Josh: Welcome to the Gym Heroes podcast. I’m your host, Josh Peacock. Today’s show is brought to you by Gymdesk, the easiest gym management software you’ll ever use. Take payments, create marketing automations, track attendance, and much more. To try the software out free, go to gymdesk.com. No credit card or painful sales call required.
Our hero today is Jessica Blasingame, owner of Beam Financial Group and a CPA. Jessica specializes in helping small businesses set up effective financial systems. And today, she reveals to us how to properly do bookkeeping for fitness-based businesses. She then walks us through practical tips for record keeping and accounting and dispels several common myths about taxes. Without further ado, Jessica Blasingame.
Alright, well, welcome to the Gym Heroes podcast, Jessica. Please introduce yourself, and give us your background in business and finance.
Jessica: Awesome. Thanks for having me, Josh. Yeah, so my name is Jessica Blasingame. I run a company called Beam Financial Group. And I’m a CPA, and I’m also a QuickBooks expert. And we basically work with our clients to set up their financial systems so that they have a mechanism for tracking their numbers, so that tax time is very easy, and also, so that they’re more connected to what’s going on with their business. So, you can make proper decisions, you’re informed.
Jessica: Yeah, that’s what I do.
Josh: Cool. So, that’s really what we’re going to be talking about today is a lot around bookkeeping and accounting and things like that. So, let’s talk about bookkeeping first. What should fitness businesses or even small businesses in general, what should they be tracking for the purposes of their own accounting? And what are the best practices around bookkeeping?
Jessica: Yeah. So, one thing I see with small business owners that happens a lot is they’re looking at their cash flow. So, they’re logging in, looking at their bank account and sort of managing things from there. But cash flow is very different than profit. And there’s a lot of reasons why it’s really important to understand your profit. And it’s just surprising to me how many business owners aren’t even tracking their profit. So, that’s the first thing you want to get set up is being able to see what your profit is. And profit is just all of the income you collect minus all of your business expenses, that shows your profit.
And that number is important to make decisions off of. It’s also important for tax purposes, because you’re taxed on your profit. A lot of people think you’re taxed on what you pay yourself or what you draw to the business. But you’re actually taxed on just the profit number from your business. So, that’s the first step is we always want to get business owners having a way to track their profit. And that can be done very simply in Excel. You could just be tracking, if you’re small, you could be tracking you know what income you collect, and what you spend on business expenses.
I’m a big proponent of getting into QuickBooks sooner rather than later, because it just makes your life a lot easier. There’s a lot of automation you can set up so that things are happening automatically. So, never too soon to get into QuickBooks, and then you know, you’re connecting your bank accounts and all the transactions are funneling in, and you can start to get to that profit number very quickly, which is always good.
Josh: Awesome. Cool. So, we have an idea of what we need to be looking at. Are there any other things that are good to track, like purchases, receipts, things like that?
Jessica: Yeah. For all of your business expenses, you want to be saving your receipts. And that can be done pretty simply. You could just snap a picture of it, load it into Dropbox, or you can load it directly into QuickBooks. QuickBooks even has some features that help you organize your receipts. But the most important thing is that you’re saving those receipts. Even if it’s paper receipts, and you’re putting them in a file and you’re organizing them some way, you just need to make sure you have them. Because if you were ever audited, they’re going to ask you to prove it. You gotta prove that you have that expense. And a lot of people will ask, “Can I just save my credit card statements?” It needs to be a step more than that. It needs to be the actual receipt.
Jessica: Because the IRS would want to see that it’s a business expense, not just… like, if you went to Whole Foods and bought some food for your team, they want to see… like, they want to see that clearly. They don’t want to just see the charge from Whole Foods.
Jessica: So, very important to save all your receipts. From an income perspective, just again, you want to be able to prove that. So, if you have invoices that you’re sending, or you have a system that you’re tracking income in, you just want to be able to like validate those income transactions.
Josh: Yeah. What if you took pictures of your receipts, would that count? Or do you need that physical copy?
Jessica: Yeah, picture is fine.
Josh: Just keep a picture.
Jessica: So, they can take the date and all of the information. Yeah.
Josh: Does QuickBooks will let you upload those pictures to it?
Jessica: Yeah, they do. You can upload, you can even set up an email address where you can forward your receipts and they just go directly into QuickBooks. That’s the easiest way.
