Episode Summary

Today, we’re diving into a topic that can make or break a business—tax planning for entrepreneurs. In this episode, we’re excited to have Tiffany Vaught join us. Tiffany is not just any CPA; she’s a Certified Exit Planning Advisor (CEPA®) for small business owners, the CEO of Incurio, LLP, and the co-founder of Something Artists. With her entrepreneurial spirit and extensive experience, Tiffany brings a wealth of knowledge about proactive financial planning and tax strategies that can help you navigate your business journey with confidence.

 We’ll discuss tax planning essentials—whether you’re a sole proprietor or contemplating making an S Corp election, the significance of maintaining accurate records, and Tiffany’s insights on the IRS’s increasing use of AI for audits. We’ll also touch on how unique income streams and expenses, like those from influencers, or complex real estate investments, play into your tax planning. So, whether you’re a seasoned entrepreneur, a solo consultant, or just starting out, join us!

What You’ll Learn in this Episode:

• How a CPA can help provide financial solutions in your business
• When to do your own accounting and when to hire a professional
• The importance of understanding basic accounting to facilitate planning and tax filings
• Why accurate and timely bookkeeping is crucial for business strategy and financial planning
• How frequently you should be checking your business books and why
• A key to long-term business stability
• The best way to improve cash flow management and mitigate unforeseen financial challenges
• How to shift your operations from hand-to-mouth to forward-looking financial health
• What you need to be strategic with cash flow management and acquiring lines of credit
• Understanding how entrepreneurs can avoid crises and optimize growth strategies

Resources Mentioned on the Show:

• The Soul of Money: Reclaiming the Wealth of Our Inner Resources by Lynne Twist

Stay Connected:

• Connect with Tiffany Vaught on LinkedIn, Twitter, and Instagram. Visit Encuriohq.com to learn more. 
• Connect with Mary Beth on Twitter, Instagram, and on LinkedIn
• Connect with Neela on Twitter, Instagram, and on LinkedIn
• Join the Abacus community by connecting with us on Facebook, Twitter, Instagram and on LinkedIn

Transcript of the Episode

Mary Beth [00:00:14]:

Hey There. Welcome to the If Money We’re Easy podcast, the show where we teach you how to expand what’s possible with your money. We’re your hosts, Mary Beth Storjohann 

Neela [00:00:24]:

and Neela Hummel, 

Mary Beth [00:00:25]:

certified financial planners and co CEO’s of Abacus Wealth Partners. Today on the show we are talking about tax planning for entrepreneurs. 

Neela [00:00:36]:

So today we are joined by the fantastic Tiffany Vaught. Tiffany is a dedicated CPA and certified exit planner with a passion for empowering small business owners. As the founder and CEO of Encurio LLP, Tiffany leverages her extensive experience in accounting and tax to provide tailored financial solutions that drive success for her clients through her talented team. In addition to her accounting practice, she co founded Something Artists in 2014, a full service artist management agency that reflects her entrepreneurial spirit. And as an aside, we’re a bunch of nerds over here at Abacus. Tiffany did a lunch and learn for our entire advisory team and I turned to Mary Beth and was like, she needs to be on the podcast because she’s awesome. So Tiffany, welcome to the show. We’re excited to have you. 

Mary Beth [00:01:24]:

Thanks for being here. 

Tiffany [00:01:25]:

Thank you. I hope I live up to that right now. 

Mary Beth [00:01:29]:

I’m sure you will. And don’t worry, we can edit any of this out, so it’s fine. 

Tiffany [00:01:33]:

Great, great. Listen, I got the gift of gab, so just cut me off if you need to. 

Mary Beth [00:01:39]:

So the direct question is, why do entrepreneurs need a CPA or accountant versus going the DIY route.

Tiffany [00:01:47]:

Interesting. Now, the DIY route I’m not necessarily opposed to. I think there’s a time and place for it, especially when you’re starting out and you have limited funds. Cash is everything. When you’re starting out and you have different priorities, and it depends on what your personal entrepreneurial skill sets and interests are. I’ve met entrepreneurs who have looked at YouTube tutorials. They’ve kind of rudimentarily figured out how to use QuickBooks and can do it to a place where it’s good enough for us to be able to plan and do taxes with it and to make some financial decisions. Great. And they want to use their money elsewhere until they get to a certain size. That’s great. It’s a very personal question. For me, I always say, if you’re a client like me. So, for example, when I went to my marketing people, I was like, I don’t know anything about this. And I have zero desire to know anything besides the rudimentary stuff. I need to understand the terms. I need to understand overall general macro bird’s eye view of what’s happening. But I don’t want to understand color theory and, like, all this stuff to be able to do this. And so that’s when I really tell clients a. If you can’t do even the rudimentary stuff to do proper planning and taxes, then you need help.

