Texas Counselors Creating Badass Businesses

76 Bookkeeping for Therapists: Navigating Your Taxes in 2024

• Dr. Kate Walker Ph.D., LPC/LMFT Supervisor • Season 3 • Episode 76

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Embark on a journey to seamless tax management with Dr. Olivia Wedel, a beacon of wisdom in the labyrinth of tax law for professional counselors. Feel the empowerment course through your veins as we dissect the essentials of record keeping, navigate the chasms between 1099 and W-2 positions, and unpack the ethical considerations that are pivotal to your practice. Dr. Wedel brings her rich tapestry of experience to the table, ensuring you'll come away with a toolkit brimming with strategies to make peace with the IRS and keep your financial health in check.

Let's shift gears and explore the linchpin of business success: unshakeable organization and meticulous planning. Learn how honing your skills through training and education isn't just a career-booster; it's a lifeline for ensuring compliance with professional standards and laws. I'll illuminate the paths of setting competitive hourly rates and forecasting annual expenses, ensuring that every step you take in your private practice plants you firmly on the ground of prosperity. 

Finally, we chart the territory of business entities and tax preparation, where choices like PLLCs, LLCs, and S-Corps shape your fiscal landscape. With recent changes stirring the federal waters on worker classification, understanding these nuances has never been more crucial. Dr. Waddell and I will guide you through the maze, offering financial tips and sage advice for managing your practice's wellbeing, striking the perfect balance between deductions and solid business decisions. Tune in for an episode that transforms daunting tax tasks into a mastered craft, exclusively for our dedicated listeners.

Get your step by step guide to private practice. Because you are too important to lose to not knowing the rules, going broke, burning out, and giving up. #counselorsdontquit.

Speaker 1:

And I think we're recording. So, welcome everybody, I'm Dr Kate Walker and this is our free webinar offered as part of Kate Walker Training Texas Counselors Creating Badass Businesses. So we have a few procedures that you need to pay attention to, and just the easiest thing to do is to grab your chat, pull it out and you will be able to click the link, and I always want people to click the link right away, so always want people to click the link right away, so it's already open in your browser, because once we shut the meeting down, then the chat box goes away and you may miss that. And if you need the CE, leave your camera on and fill out the form. If you don't need the CE, don't worry about it. You can leave your camera on and or off, or you know whatever, and we don't care if you're whatever. And we don't care if you're eating. We don't care if you're drinking, you do you? You're here and you're amazing because it's dinner time and you're spending it with us to find out some amazing information about how to not get in trouble with the irs, and dr olivia waddell is going to help us with that right now.

Speaker 1:

No pressure, no pressure, I don't know, just Just hearing. Hang on. What happened to the sound. Do you guys hear everybody here? Then it's me Okay. Continue, okay.

Speaker 2:

Yes, just hearing IRS feels a little scary, especially since we're so close to the tax deadline.

Speaker 1:

All right, sorry about that, I couldn't hear you, but now I can.

Speaker 2:

Oh, it's okay okay, I am going to share my screen everyone. It's a pleasure to be here, um, if you were in this workshop, um, when I did it last year, um it, it might look like the same presentation, but I I assure you it's not. It has been updated and it's actually a tiny bit longer. So as I was running through it earlier today, I wanted to be sure that it still fit within the hour time frame, and it does. But we've had some changes from last year to this year, so while the format might look the same, it is a different presentation.

Speaker 2:

So I'm Dr Olivia Waddell and I'm a licensed professional counselor here in Texas. I'm also a national certified counselor and the PMHC beside my name stands for perinatal mental health certified. So that means I have done a lot of training and passed yet another exam in order to specialize in perinatal mental health. I have a private practice in Grapevine and I'm a sole proprietor there, which we will talk more about shortly. So just some disclaimers here, not to throw a wet towel on the party, but I am affiliated with the leadership with Texas Counseling Association and Texas Mental Health Counselors Association, so anytime that I speak outside of that capacity, I always do a disclaimer that the opinions expressed are my own and may not reflect and do not reflect those of TCA or TMHCA. And just being mindful, to just take this as educational purposes. You will leave tonight with a lot of information and some resources, but take that and go talk to maybe your own practice attorney, your own CPA, seek that legal, professional and financial advice with professionals outside of this webinar. So it's a starting point. So again, working with your bookkeeper, your CPA, knowing the LPC rules, our codes of ethics around record keeping, things like that will serve you well.

Speaker 2:

So just a little bit of background. Why is Dr Olivia talking about bookkeeping and taxes and all of those things? As an LPC, I actually have a lot of bookkeeping experience. My past life in Virginia, before I came to TCU, to grad school, I actually did bookkeeping and payroll for an organization. And then here in Texas I do bookkeeping for my business and my husband's business. We're both self-employed. So those of you that are here and you're self-employed, you know what that entails. And then I do offer on the side business consulting services for people who are interested in getting started in private practice. It's just strictly the business part and it's not supervision. I have background in nonprofit community mental health, the university and higher education setting group, private practice and then, as I've said, as I mentioned, I have owned my own private practice in Grapevine since 2021. And as we speak, literally we're in the process of moving out to Decatur, texas, which is northwest of Fort Worth. If you look on the map, it's about an inch northwest of Fort Worth, about 50 miles. I am the immediate past president of Texas Mental Health Counselors Association, which is a division of TCA.