Josh: Nice. Cool.
Josh: Awesome, awesome.
Jessica: But I mean, I simply just like put them in Dropbox. They just have a couple folders that helped me organize them, and I’ll take a picture and pop it in that folder.
Josh: Awesome. Yeah.
Jessica: Yeah, it doesn’t have to be fancy.
Josh: Yep, yeah. Definitely. Okay, so QuickBooks seems like it’s really helpful. It does a lot for you. Can you run the business off of QuickBooks? Or is it advisable to also hire a bookkeeper?
Jessica: Yeah, usually, I think you can start out doing QuickBooks yourself. If you’re small, you’re very small, maybe you don’t feel comfortable with the expense to a bookkeeper yet. A lot of my clients, they start out that way. First year or 2 of business, they’re managing QuickBooks themselves. Once it starts to get where they have a lot of transactions, and they don’t want to be spending their time doing that anymore, that’s the point where they usually hire a bookkeeper and outsource that function. It’s always a good idea if you can afford it to get it off your plate. Because that’s usually most business owners, it’s not their specialty. They want to be out like generating business. They want to be… for fitness professionals, you’re probably trying to get clients or you’re working with clients. So, it’s not really where you want to focus. So, never a bad idea. Of course, it has to make financial sense, but never bad idea to outsource that.
Josh: Yeah, yeah. If it starts to… that’s a good rule of thumb. If this starts to suck your time away from things that are probably more important than just tracking your expenses, then that’s probably a good time to hire out.
Jessica: Yeah. Because as a business owner, you’re usually specialized in what you’re doing, right? So, it’s a better use of your time to be focused on those activities.
Josh: Absolutely. So, I consulted for a bookkeeping agency several years ago, and what they told me was (on the marketing and because I’m not in finance), what they told me is that they’ve stepped in with businesses that had other bookkeepers and accountants that did a really not a good job. Like just even they’re like QuickBooks certified and all that, and they still did not do a good job. So, this is more, a little more off the cuff, but what should a small business owner look for in a good bookkeeper?
Jessica: Yeah. I think a lot of business owners, and I’ve had a lot of people come to me and same story. They’re like, “My books are a mess. The person messed up my books. They didn’t know what they were doing. They didn’t have the right expertise.” And business owners get in trouble because like, how do you know? You’re not a tax specialist. Like, you’re not a bookkeeping specialist. How do you know when things are going wrong?
I think it’s important to look for, start by looking for qualifications. I always… I mean, I’m a CPA, so I may be biased, but I think it’s a good idea to look for a bookkeeping firm that’s led by a CPA. So, maybe the CPA is not doing all the bookkeeping, but they’re at least overseeing it. Like, that’s what we do in our firm. Like, I oversee everything. I’m checking everything. So, someone else might be doing the bookkeeping, but I have the final review. So, that’s one thing that can be really good to look for, because I see a lot of people that they’ll work directly with the bookkeeper. And that person basically knows what they’re doing, but they don’t have the higher-level expertise, so things are falling through the cracks. That’s one thing to look for.
Also, making sure they understand your industry, you want to see that that bookkeeper has experience with your industry? Because there is nuance by industry. So, you can find someone like fitness professionals, find someone that’s used to working with fitness professionals or has several fitness professional clients.
Jessica: Yeah. Also, you can read their reviews, obviously, that’s always a good idea. Like QuickBooks has a pro advisor website. I think it’s just called Find an Accountant. So, you can look people up and see a bunch of reviews and make sure people are happy with that person. Yeah, those would be my big 3 things.
Josh: Cool. Yeah, that definitely makes a lot of sense. So, what are some common pitfalls that small business owners usually fall into when they start being more organized, I guess, about bookkeeping?
Jessica: Yeah. So, the number 1 thing I think is just that business owners aren’t seeing their numbers. They don’t have a regular practice for reviewing their numbers. And when I say numbers, I mean, you need to be looking at at least a basic profit and loss report every month. Ideally, also looking at a balance sheet. That’s getting into a little more accounting detail. But being in touch with your numbers and a lot… and just maybe getting a little bit of training around that, because I think a lot of business owners, they’ll tell me, “I looked at my profit and loss, and don’t really know what I’m looking at. What am I supposed to be calling out with? Like, what am I doing here with this profit and loss?” So, it helps to get just a little bit of training. And that’s like the same way I trained my team. I’m showing them, “What should you be looking at each month? There’s ways to kind of analyze that are very easy, that will help you call out issues, or will help you make decisions, or you can kind of identify trends that are happening with your numbers.
