeling you as a self employed business owner.

And so you are solely responsible for your own taxes.

You have to pay in those quarterly estimates that we've been talking about.

You have to maintain a financial system.

So again, it's a lot more complex for the actual employee.

Now I think there also is a misunderstanding with some of the groups because I'm on Facebook a lot and I'm on there talking about the do's and don'ts of the misclassification of the employees.

But I know a lot of people are saying that it's illegal and they're talking about it's illegal for the employee.

It's not necessarily illegal for the employee, it's just a lot more of a tax burden.

But it is absolutely illegal for the business owner to misclassify to the point where they can not only receive fines and penalties, but they can also even be depending on the severity of it be face criminal charges with that.

So that's how severe it actually is.

And we're not just talking about the irs.

Obviously there are state agencies folk with the income tax and then also with the unemployment.

State unemployment.

And then you also have workers compensation that gets involved.

So you have four different entities that are getting involved here that are very much interested in whether or not you're misclassifying your employees.

And so.

And it's, and it's not a pretty, it's not a pretty picture once they do come down.

So I highly recommend for any business owner, even if it was just, I didn't realize that.

I didn't know that you really look into correcting that as soon as possible because you don't want to be on the receiving end of those penalties in fines.

What's the, what's the biggest blocker for someone saying I'm taking on an employee?

You know, what's the, what's the biggest fear for them?

For business, it's the cost because you will have to pay in the unemployment, which is directly from the company's perspective.

You'll have to pay workers comp.

Which is directly a business expense.

And typically they're like, it's just easier if I don't have to file those taxes.

I don't have to get on a payroll system.

So it's the added cost to be able to do an employee correctly.

But the thing is that is part of your responsibility as a business owner to be able to do that and file in compliance with these agencies.

Yeah.

What would you say?

How would you define an employee versus a independent contractor?

Is that a clear definition?

Because it is the irs.

The IRS and also state agencies have listed, they actually have on their websites and we can link that later.

I can provide you those links.

But they actually do have, I guess, a test, so to speak.

If you answer yes to any of these questions, then you are actually an employee and not an independent contractor type situation.

And then also if you have an employee or if you are an employee and you feel like you've been misclassified, then they do have a form called the SS8 and you can fill that out and send it into the IRS and then let the IRS classify you directly.

And so the IRS will actually send you a correspondence VAT and say, no, you should be classified as an employee and you should be receiving X, Y and Z benefits.

And so just let the IRS kind of be the bag.

Now again, the side note for that is that the IRS will more than likely contact your Business employer, because they're going to need some information.

So once you submit that, they're going to know that you submitted it.

And you know, you have to take that chance, you know, because some employers might retaliate with that and you may not be working there for very much longer.

So.

And that's unfortunate and it's really unfortunate that you would have to get to that point.

But I really feel there needs to be a strong movement within the grooming industry especially that we start rectifying these wrongs, so to speak.

We need to clean this up because it is kind of a mess and it's not fair to the employees because they don't have those protections if they were to get hurt, they don't have workers cop coverage if they were to have to leave or get fired, they don't have unemployment.

I mean, so you're not getting any of your actual employee protections at that point.

Yeah, and I think there's generally people out there that are doing this because they have a real fear of employing someone and they feel that, you know, they're going to get tied up with all the legislation.

It's going to be hard to, if things don't go right, it's going to be hard to get rid of them.

And like you said, they have a lot of fear around the taxes that they have to pay, etc.

So you know, again, it's that knowledge is power, isn't it?

There's benefits to employing people, having that control over them and sort of telling them when they can and can't come in and stuff like that.

You know, that's what I absolutely.

Because then you get to control the employee and it's completely your business and then you do as the employer, you have the protection at that point you're not just an independent contractor, so to speak.

You actually can legally fire them and hire them and do whatever you need to with that.

So yeah, so there's also, it's a two way street for the vet.

So yeah, it's interesting, isn't it, how, and quite often, I suppose social media is to blame a little bit because someone will be, will be a business owner, will be like, well, how do I take on another person in my business?

I'll go to social media, see what everyone else is doing and replicate that.

But again, if we don't take independent professional advice from people, how do we know that sue down in the groomers down in the next town is doing it correctly?

If you're just copying them off what they, well, you know Ask a question in a Facebook group, get the answer and implement it.

How do we know that that's correct?

Exactly.

And that's the dangers of kind of just working with, you know, specific, you know, free Facebook groups and things.

But I will also tell you as a little side note to that as well is that I have heard many accountants that say, oh no, it's fine for you to do this because people will say, well my accountant told me it was fine.

I'm like, it's absolutely not okay.

Which is why it's so important to get an accountant within the industry.

Make sure you can, if at all possible, get an accountant that has other grooming clients that know the industry.

Because if you get a generalized accountants, again, not putting anyone down, but just generalized accountants, that's.

They just know the basics, basic things.

They don't know the market, they don't know the ins and outs of your industry.

So they actually could be more of a detriment than a health.

I love it.

I love it when people go to accountants for advice on, on their hr.

