The $70,000 Tax Mistake Most Women Business Owners Make with Emily Bowie

at Perstings, one of the number one things right away we pond off was our bookkeeping in Texas. I would not touch it with a 10-foot pole. They just asked me what they need and we sent it and voila, like I could not pay enough to have someone do it. Even when I was like a W2, I think I paid, I don't know, H&R block or whatever it is to do your taxes, but there's so much intricacy, so many, I don't know, like what even questions are asking anymore. And I kind of work in this realm, you know, but it's so complex, tax laws are ever changing and I always was afraid like if I got on it it, I'm gonna have no idea. So I just need somebody else to kind of palm that problem off to. So when people do the taxes themselves, especially business owners, I am amazed, especially when they're not a CPA because there is so much going on, but the thing I think people realize and we try to talk about at Perstings is taxes are not just April, gas that is like filing them, but there's so much pre-work that can be done to strategize, to pay less money or at least amount and to make it really successful. As a business owner, I was shocked how much we had to pay in taxes, just because income that you make, you have to pay your taxes on, which like you're kind of used to the company paying, but then as a business, you have to pay your taxes as well. And so it was just like, oh my god, Uncle Sam, please lay off, you know what I mean? We're just trying to grow. The taxes are a lot and so having someone who can help you with the nuances, help you save some is essential. And I know it sounds snory, like nobody really wants to talk about taxes, but it can see you a ton of money, they're super complex, palm them off to somebody, I swear it's the best investment you could make. And so we're excited to have Emily on today, who is a mom and a CPA. She runs a business with a couple other women who really help other women who are making money in their businesses to save on taxes. And just side note, I have never met more CPAs who are moms in business owners and they find it to be such a great career, but they really have to kind of create this career themselves because kind of the old CPA model is, you know, come in, nine to five and you're cubicle, but so many women are amazing at being CPAs. And so I know we work with a women own CPA business who are all moms. This one, they're all moms as well. And so it could be a really great business opportunity. Moms are awesome and so are CPAs. So check this out. And as a reminder, we do have a new little section on our podcast where you can put in an audio message. So we'd love to hear back what you thought of the episode. Any tax questions that you would have or what was super helpful resonated or if you got a tax bill that you just want to complain about, we'd love to hear about it. So dive into this episode. Can't wait to hear your thoughts and talk to you soon. Gloria Steinem once said, we will never solve the feminization of power until we solve the masculinity of wealth. Barbara Provost and Maggie Nielsen are the team at purse strings that will help you navigate the ends and outs of financial independence so that you can be financially fearless. This is Women in Money, the shit we don't talk about. Emily, welcome to Women in Money, the shit we don't talk about. I am excited for this conversation today because everybody loves taxes. Just kidding. Everybody hang on. This is going to be okay. This is going to be great. So let's start with Emily. Can you share who you are, what you do, and kind of what made you want to build a firm specifically for high earning women? Sure. My name is Emily Bowie. I'm one of the partners at Thorn Advisors. And a lot of what drove us to creating this firm is that we knew people were paying a ton in taxes and we wanted them to know what was available to them. But we also recognized a lot of tax strategy was missing cash flow help and actually helping them identify where to get the cash to do the tax strategy. And so we found that gap in the market and we were like, hey, we should probably do this. And both my business partner, Andrea and I came out of public accounting. I was big four. I did audit and she did taxes. And so it was one of those things for us that it started with helping the business owner and then it turned into, hey, what if we could reimagine accounting firms for accountants because we were like, hey, we want to be parents and be able to be available for our kids as much as we are for our clients. And so that really encouraged us to create the one in the first place. Oh, so you want to have like a work life balance? That's a radical thinking, Emily. Especially as an accountant. And it's fun when you meet like accountants that have personality. You know what I mean? It's like, this is not, we are not behind the desk, always kind of people. I mean, you guys are on social media. Clearly you're on the podcast. You have kids. So it's like a full life. Yeah. It's very different than people imagine. I think sometimes when they meet me, I'm sure. And that's what I always tell people like who, I've met a couple of women who are doing CPA and I was like, dude, I meet so many CPAs who are women-owned businesses who only work are all moms. You know, so it's like, I don't care when you get the work done, but we're, you know, and we know we have our busy season, but as long as it gets