Speaker 2:

So one more disclaimer this is a brief webinar, it's an hour and we do recognize in advance we're just going to say it out loud it's impossible to cover every single concern related to preparing for tax season. And another thing is just important to point out, like, especially around systems of organization, some things that work for me may not work for somebody else, so we all have different needs and things like that that we bring to the table. But you can take the information from tonight and certainly apply it to your own situation. So these are just some learning outcomes. Since this is for for CE credit, we will examine best practices for record keeping for filing taxes. We'll look at just briefly some of the ACA Code of Ethics, the Texas LPC rules and then IRS tax laws. At the end of the presentation you'll be able to list at least three differences between 1099 positions and W-2 positions, with consideration for tax planning and filing as a professional counselor. This is one area where some things changed as recently as two weeks ago and we'll talk about it later in the presentation. And then you'll be able to describe itemized deductions and list at least four of those deductions in relation to filing your taxes.

Speaker 2:

So one of the things around topics of continuing education, there's been a lot of discussion in circles that I'm in about. Why is some of the business stuff? Why is it not considered continuing education? I'm not going to get into that debate here, but I will say that just with record keeping in general, why is it an ethical issue? And it really goes back to our ACA Code of Ethics. In Section B on records and documentation, it says and I've quoted here that counselors create and maintain records and documentation necessary for rendering professional services. Now, especially if you are self-employed, if you're in business by yourself or for yourself, you know that there's an extensive amount of record keeping and documentation necessary for running your business and providing professional services. And then, with professional responsibility. It's section C those of you I'm sure most of you are probably very familiar with the ACA Code of Ethics, but we have, as counselors, a responsibility to read, understand and follow the ACA Code of Ethics and adhere to applicable laws and regulations. So that's just really like an ethical foundation for why we talk about topics related to business best practices for business, being ethical and honest in our work as well. So a little bit more about best practices before we jump into the nitty gritty of the presentation.

Speaker 2:

Looking at professional responsibility and the ethics of record keeping, there is a lot that's detailed about our professional responsibility as counselors and one of the things that matters goes without saying is that documentation matters, and I'm just going to say that includes financial documentation. Documentation matters and I'm just going to say that includes financial documentation. I have had people ask you know about documenting for cash pay clients as compared to clients that use their insurance, and I'm like I document the same across the board whether they are paying me cash or paying a copay for their insurance. I am a network with two insurance panels. The documentation is the same across the board in their charts and I document the same financially. So part of that, with consideration for our Texas rules. And, if you're not familiar, bhec stands for the Behavioral Health Executive Council, which is the organization that houses our licensing boards in Texas.

Speaker 2:

Subchapter C on duties and responsibilities, and I put the code section here just for your reference 882.36. It's on compliance with state and federal laws. So I actually have heard people say not professional counselors necessarily. But I have had people say, well, as long as you follow your LPC rules, you don't really need to worry about all that other stuff. And it's like well, actually you do, and it is in our BHEC rules that we comply with state and federal law. So, with tax day looming, april 15th, you've probably seen stuff in the news about taxes and all of that very much. There's state taxes. You know, if any of you are not from, are not from Texas, we don't have state income tax here, but there are federal laws that govern what we, what we do in terms of our business.

Speaker 2:

Texas LPC rules. 681.35.a.1 on informed consent. You must include your fees and their arrangements for payments in your informed consent. Now, if you are unfamiliar with the, there's a list of eight things in this, in this rule, that you must include in your informed consent, and I encourage you to go read it if you're if you're not familiar, but you must include your fees and your arrangements for payments. It's one of the main things around professional responsibility and ethics of record keeping. Your clients need to know what you are charging and when and how you collect payment.

Speaker 2:

And then 681.36.A.7 is around client records. This is also a section that, if you haven't read it recently, I highly recommend that you do. It's on client records, the maintenance of client records, and one of the things listed there is you must keep accurate records of billing information. So that looks like tracking payments. You know for me, like I keep a, I have a log of. You know whenever I bill, the date, the amount, very rare instances, like if a credit card is declined and I know I have to send an email. So just keeping all of that information accurately, accurately detailed.

Speaker 2:

So this is just a screen just with some general information around our Texas LPC rules and I realized that my updated link here didn't save. The most recent link should show for BHEC should be November of 2023. And we have some new rules that will be effective. Actually, I think they were effective yesterday, march 27th, so I don't know if those recent changes are on the BHEC website yet, but you can always go to the Secretary of State website and search the administrative code and find the most recent copy of the rules as well. But as LPCs, just in terms of record keeping and our professional responsibility in general, being familiar with the Texas Health and Safety Code, chapter 611, the Texas Family Code, the Texas Human Resources Code, the Texas Civil Practice and Civil Remedies Code and then the Texas Occupations Code, all of those are referenced in our BHEC rules. And then today, just as I was going over some updated information on some changes that went into effect March 11th on the federal level, I realized I was like we probably need to add the labor code through Texas Workforce. We might need to add the labor code to this list as well.

Speaker 2:

So, best practices, why do we need to talk about business basics? Simply put and this isn't a slight toward graduate programs at all but we don't learn business basics in graduate school. And that's not because the programs are not good. I would say it's because they're very strong clinically. And when you have so much clinically that you have to squeeze into 60 hours, there's not a lot of room left over for the business basics for people who are interested in going into business for themselves, such as private practice. I know some universities are starting to incorporate, like seminars and workshops into their graduate programs where you can obtain some of this information if you want to get started, and I think that's wonderful, but essentially we don't learn the basics in graduate school and if you're in any of the therapy groups or counseling groups on Facebook, for example, there's a lot of information you know people are asking questions and people are curious and people genuinely need to know like what are some of the business basics.

