Episode 747: How To Prepare For Tax Season Without Panic (+Top Deductions Food Bloggers Can Claim) With Amy Northard

EBT747 – Amy Northard

Intro 00:00

Food bloggers. Hi, how are you today? Thank you so much for tuning in to the Eat Blog Talk podcast. This is the place for food bloggers to get information and inspiration to accelerate your blog’s growth, and ultimately help you to achieve your freedom. Whether that’s financial, personal, or professional. I’m Megan Porta. I have been a food blogger for 13 years, so I understand how isolating food blogging can be. I’m on a mission to motivate, inspire, and most importantly, let each and every food blogger, including you, know that you are heard and supported. 

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[00:00:14]   

If you have ever wondered which expenses you can actually write off in your business or how to finally get your financial ducks in a row, this episode is going to be gold for you. I’m talking with Amy Northard. She is the Accountant for Creatives. She breaks down everything from treating your blog like a real business to what those top tax deductions are that you might be missing out on. Yes, you can even write off Mastermind groups, retreats and conferences. We cover bookkeeping basics, quarterly taxes, and exactly what documentation you need so tax season does not feel quite so overwhelming. If money stuff makes your head spin like it does for me, this conversation will calm your nerves a little bit and save you some money. Let’s dig in. I hope you enjoy the episode.

[00:01:05] Intro   

Hi food bloggers. I’m Megan Porta and this is Eat Blog Talk, your space for support, inspiration and strategies to grow your blog and your freedom. Whether that’s personal, professional or financial, you are not alone on this journey.

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[00:02:58]  Megan Porta 

Hi, Amy. How’s it going today?

[00:03:01]  Amy Northard 

Good, thank you.

[00:03:03]  Megan Porta 

I’m super excited to chat about this. It’s been a while since we’ve talked about the very exciting topic of finances. It’s very necessary to talk about this once in a while and touch on some of these things. So thank you for bringing this to the table today. Before we get to it, though. Yeah, super excited. Do you have a fun fact to share with us?

[00:03:23]  Amy Northard 

Yeah. So one thing that most people don’t know about me is I had actually two food blogs in my history. One of them was started in senior year of college. I was looking for a creative outlet, and I was like, well, just, you know, it was a very basic but, you know, taking pictures of my meals, having fun, playing them out.

[00:03:47]   

And then that one kind of fizzled out after I graduated. But then, like a year into my big girl job, I was like, that was fun, but I want to do it differently. So I started a new one. And those were, like, very much hobby blogs that both fizzled out. But it was fun and got to see a little bit of the food blog life.

[00:04:08]  Megan Porta 

Oh, interesting. So you truly know what it’s like to be a food blogger. I did not expect that at all. That’s really cool. Do you have any interest in doing it again or are you.

[00:04:20]  Amy Northard 

I mean, I. Now I’m more of. It has grown so much. I mean, that was, like, probably 15 years ago. It has grown so much now that I just have an appreciation for food blocks. So I don’t know that I’ll start one, you know, with running my business. But I love, you know, looking at our clients food blogs, just all the food blogs out there. Yeah, it’s really fun to look at.

[00:04:46]  Megan Porta 

That’s actually really good to know because a lot of your CPA and a lot of CPAs are like, what are. What is this? Food. Food blog. You’re a food blog. They don’t understand what our businesses are, so it’s really valuable to know that you actually do understand. So. Yeah, I’m really glad you mentioned that. So you’re a CPA and your business serves who? Do you just want to talk about your business just a little bit?

[00:05:13]  Amy Northard 

Sure. So we work with creatives in general. We have photographers, wedding planners, graphic designers, and then we also have like, content creators. So food bloggers, fashion bloggers, YouTubers, you know, in that realm. So we’ve really gotten to see a wide variety of different types of businesses and get into some of those, like, gray area questions with our content creators of trying to figure out, like, what you can write off, what’s the best way to do that, what documentation you need.

[00:05:46]   

So we work with them on bookkeeping, taxes, and we also have a virtual CFO option for folks that want a little bit more like strategic planning looking forward.

[00:05:57]  Megan Porta 

Okay, awesome. I love that. And when did you start your business? How long have you been doing this?

[00:06:03]  Amy Northard 

I started a couple years after I graduated college, so about 13 years ago now. Yeah.

[00:06:11]  Megan Porta 

Awesome. Cool. So let’s talk about some of the things that we should be aware of. So how would you say food bloggers listening could and should be treating their blogs like a business?

[00:06:25]  Amy Northard 

I would say it’s really easy in, in any stage that you’re in with your business to treat it like a hobby. So, like, with me, I started out as just a fun thing. If I had kept with it, then it could have turned into something where I’m getting ad revenue. And I think that might be how a lot of food blogs start.