So, we’re always just trying to get people a little more connected and more comfortable with looking at their numbers each month. That also helps you identify what your taxes are going to be. So, if you’re looking at your profit and loss, you see that profit number, and you can estimate what your tax liability is going to be, that also helps you pay your estimated tax payments, which we’ll talk about later. But again, so that’s a big pitfall, business owners just aren’t connected to their numbers. And that happens a lot of times because they’re just too busy, or they’re a little scared to look at their numbers, because you don’t know what you’re going to see in the beginning of running a business, or they don’t know what they’re looking for. So, never a bad idea to just do a little bit of training or work with a professional, so you just have some guidance, and you know you’re sort of set up for success.
And also, with that is setting up the right systems. So, I’ve mentioned QuickBooks several times, making sure you have a little training and that software, so you know how to use it. And that could be an hour of training, it’s not a huge investment, but you have a system in place that’s tracking your finances that can produce reports for you, so that you can look at those monthly. That’s really important,
I also see a lot of pitfalls with business owners not understanding their tax obligations. And that, again, if you can do a simple training, or even if you want to Google it and look it up. But you have to have a basic understanding of what your obligations are. Like, small business owners have to make estimated tax payments. So, they’re paying throughout the year, instead of paying all at the end of the year.
Jessica: So, that’s something that business owners miss a lot, and then they can get penalized for that. So, just knowing that you have to make those payments is the first step. And then knowing a little bit how to calculate those payments is important. And it’s not that complicated once you just know that you need to do it. It’s like running a small business that you sort of get thrown in there. There’s no like manual or…
Jessica: So, you don’t even know what you don’t know.
Jessica: But it’s hard. And I mean, I struggle with the same thing. I came out of corporate accounting, which is very different than small business accounting. When I started my business, I was learning all this stuff as I went, and it was complicated. So, yeah, I mean, that’s one thing, estimated tax payments, knowing what you can deduct, your basic business deductions. That’s important. If you have other tax liabilities, some people are selling products, so they have sales tax, they have to pay, just work with a professional or do a training or something. Get some guidance around it just in the beginning. It will be a very low investment, but just so you’re set up and you won’t get any tax penalties or surprises down the way.
Josh: Yeah. That’s great advice. When I did… same thing happened to me. I was working for a company teaching martial arts. The company closed down, I still had students that wanted to train with me, and I wanted to open up, so I did. I found a location, I opened up, and then all of a sudden, I’m a business owner.
Josh: And I don’t know anything about taxes. I don’t know how to calculate it. So, I’m like, the information is not easy to find.
Jessica: No, it’s really not. It’s really not.
Josh: And I think it was operating for 3 months before I realized that I needed to get this thing from the county in order to run a fitness business, like certificate of authority or something. Yeah, so definitely. And I couldn’t really afford to like talk to a lawyer or anybody.
Jessica: I know.
Josh: But yeah, do your research. And I am curious, because QuickBooks is so helpful, and it does so much for you. Are there any helpful like integrations with QuickBooks that can kind of save you time in pulling in that information?
Jessica: Yeah. Let’s see. So, there’s a BillPay app. And a lot… you can do a lot of that through QuickBooks directly now. And a lot of the integrations that the apps use to integrate with QuickBooks, they’re now like part of QuickBooks. There’s like a time tracking feature. You have people that are working for you, you need to track their time, they can do it directly in QuickBooks now. Paying bills, that used to be a separate app, and now you can just pay bills directly through QuickBooks and come straight out of your account. Collecting like invoices, getting paid. You can get paid directly through QuickBooks now, which is really nice.
There are like receipt tracking apps that you can set up through QuickBooks. But again, like QuickBooks kind of does that on its own. There are if you’re going into… like, if you have a shop, you run a gym, you have a shop, then you want to check inventory, there are apps that you can connect in QuickBooks for tracking inventory. Let me see. What else? I mean, there’s pretty much an app for anything. So, if you trying to specialize and you want to connect, QuickBooks is great for that reason, because it’s kind of like an iPhone. It’s like, you can use Android, but you may have less access to some of the apps. Like, QuickBooks pretty much works with every app that’s out there right now.