done, so it can be a really great opportunity, but you kind of have to make it yourself. We're kind of finding, you know, it's a plus and minus. And it's one of those things where it's not a paved path, right? So even if there are other ones, we're all kind of starving at the same time, you know? And I think it's interesting because kind of the conversation around it is like, you know, moms tend, well, we don't focus, but like society focuses on the fact that it's so hard we're doing everything, but we really want to reimagine that to be like, hey, look, this is an opportunity where we can be super present in our children's lives while also building legacy and wealth and helping other people do the same thing because that is a gratitude that we want to live in on our part because it truly is so freeing that we can do both and do it well without burning out and like, you know, I see your super women cape on. Yeah, I mean, we love the and that's coming in, you know, we can do both these things. We just have to do them kind of on our own terms. We're not going to beat nine to five in your cubicle, but we can get it all done. So you work more specifically with women earning over a hundred K in net income, and so many of them are still shocked by their tax bill every April. So what is actually going on there? Why does it keep happening when women are really making good money? I think what I notice is that when you're trying to juggle all the things and potentially when you're starting out in business, you're used to doing all the things in business because you do all the things in life. And so there becomes a time that a lot of people do not outsource their bookkeeping. And so then their bookkeeping only happens in the 11th hour to get taxes done. And so at that point, you're just working with what you have. It's really hard to be strategic then. And so I notice that women may struggle with that outsourcing option because they can do it. But I always try and challenge them to figure out if they should be doing it or even looking at the opportunity. If you do outsource that, then you can rely on those numbers and get real strategic and grow and scale so much faster. It was like the number one thing we outsource right away. We're like, we are not doing our own books. Like it's not going to, they're not going to get done. And you do need to be like a little proactive about that thing because also when people do it at the 11th hour, you are doing everybody and their brothers at the 11th hour. And don't have time to like really be like a supportive help. It's like, no, we're filing and getting it done. If you talk to me in December, we could have had some more chat. Exactly. Do you have like any good client stories of like a woman maybe who got everything right, but kind of ambushed at the end with all her tax bills? So I think what I tend to see and where I tend to see this happen. We have one client in mind having this conversation is that they probably should have made that S corp tax election earlier than they did. And what happened was they paid about $70,000 more in taxes than they should have. And so that is why it's so important of really knowing what your numbers are, where you're progressing to. So not just where you've been, but what business is going to look like going forward because it's not fun to be in the 11th hour after the fiscal year has ended and saying, oh man, I should have changed my tax election. Now, the beautiful thing is even though on paper, it says you can only become an S corp by March 16th is this year's deadline. I think it was. You actually can do a late election. And so even if you determine this October, November, December timeframe, as long as you get that paperwork done and in by the 31st, you can still get it back dated for the year, but you have to have all the boxes checked and all the metrics hit in order to get that done. And I don't recommend waiting until then, but it is a possibility. It's just usually when we're talking about people getting ambushed in April. it's after the fiscal year. So in this case, we were able to convert them into an S-Corp after a fiscal year for the current one. And then they ended up making that savings and more, because they made that election. And then they implemented some tax strategies that are available to you when you become an S-Corp. 70K is not a small number. Like paying a professional is 100% worth it, pays for itself time and time again. I mean, that's the thing is like, yes, I can do it. Am I doing it well? And what is it costing me for not having an expert? Because the thing I always highlight about like tax code, it is forever changing. I don't know how you guys keep up with it. I mean, like, I get professionals need CE's, but I feel like you guys do get the most because it's forever changing. And so it's like all these nuances. And then it's just that's I'm there's a reason why I'm not a CPA. So I'll let you do it. Well, and I think too with that same sentiment is I think there's some confusion of like who all of those finance professionals are, right? So like having a bookkeeper is one thing. Having everybody will say my CPA, most people who do your taxes, well, I shouldn't say no. In general, you do not have to be a CPA to be somebody who prepares taxes. And no, not all tax preparers are tax strategists either. And so I think it's also really important to know who is in your ecosystem of who you work with to because to your