[00:06:46]   

Unless you have already been in business and are starting a new one with that experience. So I would say, you know, as soon as you start making any income from your blog, go set up a separate business bank account. You probably don’t necessarily need to jump right into setting up another, like an LLC, but we can talk about that later.

[00:07:09]   

But having that separation and tracking through either a spreadsheet or a bookkeeping software, just so that you can have your eyes on what’s coming in and what’s going out. Because it can. You can spend a lot of money on, you know, coaching, education, all the supplies, all the fun plating and everything. And you need to be able to look back and see like, is this, am I making money or am I just spending a lot of money and time and still at a loss?

[00:07:47]  Megan Porta 

Yeah. So I mean, that’s super easy, right? To go to your bank and just set up a separate account. And you mentioned a Google sheet. It could be as simple as that. So those two things are kind of where you start. I know groceries are a big thing. Do you recommend. It’s such a pain, but I think that most people know to do this, like purchasing groceries separately. So family groceries and then your business groceries. Right?

[00:08:15]  Amy Northard 

Yeah. So, I mean, you want to think about like how if someone from the outside were to come look at your receipts, how would you explain what you are turning into them? So if you have a long receipt of food, that person’s not, it’s going to look like family groceries if it’s mixed.

[00:08:34]   

So it’s really hard to separate that out. But if you can show them, every time I go to the grocery store, I have a separate receipt for the business versus personal, then they can understand you have a process for it and you’re not trying to hide personal groceries in with your food blogging expenses.

[00:08:55]  Megan Porta 

Yeah. Okay, so aside from bank and budget and tracking, what else would you recommend to do to treat your blog like a business?

[00:09:06]  Amy Northard 

I mean, I would say that, you know, look into different ways of earning income. So there’s ad revenue, there’s affiliate sales, there’s, you know, online products that you can sell through your website. But not relying on one source I think is really important. We have seen with like any type, anytime Google makes an algorithm change to their search engine, it affects folks.

[00:09:34]   

So you don’t want to have all your apples in a basket with, you know, just getting income from ad revenue that’s based on Google. You know, same thing with Pinterest. Pinterest could change their algorithm and it affects, you know, page views. So the thing that I’ve seen our successful food blogger clients do is have multiple things going on with their business and they’re truly thinking about it like a business.

[00:10:02]   

Then at that point they can with, you know, doing regular bookkeeping, they are seeing how much is coming in and from each different source and then where the money’s going out. So if they have an assistant or they have recipe testers or things like that, they by tracking that and seeing it on a monthly basis, they can see how the business is doing and where they can invest money in.

[00:10:29]   

If you are thinking of it more like a hobby, you know, even just from a tax perspective, you lose out on a lot because with a hobby, from the IRS’s view, you have to report your income. So any income you earn, but really there’s no way of writing off any related expenses when they deem you a hobby.

[00:10:49]   

So you want to look at like the last three years of your income and expenses. And if you’ve had a loss for the business in the last three years, the IRS could come and say, you know what, this is really more of a hobby. It doesn’t look like you’re trying to make any money from this.

[00:11:09]   

So we’re going to disallow all of those expenses. And now you have to pay tax on any income you earn. So from a tax perspective, treating it like a business is huge. That loss isn’t the only thing they look at. They’re going to look and see, like, have you tried to make money?

[00:11:27]   

So are you trying to market the blog? Are you trying to advertise it? Are you doing bookkeeping for the business? Are you tracking income and expenses? So there’s a lot of different things they look at. It’s not just a black and white have you had a loss for the last three years? Type of a question.

[00:11:48]  Megan Porta 

Okay, that’s an interesting, interesting frame. But yeah, that makes sense. If you’re losing money and not bringing in more than you’re losing, then it’s probably not a business. Right, right. You mentioned llc. At what point do bloggers need to get an LLC for their business?

[00:12:06]  Amy Northard 

I think if you, if you talk to an accountant and a lawyer, you’re going to get two different answers. So a lawyer is probably going to tell you, you know, do it right away, separate yourself from the business. And I’m, you know, that is going to apply in some cases, in some cases not with blogs, you don’t have a huge liability.

[00:12:27]   

Especially food blogs, I would say, like, you are, you’re not selling the food to someone to ingest. So the chances of them suing you for a bad recipe, I would say is probably pretty low. So, like, if you’re in a state like California where you have to pay an $800 minimum annual fee for that LLC, you went away like, yeah.

[00:12:53]  Megan Porta 

$800? What?

[00:12:54]  Amy Northard 

Yeah.

[00:12:54]  Megan Porta 

Oh, gosh. I don’t think mine was that expensive in Minnesota. I think it was like a hundred dollars or something.