Speaker 2:

So, again, this workshop is a starting point, because being successful at business, I'll tell you now, it requires ongoing investment and training, and sometimes it's an investment of your time and energy. Sometimes it's an investment of your money as well as your time and energy, but it's not something that after you do a few webinars or you filed your taxes once, then that you know that's all you need to know. I would say that's just the beginning, because things also change on an annual basis as well. There is a research evidence base for learning business basics Johnson in 2020, and I have a longer reference list for this. If anybody would be interested, I'm glad to share it, but talked about career development trainings being beneficial, strengthening our counselor efficacy and also enhancing our professional identity, which I'm a big believer it goes hand in hand with our professional responsibility, from our ACA Code of Ethics, and then state codes and various LPC rules, inform aspects of business and then federal laws and statutes which we will be getting into, inform tax planning and preparation.

Speaker 1:

Dr Waddell, yes, are you going to share this PowerPoint with?

Speaker 2:

me. Yes, I can actually share it right now if you want me to.

Speaker 1:

Oh, no, that's okay, I just will send it out with the certificates. Yes, just make sure everybody gets on.

Speaker 2:

Yes, I'm glad to share it. I will do that, Thank you, You're welcome, All right. So I guess if there's something to remember from tonight and if you don't remember anything else, just remember it starts with organization. Yes, we need to know our codes of ethics, we need to know our LPC rules, we need to know state-specific stuff as well as federal rules and regulations. But the thing that's going to help you with all of that is being organized. And I'll tell you why I like organization. Not because I'm the oldest child strong type A personality at all, why I like organization. Not because I'm the oldest child strong type A personality at all, but I like organization because it's subjective Things that I do to stay organized. Dr Kate might do something totally different, or the counselor down the hall from me might do something totally different. The beauty of organization is you can find what works for you and it doesn't matter what anybody says online. If it works for your business, keep doing it, Just do more of it, as they say in the solution-focused world. Have some type of filing system. Keep track of your continuing education certificates, the receipts if there's things that you pay for for continuing education your license renewals I used to have my LCDC license as well and in my filing cabinet I had a folder that said LPC, LCDC, and then one that still says NCC and then PMHC. Like NCC, for example, you have to have hundred continuing education hours in a five-year period. So that doesn't sound like a long time at least it didn't to me whenever I first, whenever I first got it. But it's a lot. It's a lot to keep up with and I say down here keep copies of everything and ideally, printed copies. I'm just going to say I'm old school, I like reading from a hard copy, I like having hard copies, but I know, with the increasing costs of like ink and paper and things like that, it may not be ideal to it just may not be an option to print everything. So I know a lot of your banking apps and a lot of your credit card apps and things like that have. They have ways now where, like you can take a picture and store, store your receipt. Mycpa still has us save paper copies of receipts whenever possible and especially if it's a major, if it's a major expense, Put a note on your calendar for what you need to pay yearly.

Speaker 2:

And again, I'm old school, my paper planner's laying right there, right there beside me, to my left. But having calendar notes for what you need to pay yearly is a really good way to stay organized and on top of your expenses so they don't sneak up on you. So I know, for example, every year in February my insurance through CPH is going to renew and I like to pay it out of my business bank account. I don't put it on a credit card, it's my personal preference, but it's a substantial like it's a chunk of money. So I know and I plan for that and I budget for that every year In November. Every two years is when my LPC renews. I have to pay a fee every December when my NCC is up for renewal. So keeping calendar notes for what you need to pay yearly is also a really good way to stay organized and prevent certain expenses from sneaking up on you.

Speaker 2:

If you have a CPA, they will determine your estimate taxes. There is a tax estimator calculator on the IRS website and I have it linked later in the presentation. If you don't have a CPA yet and you're curious like hey, do I owe estimate taxes, you can figure that on your own. An EHR electronic health records is a good way to stay organized, but I would say it's optional. You know, for probably the first year of my practice I didn't use an EHR, but it can be very helpful. And then whatever you pay for that EHR is a tax deduction for those who are self-employed.

Speaker 2:

Much more goes into all of this than just deciding your hourly rate. I've had people say, well, I can't believe that's what you charge and it's like well, I actually take home sometimes a very small portion of what I charge per hour because, you know, as somebody who's self-employed, I'm contributing to my own retirement, I'm contributing to a fund for my son in case he decides to go to college or, you know, trade school or vocational school or something like that. When you're self-employed there's a lot of different things that you have to pay into Medicare and social security and all of that on your own. So there's a lot that goes into deciding an hourly rate and that could be an entirely separate presentation by itself, but then also keeping your business and your personal transactions separate.

Speaker 2:

If my bookkeeper was here the one that helps me with just my business she would start like clapping and say yes. She said it's just an absolute mess when people bring us like a cardboard box full of stuff and they don't know what's business and what's personal. Definitely, definitely, definitely, keep your business and your personal transactions separate. So I would just encourage you to reflect here and you can take a picture of this or jot it down, or whenever you get the presentation with your CE certificate, just think about it. What is one area where you can improve on organization? And then are there things that you're already doing that can help, that maybe could just be improved upon. Every year, whenever I finish my taxes, I always say that I'm going to do away with paper files, but I never do. So far I have not done away with my paper files.