point about outsourcing and just knowing like what it's taking from you to not make take action is so big because we're not just talking about taxes here. This is growth and potential and scaling that has to be delayed because we didn't have the cash to them be able to keep going, you know? And so we work with like a lot of financial advisors to who some kind of do work on that tax strategy standpoint, but they say like I can't prepare your taxes, but I kind of want to work with your tax advisor all those different things. We love when everyone works together. So let's kind of talk about that difference between tax preparation and tax strategy and like why this matters so much for women who are building wealth. As I think it really gets lost in the shuffle of just taxes, you know, and you're like, oh, these are very different things and very different times of the year for sure. So tax prep is essentially what everybody's familiar with. It's what do you in March if you're in S Corp in April if you have a sole prop or just filing your regular taxes? And so that's, you know, your normal H&R block, all of those things. That's tax prep. And it is then kind of met with someone who is a tax strategist and not all tax preparers are tax strategists. Tax strategists are people that understand the tax code so that they can help their clients leverage what's available to them. And for a tax strategist, typically you will see they have some continuing ad for us, we're CPAs, so we're going to make sure that's where our continuing ad is. And the good thing about that is you know that you have someone in your back pocket when you're not sure how to handle a situation that you can call and say, hey, these are my opportunities. And then we can run like a scenario analysis. The one thing we noticed in the industry is there was a gap with the cash flow side of things where there were a lot of tax strategists that had good strategies, but then they couldn't help the client figure out how to have the cash to use the strategies. And so I have a fractional CFO background. I was an auditor in big for accounting, so I kind of came in and said, hey, we need to create this offer for people where they need help being able to identify the cash leaks they have in their business, operational inefficiencies that's really impairing their cash flow. And then we then help them with the tax strategy side. And I think it's interesting because we lead with taxes because everybody knows they have to get their taxes done. Not everybody knows they need cash to do their taxes. And so like when do you like if someone wants to work with the tax strategist, we don't meet in April. When do you meet how often do you meet like what's kind of that cadence of a relationship to make this effective and productive for you know a business and personal finances. So no matter if you come in just doing tax strategy or tax strategy with cash flow, we always start with goals because I think one thing that a lot of strategists can get wrong is they can get you so much money back, but then impair you from being able to do life things like get a mortgage or get a line of credit for your business. So we want to understand what your goals are. So then we can create a strategy that makes sense for you. Then we will meet with you after you fill out this like detailed tax organizer that tells us all things about you. And then we create a projection and then from there, we're kind of on call of sorts is the best way to explain it. And then we do a tune up quarterly from there. So the idea behind it is you keep us abreast of what's changing in your business and that's why we think it's important and imperative that we are connected to your CFO, your bookkeeper, your financial advisor, because all of those decisions then impact the tax strategy. And one thing I just want to note about financial advisors and their tax strategy, they share tax strategy based on the products that they can give to you. And so that's a really good thing to keep in mind is when we're talking tax strategy, we're looking at the holistic portion of it above and be on just any kind of investing and retirement related to it. And so it is a very key relationship that needs to be there and also a recognition that there's so much value added from having that financial advisor or financial planner in the mix because they're going to have insight on everything that comes into play as well. But also it's not competing with them so much as it's a good collaboration if that makes sense. Yeah. And that's what we like to kind of show is like it enhances everybody's decisions together, you know, and they can work kind of in you and to send. And it's interesting that you kind of ask about their goals because it's like, well, my goals is to make more money and pay less to Uncle Sam like what's anybody else's goal, but it is kind of different on the cash flow and how you take money out of the business and those things, which I think are harder to realize because again, tax we just have like pay is at least as we can Uncle Sam. Yeah, for sure. And it also matters personal goals too. So if you don't own your home now and you want to go own a home, you don't want to look like your broke on paper. So sometimes tax strategies can work in that way. We don't recommend those tax strategies, but sometimes that will happen. And I can't tell you how many times we have people that come to us that they're like, it was