[00:13:01]  Amy Northard 

Yeah, most states aren’t, but California is an example of one that’s really high and you really want to double think, like, do I need this LLC or not? Because when you’re switching gears to a tax perspective on it, just becoming an LLC doesn’t save you anything. You are still taxed as a sole proprietor, so there’s not any benefit there.

[00:13:26]   

We typically tell our clients who are making more than $50,000 in profit, so after expenses are taken out, they have $50,000 left. We tell them, let’s start thinking about becoming an S corporation. So with that, you have to be an LLC first, and then you can submit the paperwork to be taxed as an S corporation.

[00:13:51]   

So that is when I would say you definitely need to set up the LLC, because you can’t, you can’t make your S corp retroactive to before that LLC was set up. So if you want the tax benefit, then you need to, to get your LLC set up. Otherwise it’s not, it’s not going to help you from a tax perspective to just set up a bunch of LLCs for every different business venture that you’ve got.

[00:14:22]  Megan Porta 

Yeah, I can’t remember. I think it’s fairly. It’s been so long since I’ve done it, but it’s a fairly easy process. Right. You just fill out a simple form from your state.

[00:14:32]  Amy Northard 

Yeah, I mean, if it’s just you as one person, it’s super easy to go right to the state’s website, pay them their fee directly. There’s a lot of services out there that you can, can pay an extra fee and answer questions through their website and then they submit it for you. And I have seen a lot of those go wrong. And also you’re just paying way too much for something that you can do directly with the state.

[00:15:00]  Megan Porta 

Yeah, I’ve seen those. If you do a Google search, just be careful that it’s not a third party because like you said, it is super easy to do yourself and not pay that extra fee.

[00:15:11]  Amy Northard 

Yeah, same with actually the tax ID number. So if, like, if you go to the bank and you want to get a business bank account set up, if you are an llc, you’ll want to take your articles of organization with you and your EIN number. If you go. If you just Google EIN, I’m not sure what the top one will be, but you want to make sure you go to irs.gove/ein and get it directly from them.

[00:15:38]   

You. That is a free service. So you should not be paying to get a tax ID number from the IRS and you would take both of those things to your bank and they would use that to set up the business bank account under the business name.

[00:15:53]  Megan Porta 

Yeah, I’m glad you mentioned that too. What are. Oh, well, first of all, is there anything else that you would mention as far as just making sure you’re treating your blog like a business?

[00:16:04]  Amy Northard 

I mean, I think those are going to be the main things just don’t get in the. What I see a lot of is because a lot of blogs kind of start out in the hobby mindset, is that it’s hard to decide when to switch over and, you know, start separating things out. So do it sooner than you feel like you need to.

[00:16:28]   

I would say that allows you to have all of your expenses flowing through one bank account and it makes tax time and bookkeeping a lot easier. If you don’t have to sift through, like, oh, what was this purchase for at the grocery store? Was that business or personal? It’s a lot fresher.

[00:16:46]  Megan Porta 

Yeah. It’s kind of a pain to separate, honestly, but once you get it, it’s so nice to have everything just organized that way up front. Can you talk through a few of the typical tax deductions you see for food bloggers?

[00:17:02]  Amy Northard 

Yeah, I mean, we’ve already talked about, like, food and supplies on that end. One of the big ones is going to be home office. So you might not think, like, if you might think, oh, I’m doing most of my work in my kitchen. But if you have an office space set up in your home and it doesn’t have to have four walls and a door, it can be like a little area in your basement that you have your desk at and your chair that you work from.

[00:17:29]   

That square footage can count towards a home office deduction. One of the questions I get a lot is, you know, what about my kitchen? I use my kitchen mostly, you know, a big part of my business. And the problem with the kitchen is that it’s also used by your family or for you, you know, if it’s just you, you’re also using it to cook your personal meals.

[00:17:52]   

So it’s not something that is exclusively used for business purposes. The two tests that there are for home office space would be regular use and exclusive use. So if it meets both of those tests, you’re using it on a regular basis and it’s only used for business, then that square footage can count towards the home office deductions.

[00:18:19]   

And then you can write off things like mortgage interest, rent, utilities. If you have an office space that you know is separate from the home or, you know, is a room, if you paint that office space or like, you have art behind you, you know, art on the wall in your office space can be written off.

[00:18:42]   

So anything that is 100% used for your office space can be written off at 100%. Everything else, like Internet utilities that benefit your entire home have to be written off at, like, a percentage. So, like my home, let’s say my office is 10% of the entire square footage. That means I get to write off, you know, 10% of the rent and utilities and that sort of thing.