Speaker 1:

Dr Olivia quick question what do you think is a good rate for a CPA? I know that's just obviously wide and broad and everything else right?

Speaker 2:

Yes, yes, I'll tell you, I have my CPA. I have a small stroke every time we pay him, but I don't worry about my taxes being done, which, again, it's also hard to gauge, because if you have multiple Schedule Cs which is something that those who are self-employed it's where your deductions are listed A lot of CPAs will charge like per Schedule C. So, like my husband and I, we have, I think, seven or eight Schedule Cs. We have a lot and we pay $1,800 for our taxes. Now, again, that's all of our businesses, our streams of income, our personal taxes, everything, everything together it's eighteen hundred dollars. I know CPAs that charge, would charge more than that, and then I know some that would charge, would charge less, and then just some CPAs that I've gotten general quotes from. I'm in the DFW area, so it's heavily urban usually, for you know two to three Schedule Cs. It could start out anywhere seven, $800 and go up, go up from there. So it's, it's, it's an investment, it's, it's definitely an investment. So I will show you all here.

Speaker 2:

There's a link at the top of the screen for record keeping and I've got a small screenshot from that that I'll show you on the next slide. But if you are just really concerned about where do I begin, you will not go wrong by going straight to the source, the IRS website. It says good records will help you monitor the progress of your business, prepare your financial statements, identify sources of income, keep track of deductible expenses, keep track of your basis in property, prepare your tax returns and support items reported on your tax returns. Now I will say something too when you are maybe getting quotes with, in regard to what Dr Kate asked when you are getting quotes from CPAs, ask how much of this they help with and if any of it is included in their annual, in their annual fee. So like, for example, our CPA does help prepare our tax returns. He does check out our record keeping systems every year. He helped me create some spreadsheets and things like that at no extra charge, but their bookkeeping, for example, is an extra charge. That was really expensive and I was able to find a small woman owned bookkeeping company here in Grapevine that I pay to do my bookkeeping and they do a great job, but it's substantially cheaper than having my CPA do it.

Speaker 2:

So record keeping applies to both 1099 and W-2, regardless of your business structure, regardless of your employment status. I would just say the record keeping applies across the board and, again, keep your business and personal expenses separate. I've had so many questions since I've been doing this presentation about the home office deduction. The IRS says that it must be regularly and exclusively used for business and proof beyond reasonable doubt. So our CPA again, it's something that he just checks because we do have a designated home office Part of it's where I'm at and then we have another one in another room that we can prove like if an IRS auditor walked in, we can prove that it's regularly and exclusively used for business and the proof is beyond reasonable doubt. So again, that is a conversation you would want to have if you worked with a bookkeeper or a CPA. What are the things you require for confirming the home office deduction?

Speaker 1:

Olivia, somebody wants to know why would someone have more than one Schedule C and do you recommend QuickBooks for record keeping?

Speaker 2:

Okay, we're going to look at QuickBooks or I think I have a slide on QuickBooks why somebody would have more than one Schedule C. It's usually related to multiple streams of income and I'll just share my thing. Like, I have my counseling practice, but we also have, like, a commercial real estate business that we run. We have residential real estate. I have a separate speaking and consulting income stream. So, since each of those, my husband works in aviation, he's self-employed, he has a commercial real estate thing that he runs. So that would be why there would be multiple Schedule Cs is because for each one of those businesses there's different things that we deduct and different things that we have to track for those. That's a great question, great question. And then QuickBooks I would say, yeah, I mean, I've used QuickBooks. It's not my favorite, but it is good. It definitely can be helpful in terms of your record keeping. But this is from the IRS website. Why should you keep records? So just don't take my word for it. This is directly from the IRS website and down here at the very bottom, where it says the burden of proof. This is where, if you were ever audited, you will be so thankful that you kept records, because when you have your records, you have receipts, you have financial statements, you have like, my bookkeeper gives me monthly and quarterly reports. My bookkeeper gives me monthly and quarterly reports. When you have all of that, it supports the information that's on your tax returns. I will mention here I think I put it at the end of the presentation too but the IRS actually has a YouTube channel and they have a lot of little clips on there that are just a few minutes long and they're surprisingly very helpful, very helpful. So, essentially what I just said record keeping it really can make or break you in an audit. It's just one of those things where best practices, but also following the rules around record keeping, the ethics of record keeping that part, but also knowing the laws around the records that you're supposed to keep can really save you in terms of an audit.

Speaker 2:

So this isn't a question that comes up quite a bit. I had somebody asking me about this today with estimate taxes, like do we have to pay estimate taxes? That was the question and it's like well, yes, but it's one of those. Yes, but from the IRS, if you're in business for yourself, you generally need to make estimated tax payments and that's used to pay not only income tax but other taxes such as self-employment tax and the alternative minimum tax. So with that, your question might be well, who, individuals, including sole proprietors, which, if you have, if you're a PLLC sole provider in Texas, that would be you Partners, s-corp shareholders those are generally the ones that have to make estimated tax payments.