great. I got a huge return last year. And I'm like, yeah, but have you talked to a lender because a lender is going to see this and be like, you can't pay anything. Or you know, you won't qualify for that line of credit, which is, you know, typical in the business world piece of it too. And a big return is not always great. Can you kind of dive into that? Because like, I get it. It's like, we all love a paycheck. We all love some money coming to us that we didn't plan on. But why is that not always, we really just want to be even. And so why do we not want money? So in general, like, let's say not from a tax strategy realm as much as like the individual tax person getting their taxes done, you really want to be closest to baseline of not having a return, but not owing. Because that means you paid the government exactly what you owed them. And you didn't give them a free loan that they don't have to pay interest on, you know. And so that is why if you are getting big returns and you're not implementing strategic tax strategy, that means you're pre paying way more in taxes than you should. And then that, yeah, and is another thing that can hinder your growth because that money could have been in the business growing it or in your pocket and allowing you to be compensated well too. Yeah, because I was watching one of your reels where like somebody got like 15k back and great, I would rather have that money at the end of the day than network. But also, I could really use 15k in my business today, tomorrow, the next couple of weeks or in my personal pocket or just earning shit in a high yield savings account of 3.5%. I don't care where it is, but like it's interest growing. And so versus just like, oh, you hold on to this for a bit and I'll just come back and get that later from you. Like, yeah, and I feel like, you know, it's one of those things I live in personal finance realm as well. And I talk a lot about this too, where some people are not great at saving. So they utilize this as their when fall in order to make even every year. And my thought process or the hard question I asked them is like, what if you just grew in that area of your life? Like, how much would life be easier than you having to be stressed about that credit card dead that's piling up or whatever it's causing? Same thing to be true with businesses. Like, this stuff is hard to talk about when you're not a numbers person. However, I can tell you, if you're working with the right people, they would explain it in a way that educates you and enables you to start making these decisions on your own, you know? And 100% agree. And that's why we also love working with like a money coach. Is that somebody who can hold your hand weak to get it done? Because sometimes it's like you know when it's like I'm all hyped up in this meeting and then I go home and then it's like oh you know and so like having someone who will check in and hold you accountable to really change those habits will be worth your money. Well and being having someone that can talk to your specific situation, it's also invaluable because you can get all this information online. You won't necessarily know if it's good or not and but having someone you feel like you can ask and they have been and feel invested in your situation. They can then help you make decisions that would otherwise feel like you're just rolling the dice, you know? Yeah I know. So what is like one thing women earning over 100k are most commonly doing wrong with their money, especially when it comes to this kind of tax prop tax plan situation? Yes. So I think first and foremost if you are netting 100k or more meaning revenue less all your expenses and you still have 100k, then that means you should be a tax election of S Corp, right? I want you to make that transition from sole prop to S Corp because that transition in itself will save you money but it also unlocks all this tax strategy that's available to you such as an accountable plan, a gustar roll. Those things are invaluable once you have that in because they can be tax-free vehicles into your home in different ways so you're paying less in taxes. So when you then become an S Corp you have to pay yourself a reasonable compensation and I use quotations as I said that is basically if somebody were to replace you for the job duties you do then you would have to pay them a reasonable salary and when you do an S Corp conversion with us we help you figure out what that is. When you do strategy we help you figure out all the strategies you can use, right? But the reason I say that this is a problem is you don't have to pay yourself less, you just need to be strategic and how you pay yourself and I think there's a lot of misinformation online where they only give you like the height of the headline and not all the details of how it works like paying your kids the right way to pay your kids and how to do it so you don't have to pay associated taxes with it and so I think that's what women are potentially missing at that benchmark is not only these opportunities you know that sunk costs opportunity piece but then also having this inordinate amount of stress on them because they don't know what they don't know they just know they're paying a lot in taxes and it's a rabbit hole I mean it's a full rabbit hole especially I mean yeah on social media all you hear is like my kids know a millionaire because I paid them and you're like okay like how you know they're like you just