[00:19:13]  Megan Porta 

So basically, you would take your exclusive, regularly used area of your house that you use for your space and figure out what percentage of the full square footage of your house that is, and then write. Write it off based on that?

[00:19:31]  Amy Northard 

Yeah, I mean, if you, like, if you work with an accountant, they’re going to collect that information and do the calculation for you. So what you would need to track is like total amount I spent on utilities, total amount spent on Internet, those sorts of things. That’s what you as a business owner needs to track.

[00:19:51]   

Even if you use something like TurboTax to do your tax return, they’re going to want those whole, whole total numbers. They don’t want you to apply the percentage. But yeah, that’s the information that you would gather.

[00:20:04]  Megan Porta 

Yeah, but as a CPA, you do that legwork for us. You just gather information. We don’t have to do all the calculations, which is great.

[00:20:11]  Amy Northard 

Exactly.

[00:20:12]  Megan Porta 

Yeah. Any other tax deduction information that you think would be helpful?

[00:20:18]  Amy Northard 

Yeah. So one of the other ones that I don’t think people think of is mileage. You’re probably not driving to meet with clients, but if you’re driving from your home, which is like your home base, to a grocery store, every time you do that, the mileage there and back counts as a write off.

[00:20:36]   

And so, you know, it might not seem like much, you know, if you look at one trip, but when you think of it as going back and forth maybe at least once a week to the store over the whole course of a year, that can add up to a good sizable chunk of a deduction.

[00:20:55]   

And you know, you can have like a sample of your year and then extrapolate that for the whole year so you don’t have to have a log that has the date, the starting point, the ending point, and the miles for the entire year. As long as it’s pretty good sample of what you would normally expect for the year.

[00:21:18]  Megan Porta 

Okay, and then how do you recommend keeping track of that sample? So like just keeping track in your phone when you drive around or on a notebook or. I mean, could it be as simple as that?

[00:21:31]  Amy Northard 

Yeah, it can be as simple as having a notebook in your car. Me and my husband are working on like rehabbing a property and so we have to track our mileage there and back. So we. I have a Google Drive document that I like saved as a link on my home screen so I can remember to get easy access to it and log our trips there.

[00:21:52]   

QuickBooks Online, if you have that, their app for your phone has a mileage tracking feature. I haven’t used it, but it’s in there and it’s not something extra you have to pay for. And then another popular one, and I would say this is more, probably more popular with like real estate agents and photographers because they’re they’re doing a lot more driving, so it’s worth it.

[00:22:16]   

But MileIQ is another app that you could pay for. And how those work when they’re on your phone is if they sense that you’re going more than five miles an hour, they will start logging the trip. And then you. They’ll have like a list and you just have to mark like, this was personal or this was business.

[00:22:40]   

Eventually you would want to add the purpose to all the business trips, but at least it tracks it so then you have something to go back and look at.

[00:22:50]  Megan Porta 

Yeah. Wow, that is. That seems so intelligent that it can know you’re driving over a certain speed and start logging. Crazy.

[00:22:59]  Amy Northard 

Yeah. You have to have your GPS turned on.

[00:23:03]  Megan Porta 

Gotcha. Yeah. Anything else for tax deductions that we might not know about?

[00:23:08]  Amy Northard 

Yeah, I mean, education would be one. So, you know, people are buying courses or different types of education, going to conferences. Those can be written off as long as they’re relating to the, the blog world and helping you grow your blog knowledge. If you do go to like a food blogger conference, you know, your mileage to the airport can count, your hotel while you’re at the conference, your Uber from the airport to the hotel, you know, literally everything from when you leave your house to when you get back from that food blog conference can be written off.And you know, there’s. I don’t know how much travel is involved, but like, that’s the main thing I could think of.

[00:23:53]  Megan Porta 

And let’s see what percentage of like courses or mastermind groups or things like that that people join. Can you write off?

[00:24:02]  Amy Northard 

Yeah, you can write off all of that. As long as it’s not like a course in how to start a bakery or you know, like something that is not related to your food blog, but as long as it’s related to the blog, you know, that can count. If you had like an in person mastermind or like you met with there’s like, you know, entrepreneur groups in towns or cities that, you know, folks meet up with and get to talk with different types of business owners, those, you know, mileage to that or attendance fees to attend, that type of thing would be, you could write off. Or like if you got lunch with another food blogger or another business owner and wanted to talk business during lunch, you could write that lunch off.

[00:24:47]   

So as long as there’s a business purpose and as long as you are tracking it in some way, which it could be like a calendar, you know, event where it was like, I’m going to have lunch with Megan and talk about blog metrics or something like that. You know, tracking that little bit of information would be helpful if you ever had to kind of prove that it was for business.