Speaker 2:

If, again, it's a little complicated, that's if you expect to owe tax of $1,000 or more when your income is filed. So if you are thinking, oh my goodness, how do I know if I owe $1,000 or more when your return is filed, I would say a good rule of thumb in general that my CPA would say if he was sitting here, is if you are well established in self-employment, you're going to owe some taxes, maybe more than you would care to admit. But this is where the link that I put right here at the bottom for small businesses excuse me, where you can. If you go to that link, they have an income tax. It's called an estimator calculator, I think is how it's referenced on the website. So you can put in, you can answer some questions there about your income and it will tell you if you might owe anything. As far as estimate taxes. I have to cough for some reasons. I'm just going to mute really quick and cough and then I'll be right back.

Speaker 1:

Well, totally fine. So you notice in the chat other people are answering too. So if you know an answer to something, feel free to put it in there. I see the next question. So if you work part-time from the home office but also have a physical office, can you use that as a deduction, so can you double dip kind of right off both offices?

Speaker 2:

I wouldn't say double dip, no, but what you can do is write off, like if you're paying rent. I have a. My landlord gives me a rent, a rental income statement every year, and then I give her a 1099 so that I have that as proof of what I paid for my rent. So I wouldn't double dip in that regard and that's a great question. But you can deduct your rent as an expense. And I saw another question too if we don't pay quarterly, do you get a penalty? Yes, that's one of the things about and I think it's on the next slide actually yes, if you don't pay by the deadline, then there are penalties. I know that's one of the things that's really important and I'll just go ahead and mention it here. Like, for example, if you know that you can't file your taxes by April 15th, if you're working with a CPA, they can automatically file an extension for you, which is very helpful.

Speaker 2:

But an extension on filing your taxes does not equate to an extension on paying, equate to an extension on paying. So that is another benefit for knowing what your general estimated taxes might be. And, like last year, we didn't get to. We had multiple issues. We didn't get to file our taxes until October the October deadline, when we finally finished everything, but we were still paying those estimate tax payments, because you can definitely face penalties. So a tax extension does not mean that you're extended on what you owe. So estimated federal taxes are typically due 15 days after the previous quarter ended. So this is the table for 2024. So for the income period that we're in right now, you would pay if you owe. You would pay those estimate taxes by April 15th, which is also the tax filing deadline.

Speaker 1:

We have a couple other questions if we want to grab them. I know you're going to talk about 1099 and W-2 a little bit. Somebody has a question about Social Security versus EIN number and another question about the home office. Does it have to be used exclusively for counseling or can it be used for a couple of businesses?

Speaker 2:

I would say about that. It would just have to be proven that it's for for business. So, like, where I'm sitting right now is where, like, if I'm teaching online, I do sessions here, or I do classes here, if I am, if my kiddo is home, which is not right now, but if my kiddos here and family and things like that, then this is a private area where I can do counseling sessions and it is set up as such. But we have an actual like office space set up in our sunroom. It's got two desks husband's desk, my desk we don't share, well, and everything like you can tell when you walk in like, yeah, it's a sunroom, but people do business, people do business here.

Speaker 1:

And this office, my office here. This is actually a bed, this is a Murphy bed. Yes, that was one of the things when we moved here. We did want to put beds out, because my husband works from home, I work from home. We didn't want, I mean our poor kids, but oh well, right.

Speaker 2:

Yes, yes, I completely understand. So, yeah, and with how much to set aside? Because that's usually, I think last year, this question came up like, well, how do I know how much to set aside? Again, there's no clear-cut answer, and I think that's another reason that anything around estimate taxes can seem a little scary. It will depend on several things, like maybe how long you've been in business.

Speaker 2:

I didn't have to start paying estimate taxes until my second year in business. I didn't really go in the hole the first year, but I didn't make. I didn't make so much that I wound up owing more than a thousand dollars. So the key, I would just say save something as far as a goal. My CPA again and he's he's not, I wouldn't say, the final authority, but he's been doing this for about 30 years he would say save 25% and then if you overpay, you can get that back as a refund or you can just request to roll it over into your upcoming payments. But again, you don't have to use a CPA Just starting out in business. If I hadn't had access to the one that my husband used for his business, I wouldn't have been able to afford to afford him. But there are lots of good resources on the IRS website that you can use for free the tax calculator and then their YouTube channel has tons of just little tutorials that you can watch quickly to walk you through certain things.

Speaker 2:

So we had some questions about organization with I guess in a little more specifically so, benefits of a bookkeeper. They can assist with record keeping for compliance and protection in case of an audit. If you are just generally completely unclear on how to organize your income payments from clients all of that they can help you get set up on a system that works for you. They can help you look at trends and finances and make sense of the numbers for your business. They can also provide accounting records. For me that's something that I love. It will show when or if and where your business is making profit, what you're doing that works and if there's certain things that don't work. One of the things that I hear counselors mention a lot is I wanted to sponsor such and such, but I realized because I could deduct it. But then it's like but I realized I spent like $10,000. That's just an example, but I spent $10,000 on sponsorships. So maybe I need to evaluate that trend for next year. So that's an example of how your books for one year could inform your future business decisions.

Speaker 2:

So, excel spreadsheets I think you can't go wrong with a good, old fashioned Excel spreadsheet and personally I don't like Excel. I do use it, but I don't like it Just the whole. It just stresses me out. Xero is the one that my bookkeeper uses and it's linked with my bank account. It can do all of the things reconciling bank statements, all of these listed here QuickBooks, wave and FreshBooks will store your bills, your receipts, track your W-9 or 1099 management, track your deductions.