made an account you're like okay well I know it's more than just opening an account like there is more to that and especially with the auditing you know so sometimes I'm like I'm hiring a pro just in case I get audited it's your problem now you know what I mean I won't remember what I did I think part of it too is I don't know it's just and maybe just because I'm in the professional service realm like I don't pretend to be a lawyer like at the end of the day if something comes up and I'm like that's a lawyer's job I'm not going to pretend like I know what I'm talking about I can give you advice as CYA as a business owner but like I'm not I'm gonna say hey let's bring somebody in that can actually support you and review the law behind it and I would say the same thing when we're talking about taxes they are confusing and sometimes you wonder if they are confusing for a reason so oh crazy but I mean I think that's the biggest thing is not to be afraid to outsource because it really does unlock capacity for you and gives you these opportunities to be more strategic and you know I'm all about anything that gives you your time back gives you your capacity back because I think capacity is one of those like under valued things sometimes in women's lives because we literally use every inch of our capacity to do everything if you're a business owner and a mom you're at malice capacity and try to keep like your love relationship also intact and your fun chips and maybe going to planification like absolutely not outsource yes and so could you kind of walk us through like what a 360 degree view of finances actually looks like in practice like what are those cash leaks and misdeed actions that most women don't even know to look for yes we actually have a guide for this I think the thing with the cash leaks are you know one is pricing oftentimes business owners price based on how the market is or how Sally prices over here or whatever the case may be and they don't really know if at the end of delivery they actually are making a profit or not so pricing without covering your overhead is usually the first cash leak I look at in all businesses and overhead is everything that's under that expense line in comparison to the revenue you generate so it's a percentage that you can use to figure out if you're pricing well and if not you can then just up it to what you want it to be it makes it a predictable margin or you can up it five dollars ten dollars a hundred dollars at a time whatever it's comfortable for you I feel like that's so much easier when you're selling like a physical item than like a coaching or a theory or you know like something more of a virtual product so that's really good especially women were known for underpricing which we are going to change you know we're not just making people feel comfortable and oh what do you want to pay and I try and remind business owners all the time like they're paying for all the businesses like say you're in professional services they're paying for all the businesses you've looked at they're paying for that college education you have in the CPA exam you've upkept this whole time like you know all of those things because they recognize you have a skill set so we need to charge accordingly and I truly believe you lose more clients without the zero on the end than putting the zero on the end because they're going to inferred value with the pricing piece too that's a good one are there other gaps that you're seeing yes especially if you have a bigger organization say it's you plus someone else the compensation structure is usually the next thing I look at like how are we compensating the people in our world we work with like a lot of therapists that are in group practices and so typically there's a standard way to pay them and then we kind of fight against the standard way to make sure you are you know not only making sure your prices are right but like the compensation piece of it is advantageous for you to actually outsource it because if you're outsourcing at a loss that's not going to do much for you you're going to have to then sell more of something else that's not at a loss to make up for it so really heavy looking at that another cash leak that I really encourage business owners to look into and it's not something you have to do it's something you can get rid of doing which is doing expense reviews and getting rid of things off the top so when you outsource your bookkeeping and you get your bookkeeping ask your bookkeeper for a transaction list and use at to just say in the D check like do I need this did this give me a return do I have two tools like softwares and above the one that everybody struggles with but like do I have two softwares that do the same thing or am I even using this thing anymore and so that expense audit it's great because you don't have to go sell more you don't have to go do more you just really need to be able to cut back on things that you had good intentions of using or it served you for a certain period of time but no longer does you know 100% I mean that's just like your personal finances too we have all these subscriptions we don't know about and sometimes it almost seems harder to cancel them than they are worth paying for which I thought we were making some rules about but besides the point you know like it it does add up and eventually at the end of the day it does pay off and so it is just going through those things and man so many