Jessica: So, that’s kind of the nice thing about QuickBooks online, versus there used to be the desktop version, is it’s supposed to be customized. You’re supposed to start plugging these apps for your business. So, it’s a lot more simple. The software is simpler. But then you can build it out, like however you want.
Josh: Cool. Almost like Salesforce is kind of like that too.
Josh: But for like client relationship management, and all that. Marketing.
Josh: Yeah. That’s really cool. Cool. So, I guess we can… let’s transition to small business taxes. It’s a bit of a black hole thing.
Josh: Like I was saying before, I was like I had no idea what I was doing.
Josh: And I think I was probably late a bunch of times on sending in my estimated taxes.
Josh: So, how should small business owners approach doing their taxes? What can help make things smoother?
Jessica: Yeah. So, I think it’s a good idea for business owners to work with the tax accountant. A lot of tax accountants aren’t that expensive if they’re just doing like a pretty simple business return, maybe a personal return as well. A tax accountant will usually help you navigate the estimated tax process. They’re going to tell you approximately what you need to pay, if they’re good. They’re going to tell you what to pay each quarter. They’re going to help you calculate it. If your business is changing a lot, those payments can change. So, they’re usually going to help you navigate that process. If you’re doing it on your own, it’s totally doable too. We usually just say a simple way to estimate your estimated taxes is to take 25% of your profit and just do that each month. So, look at your profit and loss each month, take 25% of your profit, funnel it into a savings account so it’s there. You don’t have to worry about, “How am I going to pay this tax liability?” It’s there for you. And then you go to make your estimated tax payment, and you just pull it out of your savings account and make it, based off 25% of that quarter’s profit. As far as the dates to make estimated tax payments, I think this is where business owners get tripped up a lot. Because they’re not… they don’t make sense.
Jessica: You think they would just be every 3 months like after the quarter ends, but they’re different. So, it’s like there’s one in April. And then there’s one in June. There’s one in September. And then there’s one in January. So, that if you want those dates handy, I usually say you know, just Google 1040-ES, that’s the 1040 estimated tax payment. And if you look in those instructions, there’s a listing of the dates. So, just take a screenshot of those dates, plug them into your calendar, and then you know exactly when you need to make those payments. And you already have your stuff set aside in savings, so should be pretty easy. You can just make an electronic payment for estimated taxes. You don’t have to file a return or anything. The IRS just basically wants their money.
Josh: Yeah. So, that’s for Federal.
Jessica: That’s for Federal.
Josh: State’s probably going to be different. I remember, in South Carolina, I made payments every month.
Jessica: Oh, you did? You had to make them every month.
Josh: At the end of every month, yeah.
Jessica: Wow. Yeah, every State is different. Yeah, Well, I’m in California. So, in California, we do have State income tax. So, you would have to also make a payment to the state. It’s a very similar process. It’s obviously a lower percentage. You’re not going to pay a 25% to your State. So, it’s going to vary by every State. But you’re going to pay a small amount usually to whatever your tax board is for the State, California Franchise Tax Board. So, yeah, that’s important to think about too.
Josh: Yeah. So, that’s one of the things that really tripped me up. Because when I was looking at incorporating or organizing, I settled on an LLC and the LLC is a pass-through entity, and you’re supposed to be taxed on your income. So, I took that as, I did not do the… when I was calculating my taxes, I did not put in my costs and take the profit and tax. I calculated based on the profit. I calculated based on my total income.
Jessica: Oh, yes. You’re paying way too much, right?
Jessica: Yeah, yeah, yeah. And that’s really common. I see… I’m on Tik Tok. And I see a lot of people on tick tock saying, “Oh, I took this percentage of my income.” And I think it gets confusing because profit is also called net income. So, a lot of people will sort of abbreviate it and say ‘income’, but no, it’s profit. And then a lot of business owners are funneling all this money away into a savings account too much. And then they’re not even using it in their business. It’s like, well, you don’t have to set aside that much. So, I’m glad you mentioned that, because that does happen a lot. It is you do want to take out your business expenses.
Josh: Yeah, if you’re new to business, some of these terms can be…
Josh: If you’re in business, you use them, and everyone knows what you mean. But if you’re new to business, you don’t know.