Speaker 2:

They just have some different features that will change the price depending on what you, what you want to pay for. But our CPA actually recommend or mentioned to us about FreshBooks out FreshBooks, apparently it came out in Forbes that it's really good for sole proprietors in terms and especially for small business, like tracking income, your expenses deductions, storing receipts, things like that. So for whoever it was that asked about QuickBooks, I have used QuickBooks and I think it's fine. I think it just depends on your preference and also maybe the amount of time that you have to dedicate to learning the software.

Speaker 2:

So the picture on the right is a little weird, but this is an actual screenshot from my first year in business I've removed all the numbers, but how I used to track things myself in Excel. So if you look here at the bottom, like, I had my yearly totals for everything and then I had it broken out by month January, february, march and then I had like what my expenses were. I did income on a separate sheet, but I wanted to show you a screenshot of this just to show you that you don't have to start with the most expensive version of QuickBooks or the most expensive version of Wave or something like that. You can literally start with Excel. And then this was how I would break out my categories for each month my renter's insurance, office supplies, training, meals, cell phone, all of those things.

Speaker 2:

So it's like don't despise meager beginnings. There's nothing wrong with starting out with Excel. But I will say, whatever system of organization that you choose because we are ultimately accountable always, always, always keep your eyes on your books, even if you are working with a bookkeeper. It's just best practices, it's good business sense. You need to know what's coming in and out of your bank account. You need to know the areas where you're spending the most money. Always, always, always keep an eye on your own books.

Speaker 1:

Olivia, there's a question Can any CPA help a counselor, or should we find one that knows how to specifically support counselors in private practice?

Speaker 2:

Yes, that's a great question. I personally think that if you can find one that also understands the ins and outs maybe not specifically of private practice, but small business that would be very, very helpful. My CPA is not an LPC. He really doesn't know anything about the counseling field other than what I have told him, but he is a small business wizard when it comes to taxes, so I do trust him in that regard. Probably a matter of personal preference.

Speaker 1:

I know my CPA. I changed CPAs this year and he belongs to a group and they get together and they talk about the newest trends, because he knew that I like to use social media and I used my traveling on Instagram and we had a long talk about that when I was, you know, interviewing him, and so I don't know. I mean, think about the particulars of your business too.

Speaker 2:

Yes, yes, the particulars of your business, your business structure. Again, going back to what I mentioned a few slides ago, what all do they include in that seemingly astronomical fee that they charge? And I think you would know too if you had one that wasn't holding up their end of the bargain. It's perfectly okay to switch as well, but sometimes CPAs will also help with your business structure. The CPA that's going to be speaking at the TMHCA conference at the end of this month helps with small business structure, that formation. So for people who hold a professional license in Texas, it is recommended to do a PLLC. I know people in practice that do an LLC and some that do S-Corp, but they've worked with an attorney on their own needs to get that set up. But I have some links here. One, well, all three are from the Secretary of State. The top one is on your business structure. So if you haven't given a thought yet to how do I want to structure my business, you would look at, you could look at that website and then there's the entity chart and then, if you go down to the link where it says the third link, you can actually file your PLLC yourself. It's time consuming and tedious and I would say the instructions are clear as mud. It was an extremely tedious process but you can do it. You can pay an attorney to do it, but it is something you can do on your own.

Speaker 2:

So business structure that is what determines your tax preparation. So, for example, me as a sole proprietor with a PLLC, my business has a Schedule C that's actually filed with my personal income taxes. That's where the question, I think, come up about do I use my social or do I use my EIN? With the schedule C, my income tax, since it's filed, everything is filed through our through our, I guess, our personal income tax. It's filed under my social security number but I do have an EIN for for my business that I use with insurance companies and if I put it on a super bill, I do an EIN. I don't use my social security number. When, if you have filed for your EIN or tax ID letter from the IRS, that letter will tell you which form you need to file. So, depending, whatever your business structure is and you'll have to answer questions about that when you're filing for your EIN the letter that you get from the IRS will tell you the forms that you need to file and then you can go to their website and download copies of those forms for free just to look at and be informed.

Speaker 2:

So, with some differences contractor versus 1099 employee this link is from the Texas Workforce Commission but I've built some things in a couple of slides ahead where we've had some pretty major changes about this on the federal level, like two weeks ago they went into effect March 11th, and I'm the type person like I've been reading the final rule like from the federal register, like I need, I want to know what this, what this means and what it implies. But 1099, simply put it means that the employer or whoever the business that you're working in, that they have less of the financial load. So you are going to have you're ideally supposed to have more control over the services you offer. So you are going to have you're ideally supposed to have more control over the services you offer, your hours that you work, like your schedule, and the fees. So you will have more tax deductions, which will decrease your overall tax liability, but then you are responsible for paying your own estimate taxes, whereas a W-2, the employer carries the majority, or really most all, of the financial load. You would have less control over your services that you offer your hours, your fees and then your taxes are taken care of. You don't have to worry about it. They are taken out of the paycheck by your employer. But this is something that I really felt like I couldn't do this presentation and not at least mention it, because I assume there might be some practice owners or supervisors or all the above here.