I had great intentions to use I thought it was going to be like the secret sauce and I never locked it you know and then I had to find the password to cancel the account or like even coaching memberships where you've intended to go and you just haven't and it's been three years and yes you have a founding rate but like also if we're not using it and not getting a return we just need to let it go yeah it's hard but I think these are a ton of great tips and I'm going to make sure we have your download too so people can just kind of grab that and have that at their fingertips but taxes are complex and it's more than just April there's a whole method to the madness and it's a constant track-in constant team those different things do you guys do bookkeeping as well or do you have somebody else do that and the new guys come more for the strategy so we are really big on staying in our lane of strategy. We will do bookkeeping, but it's only for our strategy clients. If that, but we have a really solid network of bookkeepers that we like to refer to, that will also refer us. It's huge for us that we know your bookkeeper and we can trust the books that are coming in. And we have a good working relationship, especially if we're doing some cash flow analysis stuff, we need to be able to have books look a certain way to make it make sense and even with taxes too. So we try to not live in the bookkeeping world. It's something we will do, but usually we try to promote people to get that done somewhere else or with one of our preferred partners. And I think it's just yeah, really understanding kind of the layout of businesses looking for us. We have some great bookkeepers, we have some people who will train you how to use your quick books and help you set it up. And then you do it monthly, you know, and it's just kind of understanding how your team can plug and play and everyone can stay in their lane. And sometimes it's like, oh, I really need somebody who doesn't all in one. And somebody's like, I don't mind having these two people because sometimes more eyes is better, right? It's like all depends on what your mojo is. Yeah, for sure. I feel like we've quickly covered a ton of great content. Anything that we haven't touched on that like we're missing that we need to make sure the community knows. I think the biggest thing is not to be intimidated by tax strategy and kind of ward away from it. I've always heard people say like it's just not something I want to mess with. And I think you could be doing a huge detriment to yourself by not exploring it. But I also think you can be a huge detriment to yourself if you don't explore it with the people that you align with because there is a lot of judgment. There's a lot of strategy that's involved with it. So I really always encourage people just take that step to see if you're ready. We have kind of integrity policy where if I look at your books and I'm like, the juice is not worth the squeeze, I will let you know right away because to me, what would be the benefit? If you don't get a return, you're not going to be like, you should go work with them. Oh, I would say don't be scared that you're going to get yourself sold to or stuck in something like usually at least from our end. We're really straightforward about those things because we want you to win. That is our biggest goal. The strategy is ethical. It's not like these big businesses where the strategy is like, let's see the way we could cut corners and Uncle Sam will never notice. It's like, no, it's just the ethical way and why not save a little money if we got it. It is just that education that some people have and we're all good at our thing, right? And we're leveraging what people actually know is out there and available to you and make sure it's documented really well. So if there's ever a question, you have all the records you need to do it. So there is a question Emily. We like to ask all of our guests. So now that you are a business owner or mom running this thing, helping people with their taxes, helping people be rich women, what does financial freedom look like for you? Financial freedom really looks like not having to work but being able to work if I want to. And so for me, my biggest thing is I want to be present and available for my family. I've had, I lost my mom when I was young. And so for me being able to be available and present with my kids, but also family members if I'm needed is super important to me. So I always want to be in that trajectory of I want to work every day. Not I have to work every day if that makes sense. 100% I get it and I love it and I love that you even extend that to not just your, you know, nuclear family, but even that bigger family, which is so important as our population is aging, they're going to need us and we've got to be there to take care of them as that's another part of our women's role. Absolutely. That's the in which generation. Yeah, exactly. So we are definitely going to have all your links and all your good information in the show now, so people can reach out and keep the conversation going. But Emily, I appreciate you coming on, sharing your advice, making taxes fun. And until next time, I hope everyone is financially fearless. Thank you. You've been listening to Women in Money, the shit we don't talk about. Now it's time to take what you've learned and make bold moves towards financial independence. 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