Jessica: Yeah, I know.
Josh: So, you could misunderstand it pretty easily.
Jessica: Absolutely. And there’s a lot of misguidances out there. I see people all the time giving bad, bad tax advice, or they’re just business owners advising other business owners, and it’s completely wrong. So, it’s good if you can listen to someone that has either a CPA or an EA, that’s an enrolled agent, they’re licensed to prepare taxes, someone that has expertise in the tax realm.
Josh: Yeah. And you have to be careful searching on Google for articles, because the articles that are going to rank high in Google, some of them are just kind of like content farm stuff, and it’s very general, and it might not actually be accurate. It might not be useful to you. Could get you in trouble.
Jessica: Yeah. And it’s no specific to you, your personal circumstances, like how your business is set up, are you LLC or if you’re some other form, everything has to be considered. So, this general advice is never really a good idea to take.
Josh: Yeah. Are there any good resources for people you can reach out on informational level just to ask questions? I mean, your website, maybe or another website that’s really good?
Jessica: Yeah, absolutely. My website, I have some blog articles kind of a lot about these basic concepts, like estimated taxes or setting aside for setting into your savings account for taxes, or a lot of those introductory small business topics. Let’s see, other good resources. The IRS is a little hard to interpret, but sometimes I just send people to the instructions. So, if you know what your business type is, there’s a tax form associated with it. So, if you know that tax form, you can always look up that tax form, and there’s instructions with it. And so, sometimes, it’s just easy to do like a find… like a search within those instructions. If you’re wondering like if something’s deductible. Because they write out instructions for every single line on that tax form. So, a lot of times, that’s what I’m doing, I’m just like, “Okay, how did the meals’ deduction change?” or whatever it is, and I’ll just search on the tax form, and get my answer there, because then I know, it’s directly from the IRS.
And, yeah, I’ve been doing a lot of Tik Tok videos, and a lot of these basic concepts like the home office deduction, or how a write off really works. Or a deduction, a lot of people don’t understand how a deduction is different from a credit. So, I tried to break down a lot of these concepts on Tik Tok in short videos. So, that’s another resource.
Josh: Cool. Bite-sized.
Josh: Is there a difference between bookkeepers and a tax accountant? Can they be the same person? Should you have hire separate individuals for that?
Jessica: Yeah, there is a difference. So, the bookkeeper is doing everything. So, they’re doing a lot of the data entry, right? They’re entering and all your transactions. They’re organizing them into your books, so that you can run reports. And then those reports get used for tax preparation. So, then usually, a tax preparer is just doing the tax preparation part. So, they’re taking the reports, filling out the forms and filing for you. There are firms that do both. So, you could find a firm that is doing everything from all bookkeeping and the tax prep. More typically, it’s separate. So, you have people that are specialized in bookkeeping, and then you have people that are specialized in tax prep.
I personally kind of think it’s nice. I mean, there’s different arguments. Some people think it’saaa nice to have it together, because then it’s a holistic look at your books. Some people think that you have more expertise when it’s separate. It’s kind of like marketing. Like, you wouldn’t want to go to a marketing firm that does everything. You might need a social media manager, and you might go to someone that develops websites. So, I kind of fall into the camp of, “It’s nice to have it separate.” Because then you have someone that’s just an expert in QuickBooks, they’re an expert in bookkeeping. There’s a lot of nuance there. So, they know it inside and out.
Jessica: Or they know the tax law inside and out.
Jessica: Yeah. That might have been a long-winded answer.
Josh: No, it was I was processing it for a second, because I’m not just the interviewer, like I’m interested in these things. No, that’s good. I am curious about… because it’s just difficult to find good information online about this, about the tax benefits between like an LLC and an S Corp because we’re talking about small businesses. So, are there benefits back and forth, pros and cons between them? Is there a reason why you would be an S Corp instead of an LLC? Can you break that down for us?
Jessica: Yes, absolutely. This is so good. I’m glad you asked this. So, an LLC is not a tax structure, it’s just a legal structure. So, it is protection from… its protection for your personal assets. So, if someone were to sue you, they can’t… it’s harder for them to touch your personal assets. And that’s why people become an LLC. So, it’s never a bad thing to become an LLC. Now, as an S Corp, S Corp is a tax election. So, you can be… you have to be an LLC or some other structure first. And then you take this S Corp tax election, which means you’re treated a different way for tax purposes. So, you can be an LLC, and then take the S Corp election. And that’s what a lot of people are doing now, because S Corp has certain tax savings benefits.