Speaker 2:

Effective March 11, 2024, because of increased scrutiny on how employees are being or were being classified, are being classified. The Department of Labor had issued this statement about the final rule. The misclassification of employees as independent contractors may deny workers minimum wage, overtime pay and other protections. The final rule will reduce the risk that employees are misclassified as independent contractors while providing a consistent approach for businesses that engage with individuals who are in business with themselves. So it's really looking at worker protections If you are unsure how to analyze if maybe an employee or a contractor that you have in your practice, what their status is.

Speaker 2:

The final rule details six factors and this is the link for it right here, but I want to mention two of them over here, like why is this relevant for counselors and supervisors? I would say that we may not know the full extent. Yet Again, this is brand new from you know, two weeks ago it went into effect and this link right here, the Federal Register. You can go and read the actual text of the Fair Labor Standards Act if you want to. Again, I have been reading it and rereading it just trying to make sense of it. But for counselors in particular, from those six factors that they detail, I hear violations of factor four and factor five a lot, which is the nature and degree of control around your schedule, how many clients you see, the hours that you work when you take vacation, and then the extent to which work is performed that it's an integral part of the potential employer's business. And then employees this is from the FLSA they cannot waive their rights under the act by signing an independent contractor agreement. So I think this is definitely something that we'll have to have some more trainings on.

Speaker 2:

But since we are so close to the tax filing deadline, if you have questions about well, I was hired as a 1099, but they tell me when to come to work and they tell me when I can take vacation it might be worth familiarizing, familiarizing yourself with with this. So this is just a slide with links on it you can take a picture of it again. We will. I mean, this slide is in the PowerPoint which I will send to Dr Kate to be sure that you all get it. It talks about it has some resources for new and small businesses, the specifics of the final rule contractor versus employee, frequently asked questions. And then for Texas, if you click on the Fair Labor Standards Act information on the Workforce Commission website, they direct you to come to the Texas Conference for Employers, which actually looks really good and really informative, and I think I might need to go to it at some point. So I think I saw several questions about how do I know what to deduct for 1099. So, again, giving you a resource here.

Speaker 2:

The IRS details this in much more detail than I could include in this presentation. The deductions part, honestly, could be a standalone presentation, but deductions, again, they lower your taxable income for those who are self-employed. So this is a tax guide for small businesses in preparing your 2023 tax returns. So if you're still working on it, I'm almost done with mine. I'm like we're not dragging this out. No matter what crisis happens, we're getting this done this year. This is a really beneficial. Again, it's a free guide on helping small businesses in preparing your 2023 tax returns. So, with record keeping, this is sort of bringing it back full circle to the record keeping part and the organization part For the 1099, the things that you can deduct as business expenses.

Speaker 2:

This is not an exhaustive list. This is just a list that I have used, that my CPA prepared several years ago, and then I've done some of the free trainings through, like Simple Profit and excuse me HERD, and then Simple Practice. My EHR has a lot of record-keeping webinars and things like that too. So these are some things that you can deduct your insurance premiums if you pay. You probably do pay out of pocket for your insurance if you're self-employed, but the things that you use for your counseling and therapy supplies, your continuing education, that you use for your counseling and therapy supplies, your continuing education, your license fees and memberships, your banking credit card fees if you have student loans, that student loan interest all of that can be written off or deducted is the correct term.

Speaker 2:

With travel, where it says logs are required, I'm always extremely mindful to point out here if you are deducting business mileage, you should have a log in your vehicle where you document the date, the beginning mileage, the address of where you're going and the ending mileage. If you are audited and you've been deducting business mileage, that will come up. They will ask to see your logs. I have not been audited as far as my logs but had a very good friend that a counselor in private practice. They would not mind that I shared this, but they were audited and they did not have accurate logs for their business mileage and they had to pay back a pretty substantial amount of money. There were some other issues with the record keeping too, but a little bit more exhaustive list because I know there were some questions about these.

Speaker 1:

Let me check real quick. We've got a question about insurance premiums. I know on the previous slide you said insurance, but you were talking about malpractice insurance, right? You're not talking about health insurance, life insurance.

Speaker 2:

Malpractice insurance. Right, you're not talking about health insurance, life insurance. Both You're able to. If you pay your own premiums like if you have a plan through the marketplace or something like that you can deduct. That is a deductible expense for somebody that's self-employed, but then also, yes, your malpractice insurance is a tax deduction.

Speaker 1:

And then a question to consider them deductions. Could you have had them deducted from your personal? I mean, a deduction is a deduction, no matter which bank account you take it out of.

Speaker 2:

It's just harder to track if you're taking it out of your personal right. Yes, yeah, that's where. If we had bookkeepers and CPAs lined up down my room here, they would all say it should be keep business business and keep personal personal. And I'm curious I don't know if the question relates with filing with a personal income tax, but even if you have a Schedule C that has your deductions as far as your business, if you're a sole proprietor, that's going to be filed with your personal income tax. So I just wanted to clarify that as well. I don't know if there's any other related questions about that, but like your again, your electronic health records, if you use something like DocuSign, whatever you pay for QuickBooks or FreshBooks or Wave or any of your accounting systems, what I pay to my bookkeeper is deducted. What we that $1,800 that we pay our CPA we get to deduct that it's a business expense. If we didn't have so many Schedule Cs, we would not be paying him that amount of money. But the thing is, with all of these, if you have a record-keeping system and these are things that you're spending money on again have some type of system in place where you're keeping track of the receipts like proof of purchase.