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[00:25:32] Megan Porta  

I mean, we do that all the time. I get together with friends just for coffee or lunch, and we’re talking business the entire time. And then I’m like, oh, I can write this off. Let me, let me buy. Yeah. So so many opportunities, retreats, conferences, online virtual groups that you join. Masterminds. Yeah, Anything along those lines. Courses that are relevant to your business.

[00:25:56]   

I think a lot of us don’t think of these things. We just think their expenses, like, oh, I have to, you know, find the money for this whatever group. And we don’t think about the fact that we can write it off, which is a huge bonus.

[00:26:12]  Amy Northard 

Yeah. I mean, and also, like, if you have subscriptions to anything, I mean, it could be software subscriptions, those sorts of things, but, you know, funnel those through your business bank account so that you’re not losing them. Like, if you have that $1.99 Google fee that they charge for, like, usage of, there’s, you know, like, even it’s a little tiny thing.

[00:26:36]   

But move that over to your business bank account and get credit for anything. Even. I was, I just had all of my apps on my phone, like renew within a month period of time. And so I was like, oh, I need to move over my video editing app over to the business account.

[00:26:54]   

Like, even things like that that you might be using to make TikToks to promote your food blog. Anything that you’re paying, you know, to help you create content can be paid through the business.

[00:27:08]  Megan Porta 

Yeah, super helpful. Is there anything else before we move on that you can think of, deduction wise?

[00:27:14]  Amy Northard 

I mean, I think those are the highlights. You know, obviously contractors that you pay to do your website, do Pinterest, you know, social media folks. Anyone that’s helping you that you’re paying for the business, you know, obviously run that through the business. Get credit for those expenses as well.

[00:27:33]  Megan Porta 

Awesome. Well, thank you. I think that’ll give people some really good ideas. Yeah, that’s super helpful. Do you have any thoughts on just kind of more general business structures?

[00:27:44]  Amy Northard 

Yeah, so we kind of already talked about the sole proprietorship and the single member LLC. Those you know, your taxes as a sole proprietor, you’re paying self employment tax and income tax on any profit that you earn from the business. If you decide, you know, once you kind of cross that $50,000 profit threshold and an S corp makes sense, I would definitely talk with an accountant at that point.

[00:28:13]   

That’s not something I would recommend diying. But you know, once you’re at that point, then you get tax savings by not having self employment tax on your profit of the business. There’s a, you know, there’s more nuances to it than that, but that’s kind of the basics of how the S Corp can save you in taxes.

[00:28:34]   

And then, you know, there’s also the partnership. I don’t see many partnerships when I do they, unless it’s kind of a family partnership, they tend to split up. We do have some partnerships that have lasted, you know, many years. But before you just start a partnership from the very beginning, consider if it needs to be more of a contractor relationship or something like that where you say, you know, for this project, maybe you’re going to work with somebody on a resource that you’re going to sell for this project, you know, we’ll split the profits 50, 50, but that doesn’t mean they need to be a partner in the business.

[00:29:13]   

You can pay them 50% of the profits from that project and you know, they, they can take that and deposit it into their business. So I would say partnerships aren’t super common. They do require a separate tax return just like an S Corp does. So they can be a little bit more pricey in terms of like the tax side of, you know, compliance there.

[00:29:38]   

But yeah, those are your kind of your options. And then, you know, like we talked about with the LLC, you’ll want to check with your state to see how expensive it is. California is definitely the worst offender in terms of the annual fee. New York has a lot of hoops to go through as well for LLCs there.

[00:29:56]   

You have to put things in the newspaper and that sort of thing. So, you know, just check with your state. Every state’s a little bit different. All the rates are a little bit different and what their requirements are for. Okay, setting them up.

[00:30:12]  Megan Porta 

Yeah, it’s crazy how different things are from state to state. I’ve heard that as well. And then as far as like, I know S Corp talking about that can feel really confusing, especially if you’re just starting your business. But if you have a good CPA, they’re going to know obviously how to direct you with that. Right. So it’s not something we need to worry about.

[00:30:32]  Amy Northard 

Yeah. And I would say like I, I’ve talked with some folks recently who just, they heard an S corp was a better tax structure and it would save them in taxes and they jumped into it. And you know, maybe from their accountant side, the accountant was like, ooh, more money for me because now I have, you know, a tax return and they need to outsource their bookkeeping.

[00:30:52]   

But you really don’t want to do that right from the start. I really recommend waiting until you are. It looks like you’re going to be making more than $50,000 in profit. And the main reason for that is you want the tax savings that the S Corp is going to create for you to exceed the additional expenses that you’ll have.

[00:31:13]   

So you’ll job, you have to put yourself on payroll. So there’s about 5 to $600 fee for the year in terms of payroll software. An S Corp tax return is going to be about $1,500 to $2,000 a year for that. So those are some of the things your accountant will run through with you.