Now, where a lot of people are getting into trouble is everybody tells you to be an S Corp. Like, you probably… if you’re looking it up on Google, or you’re on Tik Tok, or wherever you are, everybody’s like, “Get in. Be an S Corp. Tax savings potential.” But it has to be the right time for you. With an S Corp, you’re required to pay yourself, they call it a market salary or reasonable compensation. So, that means you have to pay yourself a salary that you would make if you worked for another company. So, if you’re just going to go out and get a job, what would they pay you with your credentials, your expertise, everything, right? What would they typically pay you, you have to pay yourself that salary as an S Corp owner.
After you do that, you can also take distributions on the business to pay yourself. So, you’re basically drawing money out of that business. And that, that money and your leftover profit are exempt from self-employment tax. That’s where the tax savings come in. So, self-employment taxes 15.3%. So, a lot of tax savings there. But you have to make enough profit that you can comfortably pay yourself, and then have profit leftover. Where people get in trouble is maybe they’re making like 40, 50,000 in profit, but then they need to pay themselves like that reasonable salary. So, then there’s no profit leftover once they pay themselves. So, they’re not really getting any tax savings. And then you’re just going through the hassle of being an S Corp, there’s certain things you have to… administrative things you have to do.
So, it really needs to be the right time to become an S Corp. But if you are making good profit, yes, be an S Corp, because then pay yourself, distribute the rest out, and then that money, that distribution is exempt from self-employment tax, which is great. So, that’s why I think it’s just important for people to understand like when timing wise, when they should become an S corp.
Josh: Yeah, that’s news to me. That’s really good advice. I know that when you organize an LLC, that you have a window where you can elect to be taxed as an S Corp, or C Corp or something like that. And then after that window, I mean, after that window, I mean, it could take a year, take 2 years, take 3 years or more for you to get to a place where you could actually make money from organizing an S Corp. Is there… like, is there like a form that you submit to be treated as an S Corp without like, reincorporating your business?
Jessica: Yeah, there is a form to take that S Corp election. And it’s good to have like either a tax accountant or an attorney file that for you when you get to that point. Because you want to make sure they understand your business, they’ve advised you on it, and then they can make that… it’s easy once you make the election. But you can run as an LLC pretty much until it’s the right point to be an S Corp. And then you just make that election, and you can get treated as an S Corp. Did I answer your question?
Josh: Yeah, you did. You absolutely did.
Josh: On the LLC, I know that… so, it is you said it’s a legal structure and protects you. I know that some people, especially people that are like solopreneurs, whatever, they’ll form an LLC, and then things will be a little bit messy between their personal finances and their business finances. And it is possible to my understanding for the veil to be pierced as it were.
Josh: What are some good rules of thumb to keep things properly separated so that you are actually protected by an LLC if you find yourself in legal trouble?
Jessica: Yeah. We talk about this a lot with our real estate clients, because you’re owning real estate, you set it up under an LLC, and there’s always a risk that you could get sued and they could try to take your house or things like that. So, first step, of course, set up the LLC. If you have multiple businesses, like real estate properties, for example, have them under separate LLCs. So, they’re all… each one is separate. That’s a good thing to do. Get your business and your personal, very separate. And that’s I think what you’re speaking to. There’s like a commingling of personal and business expenses. Maybe there’s like 1 that account that people are using. Don’t do that. From the beginning, set up a business, a separate business account. So, it’s under the business’s name. It’s only got business expenses in it, and your personal stuff is very far away. You never want anyone to be able to trace like your personal life. So, anything you can think of that keeps that separate is a good idea. Like, have your LLC have a completely different name from your personal name. What else do I see?
Josh: Are there pitfalls for business expenses? Like, say that you have a contract, you need to travel for the contract, you’re there for 3 days, but business expense is for a week, and you kind of take a little vacation on the tail of that. I mean, is there some problems there, potential problems? Like, is the IRS looking for things to flag on that front?