It's like, well, you know, we'll go to our scissors sharpener for website advice next and then we'll, but you know, we hold our hands up.

We've certainly gone to the accountant years ago for HR advice.

I don't know why they, they seem to be the go to place for this kind of advice and they always make it out some kind of contract or some advice as well.

But.

Yeah, yes, exactly.

But again I wonder if people feel that, well if I've asked someone else and it all goes wrong, does it make it their fault?

But like you said, when the irs, when we submit these accounts and we've claimed things on the accounts that we possibly shouldn't be claiming for, we're signing those accounts off, aren't we?

We're personally responsible for.

It's your signature on that tax return.

I mean even though we sign it as a preparer, pay preparer, it's.

It's still your responsibility as the owner.

Yeah, yeah.

The accountant's not going to pay your fines for you.

Exactly.

So what kind of let's, you know, that's a whistle stock tour of the US Tax if any.

Was that easy?

Yeah.

What kind of services do you offer as a pet biz advisors?

As a pet biz advisor.

Well, the good thing is, exciting thing is obviously I mentioned earlier we do offer, you know, the standard taxation accounting bookkeeping services.

So it's coming up in just a few months.

So we are starting up a new a membership paid membership plan where you can get on this website with other like minded groomers and pet pet service pros that will come into a community and you'll be able to get features such as access to me.

I will have office hours once a week.

I will have other accountants in in this group and we will have member spotlights so we might, you know we're going to service it and spotlight few of our groomers in their shops.

Interviews with industry leaders, experts and interviews with external experts such as insurance, legal, business coaches.

We'll have masterminds groups, folk community led and professional led mastermind groups.

Group coaching with certified professional coaches just like I was certified.

And we'll have forms, PDFs, worksheets will have also in another like so to speak.

I was a graphic designer so I love doing the design work.

So I will actually lead some workshops to be able to design social media ads and things.

And so we're only opening it up to 550 members and the cost is going to be 99amonth and so it'll.

I personally think it will be well worth it.

We do welcome people from across the pond.

You know, if you feel like you can get something out of this, especially if you're looking to expand, grow your business, that would be great.

You know it's I guess, you know, international.

It's not necessarily based just on the US if you're wanting to expand we would love to have you guys and some of your people on and helping out.

But we will start putting out announcements probably close to October as far as when you can start signing up.

And we would love to have you guys on.

Yeah.

So we can.

You can find out more at your website, can you which is www.petsbizadvisors.com.

yeah.

Lizadvisors.com and if for right now we, we did launch a brand new Facebook group and that is the Pet Biz Collective.

If you look on Facebook and you go to Pet Biz Collective and it's B I Z you can look us up and we would love to have you.

So it's open to all people in the pet industry.

Awesome.

Awesome.

Say no.

How did you start working with pet groomers?

Did you just find that you drew to them?

Are you, you know, have you got hundreds of pets yourself?

Is it something that you.

No.

Well, I have a few pets.

I have, I have two dogs and a cat.

I do Love pets.

I am a pet lover, but I actually had, I still have one of my good friends and she owns a location in Madison area.

And so she, and she kind of got started with, you know, pet creamers and she referred a few people to me.

And so therefore I started getting, like I said, a nice book of pet groomers.

And I noticed, I'm like, well, I'm giving very specific information for these guys.

I really started doing a deep dive into the industry as far as the do's and don'ts.

And especially when you're dealing with taxation for states.

There's a lot of caveats, especially with sales tax.

They are worrying that'll be a whole other thing we might could talk about one day.

But it just, yeah, it's.

It's a lot of interesting little features in there.

But I just noticed I liked working with the pet groomers.

I liked working with them.

I appreciated what they did.

And they're pet lovers themselves, so we're kind of kindred spirits in a way.

Yeah.

Yeah.

Awesome.

Well, it's been great catching up with you.

I'm still, you know, I pinch myself every day when I think about how, how easy it is to meet people like yourself all the way over in, in the States and able to communicate and chat to you about stuff.

And hopefully this episode will help help some of your like, colleagues in the States to, with their starting their business or maybe get a bit more clarity around their tax affairs or maybe prompt them to, to go and speak to you or an accountant just to.

Just to start thinking a bit more about their taxes.

And I had a comment from someone the other day saying, you know, I feel as I was a pet groomer, but now I want to be a business owner.

And I think there's a real difference in that, isn't there?

Like, yeah, yeah.

And I always say that, you know, we talk about employees, but when you take on an accountant, then, okay, they're not an employee, but they're part of your team.

And we need to grow our team because business is a team sport, isn't it?

Absolutely.

You can't do it by yourself.

No, definitely.

We can't have all the knowledge, can we?

Yeah, well, the thing is we, you know, as, you know, the outside experts, you know, we want to support business owners and the groomers to do what they do best.

We want to be able to take that burden off of them so that way they can lead them to be able to do what they want to do, which is brew and be with the animals.

So yeah.

So everyone needs to keep out for part two, which we'll organize and when we talk about profit first.

But for now, thank you very much and we'll speak to you soon.

Thank you.

Look forward to it.

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