[00:31:30]   

They’ll use your numbers, calculate the estimated tax savings, make sure that’s more than the additional cost that would be involved, and then you guys can come together as a team and say, yes, we both agree this is what we want to do, or maybe we should put this on hold and see how next year’s gonna look.

[00:31:48]  Megan Porta 

Yeah. And that kind of leads into quarterly taxes. Can you explain what that is?

[00:31:54]  Amy Northard 

Yeah. So there’s two types of quarterly taxes and they get confused. One would be sales tax that you have to pay on a quarterly basis. So that’s gonna be like if you’re selling in, in most cases, if you’re selling a physical product, you charge the customer sales tax if it’s in your state, if the customer is in your state.

[00:32:13]   

And then you have to pay that in on a monthly, quarterly or annual basis. But what most people are referring to when they hear about quarterly taxes are the quarterly income taxes. So there’s not actually anything that you file with these quarterly income taxes. It is just you sending a payment into the IRS or your state, you’ll tell them your Social Security number so they can match it up, you know, with your tax return when you file.

[00:32:42]   

But you want to think of it like you’re paying a deposit towards your year end taxes. So if you’re fully self employed, you don’t have anybody else sending in payroll taxes on your behalf throughout the year like an employer would. So the IRS is a way of motivating us to send payments in throughout the year is they charge a little bit of underpayment, penalty and interest if you owe more than $1,000.

[00:33:11]   

And there’s cases where this doesn’t apply. But, you know, in general, if you. If you think you’re going to owe more than $1,000 to the IRS, that’s kind of a good time to start thinking about paying in on a quarterly basis. If you don’t do it, you won’t get a notice in the mail from the IRS saying, where’s your quarterly payment at?

[00:33:32]   

But when you file your tax return for the year, you might see a line item on there for penalties and interest. And it’s not. It’s not going to be a huge number. It’s not going to just devastate you just with those penalties and interest. So a lot of people just end up paying at tax time.

[00:33:50]   

But if you want to avoid those and you don’t want to have that huge, like, massive potential tax bill, it’s a good route to go.

[00:33:59]  Megan Porta 

Yeah, that. That’s overwhelming. When my income went up a few years ago, I was like, whoa, this. It was so overwhelming to me that I. Yeah, it’s almost like, why am. Why do I have this business? So anything you can do to kind of take the edge off of that, I think is smart.

[00:34:21]   

But it’s a good problem. Right. Because if you’re paying more taxes, that means you’re earning more revenue. So it’s. I try to frame it that way.

[00:34:28]  Amy Northard 

Exactly. Yeah. Think about it in a positive way. I mean, obviously you don’t want to pay more tax than you have to, so that’s where the deductions come in. But we have kind of started recommending to clients, like, once you finish that month’s bookkeeping, look at the profit, so whatever’s left after expenses, and move 25% of that, you know, to.

[00:34:51]   

To a personal savings account for the IRS payment and move about 5% of that over for the state payment. So roughly about 30% you’d be moving over as tax savings. And, you know, if you want less bookkeeping to have to deal with, just make it a personal savings account. It can be a high yield savings account.

[00:35:12]   

So it’s earning you a little bit more interest than a typical savings account. And then it’s there waiting, and it’s a little bit less painful to write the check out of that than, you know, your normal bank account that you’re operating out of.

[00:35:25]  Megan Porta 

Yeah, a little bit less painful I like that.

[00:35:28]  Amy Northard 

Right.

[00:35:28]  Megan Porta 

Okay, so what do we all need to document? I know a lot of people ask like, do I need to keep every single receipt from the grocery store? What do I all need to keep track of?

[00:35:40]  Amy Northard 

So you’ll want to keep the receipts, but you can just take a picture of them and save them in the cloud. I have found that Google Drive is the best for this because when you scan the receipt, Google Drive will pull out automatically the date and the merchant name. So if you go to Kroger and buy groceries, they’ll pull the date and Kroger make that the file name and then you can press save.

[00:36:11]   

And that’s really the, I would say the bare minimum that you need to do. You don’t need to go above and beyond and have everything perfectly sorted. Just have it in a way that if the IRS ever asks you or your state to provide documentation for certain expenses, then at that point you can go back and spend the time to, you know, print out the receipts, organize them.

[00:36:36]   

You would need to have, you know, a receipt matching up with every expense that you write off. Otherwise they’ll, you know, if you’re going through an audit, they’ll probably disallow anything you don’t have an actual receipt for. If you have email receipts, I have a Google folder that I just save all those to.