Jessica: They are. Travel is a highly audited sector, because people take advantage of it. All I can say there is document the heck out of everything. If you’re going to go for business, and maybe you’re going for a conference, save your conference receipts. Be able to show you were there for a conference, was 3 days, or whatever it was, and all your meals and all the expenses going on during that conference are deductible as business expenses. And then maybe you stay behind for a couple days. So, just save your receipts for that. And make a big notation on it, “This part was personal. I’m not deducting that.” The IRS wants to be able to follow your train of thought and see clear documentation for it. That’s what they would ask for in an audit. So, just be very aboveboard about it. And yeah, I mean, really, all you can do is document. They would dig into it if they were auditing you. So, if you can show like this is clearly a business expense, then they’re going to be pretty happy.
Josh: So, just like buying office lunch and stuff, that also classifies?
Jessica: Yeah. Meals are a little tricky. If you’re buying lunch for your team, that’s fine. They’re at the office and you’re buying lunch for your team, that is a business deduction. I think what a lot of… it gets a little messy when business owners are… like, if you’re solopreneur, and you go into a maybe a We Work pace, and then you grab lunch during the day, a lot of people will try to deduct that. You can’t do that. You actually have to have a business purpose for that meal. So, if you went and met a supplier or a client or someone like that and took them to lunch, totally deductible. You can’t just like treat yourself to lunch because you happen to be at work. Of course, and a lot of people do. They’re like, “Well, I’m working, and I have to eat.”
Jessica: But when you travel, it’s different. Because if you have to travel and you have to be away from your home, then usually you can deduct those expenses, because you’re on a business trip. So, that’s a little different, but yeah.
Josh: You’re sort of on the clock all the time when you’re on a business trip.
Jessica: Yeah. I mean, if you have to be away for business. You don’t really have a choice to like eat at home.
Josh: Yeah, yeah. And that makes sense. Because when you go and eat lunch at a normal job, that’s break. Like, you’re not on the company’s time.
Josh: But as it’s sort of an idea, like a framework. What if you ordered it and had a single person lunch-office lunch?
Jessica: Yeah, people ask me that. They’re like, “Well, I did Door Dash and I was at my desk.” Not really. It still has to be like a business purpose. So, you’re like conducting business at your meal.
Jessica: But one thing that’s really nice right now is there’s 100% business meal deduction, 2021 and 2022. So, the rest of this year, you can deduct 100% of your business meals if they’re from a restaurant. So, again, there has to be a business purpose with the meal. But usually that deduction is 50%. So, right now, you’re getting to take advantage of 100% of the deduction, which is nice in that world.
Josh: Yeah, that’s nice.
Jessica: It’s expiring soon.
Josh: Awesome. Cool. Well, it sucks about not being able to order in, but whatever.
Jessica: Well, just have a business purpose. Like, if it’s at a business meeting and you can’t get away, then absolutely. Or you’re like, on the phone with a vendor, you’re having like a Zoom meeting, I think you could probably get away with that, because you’re like, you have to be your desk. You have to be in the meeting.
Josh: Yeah, that’s pretty common. But if you’re a solopreneur, I don’t think you can… you’re not going to be able to explain that very well.
Jessica: Yeah. I had a client that was like, “Well, I can’t eat healthy.” He had like a whole really complicated explanation. It was like, “I can’t eat healthy if I’m on the go, and I have so much work to do. So, it have to get my food out, and it has to be healthy. So, like, I have to deduct it.” I was like, “Yeah, I mean, you can try to explain that to the IRS.” They’re probably going to be like, “No.”
Jessica: Yeah, “Nope.”
Josh: Awesome. Well, thank you. Thank you so much. This has been really insightful. Where can people find you? Where do you… what do you want to plug?
Jessica: Yeah. They can find me beamfinancialgroup.com. That’s my website, so can send me a note through there. I’m on Tik Tok. That’s my biggest social media platform these days. Yeah, send me a note through my website is probably the best way to reach me. I love to answer questions or chat about anything.
Josh: I can adjust that. I emailed you, and you got back to me like the next day. So, that’s cool.
Josh: That was awesome. It doesn’t usually happen, but it did this time.
Jessica: Yeah, I like to be responsive. There’s a lot of accountants out there that are not responsive. So, I try to not be that.
Josh: Awesome. Well, thank you again for coming on. Maybe we could do this again sometime.
Jessica: Yeah, that would be great. This was really fun. Thanks for having me.