Speaker 2:

I had noticed a question in the chat I think it might have came to just me but how do you demonstrate burden of proof? That's how, through your record keeping. That is how you demonstrate burden of proof. So, for example, my rent. I'm not responsible for any of the utilities where my office is, just because my landlord was my midwife and she's amazing. But with my rent she does give me a statement and, like I said, I give her a 1099. So if there's ever any question about the amount that I pay toward rent, I have my monthly and I write a check for that. So I have a record for it and then I have the statement from her. So that would be the burden of proof indicating and confirming what I pay in rent. So these are some other resources.

Speaker 2:

You all are part of the best group right here Dr Kate Walker and her training. I will tell you, the majority of what I have learned and am doing in my business now is because of her Step it Up program and the webinars and the Texas Counselors Creating Badass Businesses group on Facebook. You have a wealth of information. Truly, if you're just really curious about where to begin, tmhca does have a day conference. It's on Saturday, april 27th, and we will have a CPA there as one of our plenary speakers. But then Simple Profit has some really good free resources. She also has a YouTube channel that you can subscribe to. That's free. The IRS website. And then I also put a link for the IRS YouTube video right here. Like I said, who knew that they had a YouTube channel? But I learned that last year and I've been sharing it with a lot of people since then, so I wanted to contact you too. Yes, yes, I'm glad to do the business consulting part.

Speaker 2:

I will tell you here email is best. It's extremely difficult for me to return calls just because if I have clients or if I'm teaching, you know I can return emails quickly. But I tend I'd always schedule my consult phone calls as well, just so that you have some uninterrupted time. And I don't know if any of you have ever tried to do a phone call with a four-year-old, you know, making joyful noises in the background. It's very, very hard to have conversations with little people around, so email is definitely best. I also have I'm on Instagram. I'm not as great with social media as Dr Kate, but I do. I'm pretty active on Instagram, and then I'm also I have a business Facebook, and I am on LinkedIn as well, so don't hesitate to reach out. I firmly believe there's no such thing as a silly question. The only silly one is the one you don't ask, so don't hesitate to ask.

Speaker 1:

Could you pop the registration into the chat? Oh yes, somebody's asking for that. Yes, I can. And backing up, if your employer gives you mileage fees, so I'm assuming that means a reimbursement for mileage would you recommend I still maintain a mileage log for the deduction?

Speaker 2:

I would, but if they're reimbursing you for it, then I don't think you would deduct it though either. Yeah, because that is double dipping. It's double dipping, go ahead. It's just best to keep a log regardless. But I would not deduct it if I was being reimbursed for it.

Speaker 1:

And let's see, Rebecca, it depends on what mileage is. You're going to just have to run those numbers. You know if you're able to get more one way or the other. Everybody open the link right now to the Google form. Jennifer Fairchild just did that. Dr Waddell just posted the link to the Tomka conference, so click on that and then you guys can go get that information. I'm trying to see any other questions in there. This is a lot of stuff to put into an hour, isn't it? Do you know? Therapists, we can write off our own personal counseling.

Speaker 2:

That has been a big debate and what I'll just tell you my CPA's response to that. He said if it's like clinical slash medical necessity, it's written off as a medical expense and not a business expense. So again, if you're self-employed and you're keeping up with all of your record keeping and your deductions, you're paying your premiums and your co-pays and all of that out of pocket, that your own therapy would be written off as a medical expense, not business.

Speaker 1:

Nice, yes, any other quick questions questions? We still have a couple of minutes. Pop them into the chat. Someone says my cpa lets me write off my own counseling as a consultation with the w9. Yeah, and then I I kind of answered it. But uh, what's your take pros and cons of getting a car written off versus mileage? Writing off Just the numbers, what, what you get back more.

Speaker 2:

I would say probably return on investment over time. You would probably do better off deducting mileage. But again, I think that is is would is highly individualized as well. Like my CPA would not tell anybody to to buy, just go buy a brand new car. He would say, if yours is paid for or close to paid for, just continue deducting that, keeping track of that mileage and and deducting so because I do use my car for other, our other businesses, not just my, not just my counseling practice, so that you know it's a, it's a benefit of of keeping, keeping mileage logs.

Speaker 1:

All right, guys, I know that's a lot of information in one hour. So if you were able to take a picture of Dr Waddell's information, grab that real quick. Grab the link to her conference coming up, grab the link so that you can get the ce. And if you're getting a ce, I will post, or not post, I'll email you or jennifer will email you the powerpoint. Dr waddell, this was wonderful, as usual. You, you, you speak our language and it's such a relief and because I know the stuff, it can get heady and there's so much stuff and it can get really overwhelming and I kind of have that freeze for numbers. You know it's just, it's, it's yeah, when you said you didn't, you know the first, second year of paying, uh, cause you didn't estimate taxes. You know that's the story I tell. It's like oh you did great.

Speaker 1:

Now you're you, we, you. We just need a check for $10,000. And I'm like I haven't even seen a check for $10,000. What are you talking about, Right? Yes, it was like do you take a payment plan? Yes, no kidding. And yes, all right guys, thank you so much for joining. I'm going to leave the meeting open for a little bit so that you can grab the stuff out of the chat. Dr Waddell, thank you so much for joining, and just a wealth of information. So, everybody, have a wonderful evening, have a wonderful Thursday night and I'll see you next month for Dr Fox and bridging the gap successfully from LPC oh, from grad student to LPC associate. So see you guys soon. Thank you all.

Speaker 2:

Bye-bye you.