[00:36:53]   

So anytime any type of receipt comes through, I save it there. Theoretically, it would be great if you could print those to PDF and save those. But you know, it’s not something. If you have an assistant, you need a job for them, go ahead and do that. Most folks aren’t going to take the time to do that.

[00:37:09]   

But one thing you can’t just rely on would be bank statements because those don’t show the detail of what you bought from the store. It could be anything. You know, if you’re going, especially with food blogging, if you’re going to the grocery store, they see a line item of the grocery store name, they can’t tell the difference.

[00:37:29]   

So definitely with those, be sure to keep the receipts. And you know, you might even go so far as like writing on the back of the receipt or in the front what the supplies were for. Like if they matched up to a certain blog post, you could write the date of or the date and name of the blog post on there.

[00:37:49]   

We’ve only gone through one large scale audit and it was a fashion blogger, so I have that kind of frame of reference of what they asked for. And they were really heavy on just having documentation and the why behind expenses. So, like, she went on a trip. Why did you, why did you go on this trip?

[00:38:10]   

What was the business purpose? So there had, you know, we had to scrounge up all the documentation we could on what the trip was for and, you know, how it was for the business.

[00:38:22]  Megan Porta 

Yeah, I have been through an audit, so I understand. And it, and it certainly helped me to become more organized and think through things a lot more, including bookkeeping, because I thought my bookkeeping was great, but it was not. So now I’m much better at it. And I do just run a Google sheet, which I think it works really well for me.

[00:38:46]   

I know a lot of people want to go a little bit above and beyond that, but for me, that works great. So can you talk about what kind of basics you think should be in place for bookkeeping?

[00:38:57]  Amy Northard 

Yeah, I mean, when you’re thinking about what bookkeeping, you know, route you want to go, I think you really need to think through what you will actually do on a regular basis. So if you log into QuickBooks and you get paralyzed every time you’re in there, you’re not going to do it on a regular basis.

[00:39:15]   

So that’s not going to be a good fit for you. If you feel more comfortable with spreadsheets, then, you know, definitely go that route. I do think there’s, there’s a point where you can decide, do I need to outsource it or keep doing it myself? And I would say if you can never make yourself do it yourself, whether it’s a spreadsheet or a software, and you have enough profit coming in to the business to outsource it, that’s usually a good hint that that’s something you really need to take off your plate.

[00:39:49]   

But choose which method you want and then go through whatever you do. You want to do a reconciliation process. So this is, you know, essentially just print off your bank statement and you have open your spreadsheet or your bookkeeping, and for every line item on your bank statement, you want to make sure that it shows up in the software or your spreadsheet.

[00:40:12]   

So I used to have a physical highlighter and I would highlight on the bank statement and then use my highlighter in Excel and highlight the transaction. You know, a spreadsheet is going to be a lot more manual process, but that is the basics of doing what’s called a reconciliation. Just want to make sure those match.

[00:40:32]   

There’s nothing extra in the software and there’s nothing extra showing up on your statement. As long as those two match, then you can feel pretty good about the bookkeeping that you’ve done. And I guess the other thing I would say is stay away from just calling things miscellaneous. That’s going to be a big red flag for the IRS.

[00:40:53]   

If they see just a big, you know, unlabeled, essentially category of things that could have anything in there, they’re going to probably ask you about it unless it’s just like a couple hundred dollars. So really try to do your best in coming up with categories. One category is not going to be written off at a higher amount than the other, except for when it comes to, like, business lunches or business dinners, you know, meals out.

[00:41:22]   

Those are. Have a different weight. But everything else in the business, it really doesn’t matter what you call it, as long as it’s descriptive enough. On the flip side of that, you don’t need to have a category for, like, you know, breaking down your supplies to, like, food plates, you know, like cleaning supplies.

[00:41:42]   

You don’t need to have it that detailed. I would just lump all of that into supplies. So there’s two sides to it. You can kind of get in a good groove of it and then just be consistent with what you call things. So don’t call something a supply and then have the same food be called like, you know, cost of goods sold.

[00:42:05]   

You know, just keep it really consistent with how you’re calling things. And I think not as big of a deal as I think people kind of make it up to be.

[00:42:14]  Megan Porta 

Okay, so once you have people helping you in your business, you have to do this thing called filling out a 1099. Correct. Can you talk us through that?

[00:42:25]  Amy Northard 

Yeah. So with 1099, there’s two sides to it. You might be receiving a 1099, you might have to issue a 1099. So what you want to think about is, you know, if you were. If you pay contractors through cash, check or a bank transfer, like personal Venmo or Zelle, those types of things, if you pay them through that route more than $600, then you need to issue that person 1099.

[00:42:56]   

To do that, you need to have them fill out a W9 form. So there’s a lot of form names here, but the W9 form form is going to be how you get the information you need to fill out the 1099. It can be as simple as just googling W9. The IRS form will pop up at the top.

[00:43:16]   

You can send them a link and say, hey, I need you to fill this out and then hold on to that. And I would recommend that you do that at the beginning of a relationship with a 1099 contractor, even if you’re not sure if they’re going to make that threshold or how you’re going to pay them, just have it on file.

[00:43:35]   

Because in January, a lot of contractors just seem to disappear or get busy, and it’s just a lot harder. So doing that up front makes the process easier. There are different softwares to file the 1099, so if you are a DIY type person, you can go to track1099.com and that’s a good one.

[00:44:00]   

It’s like $5 per 1099 that you need to issue. But essentially all that goes on that form is your information as a business owner. So your tax ID number, name and address, the contractor’s tax ID number, name and address, and then the amount that you paid them. So it looks like an overwhelming form, but those three general pieces of information are what go on there.

[00:44:25]   

So. And then you just have to have it sent to them by the end of January. So that’s kind of the process. And then on the flip side, if you are earning money, you know, you might be getting a 1099 from one of the ad platforms. They’re going to have you fill out probably a digital W9.

[00:44:45]   

It might not be informed format, but it’ll be some way of collecting your tax ID number for the business, the business name and your address. So they’ll get that on file, typically before they even pay you. And then you’ll get a 1099k form, sometimes in the mail, sometimes to download, sometimes both. And you’ll want to make sure that what you report on your tax return equals or exceeds the total of any 1099s that you get.

[00:45:18]   

Because if it doesn’t, the IRS has a nifty automated platform where they send you a letter right away. There’s not even any humans that are involved in the process. You just get a letter if it doesn’t match up. And they say, you owe us this amount of tax and you never want to pay that right away.

[00:45:36]   

But just keep that in mind as something to look over, especially if you’re doing your own taxes.

[00:45:42]  Megan Porta 

Yeah, you mentioned earlier, that might feel daunting, but it really is. It’s such a simple thing. It takes just a few minutes every year. I’m always dreading it. But then when we do it, it’s like, why was I. Why was I so worried about that? It’s really not a huge deal. It doesn’t have to be.

[00:45:59]   

But thank you for talking through that. Is there anything else, Amy, that you. We covered a lot of basics and so much good stuff. Is there anything that we missed?

[00:46:11]  Amy Northard 

Just. I just thought of one more thing related to 1099. So if you don’t want to deal with them at all, pay your contractors through a debit or credit card or the business version of PayPal or Venmo. And the business version being the one that will charge one of the parties a fee.

[00:46:30]   

I know a lot of people pay through the friends and family route so that there’s no fees involved. But if you, if you go through the actual way to pay for services through PayPal or use a debit or credit card, then you don’t have to issue a 1099 for payments made through those platforms. So that’s kind of a little cheat if you don’t want to deal with it at all.

[00:46:55]  Megan Porta 

Great to know. I did not know that. Well, thank you for all of this amazing information. Yeah. So valuable. I think this is just loaded with gems. To end. You have either a favorite quote or words of inspiration to leave us with.

[00:47:09]  Amy Northard 

Yeah. So I mean, I don’t think this is like my life quote, but I would say I did find one that says what gets measured, gets managed. And I think it’s intent that’s intended for managers, but as business owners also, if we measure our numbers and we’re keeping an eye on the financial side of our business, then we can manage it, we can grow the business, we can scale it if we want to, but if we never look at it and you just hide from the numbers, you it’s, you know, it’s really hard to grow the business and, you know, make it something that you can live off of.

[00:47:45]  Megan Porta 

Great way to end. Thank you. We will put together a show notes page for you, Amy, if anyone wants to go look at those. We’ll have everything we talked about today in there. They are located at eatblogtalk.com/amynorthard tell everyone where they can find you if they are looking for CPA services. I know you offer that for, for us for food bloggers. So just mention all of that.

[00:48:10]  Amy Northard 

Sure. My website’s probably the best place to start. Amynorthardcpa.com you can go there, read about our services, fill out the form if you’d like to chat and then Instagram is where we get to have a little fun and creativity. So Amy Northard, CPA there and we just made our course that we had available previously paid course we are have put that on the website for free.And it goes through a lot of the things that we talked about today. Quarterly taxes, deductions, how all that stuff works. So check that out if you want a little more.

[00:48:48]  Megan Porta 

Awesome. Well, thanks again Amy so much for being here. So valuable. And thank you for listening food bloggers. I will see you next time.

[00:49:00]  Outro

If you enjoyed this topic like, you’ll also love the episode I recommend in the show notes. Click on the episode description to find the link. Thank you and I will see you next time.