Mary Beth [00:02:59]:

What’s rudimentary? Tell me more about what would be rudimentary. 

Tiffany [00:03:02]:

Rudimentary, for me, means timely. And when I say accurate, I don’t care that everything’s in the exact right category. I care more about that you can look at your financials and tell what happened in the company with general accuracy. If 20% of things are rough, you put it in marketing instead of office expense or something. I don’t care. 

Mary Beth [00:03:22]:

That’s the bookkeeping. You want them to do their bookkeeping in a timely way, is what you’re saying. If you can’t do bookkeeping in a timely way. 

Tiffany [00:03:26]:

Yeah, because you can’t be strategic, right? And if you can’t be strategic, we can’t save you money and make good decisions, and you need to be able to learn as you grow. So it has to be done on time. I think that’s really key. And that’s where I see most entrepreneurs starting out fall short, is they can’t get it done because it’s the redheaded stepchild. They want it to be the last thing they do at night, and then they have no energy. And it’s frustrating. 

Mary Beth [00:03:50]:

And timely is that monthly, quarterly, once a year, when they’re scrambling to get it done, to get all the information to you. 

Tiffany [00:03:56]:

My suggestion is monthly, because most of the time when people are starting out, they’re very hand to mouth. Do I have money in the bank account right now? I guess I can write this check. We want to grow their literacy over time. And I think that’s really where, when they’re ready and have capacity to say, look, I don’t want to feel this way anymore. And now it’s time for me to invest in this. Find an advisor for some people. That’s from day one. I’m a day one person. Don’t mess with my money. We can help them learn how to be forward looking and forecast. So, like today, I don’t run my business hand to mouth. I know if I’m gonna have enough cash 18, 24 months in advance, and I’m seeing the signals if things aren’t going as I planned, because they never do, and then what I need to do to pivot, what things do I need to change? And that’s when we see entrepreneurs all the time. Oh, I need a line of credit. When do you need it? Yesterday. Okay, well, it’s gonna be hard to get one because you usually when you’re in a bind, financials aren’t looking so great. So now qualifying for that. So if we had known that two years in advance or a year in advance, we would have been able to get that when you were healthier, and then we could use it in times like this. So that’s the type of proactive kind of decision making that we want people to start thinking about, not just taxes and planning.

Mary Beth [00:05:10]:

So basically, if you’re not in a place where you’re looking at your finances and categorizing them, if you’re looking at them monthly, but you don’t have them categorized, it’s kind of a moot point anyway. You’re in QuickBooks or whatever bookkeeping software on a monthly basis, at least getting a C+ on your categorization skills. And then that could make sense for you to continue to go the DIY route, filing if you want as well. If you’re not doing that, then it really means you don’t have a hand on your business. You should be working with a team, and working with a team ideally is a part of your startup expenses. As you indicated, it’s not always, but when you’re doing your business planning in a dream world, you probably would want entrepreneurs investing in a team like yours from the get go so they can have really a steady shot at growth. 

Tiffany [00:05:49]:

I tell clients, you know, when you’re viewing working with a team like us, the investment in us should come back to you multiple times a, because we can be strategic from a tax perspective. Now, mind you, I tell people taxes aren’t everything, it’s a part of that. And when you’re small, it could be a material part for you. It’s probably one of your largest expenses besides cost of goods or labor. But how to run your company with those numbers is vitally important in making decisions, knowing what service and product offerings and what contingency plans you need to have in place. If you lose a team member or a major client leaves or something like that, you’ve got to think through those scenarios, because if you don’t have a plan, then you’re just constantly in the emergency mode. And I think that really drains people. It’s exhausting. 

Mary Beth [00:06:35]:

My gosh, I could just listen to this, talk about this all day, and I feel like… 

Neela [00:06:39]:

This is like Mary Beth’s bedtime reading right now. 

Mary Beth [00:06:41]:

It is. It really is I feel like inside. I have joy right now, which is probably actual entrepreneurs, probably, you know, don’t want to talk about any of this, but they need to. And I get so excited. This is exactly what I’ve been saying for years. 

Tiffany [00:06:54]:

Also, we’re like, this comes naturally to us.

Mary Beth [00:06:56]:

It does. It does. 

Tiffany [00:06:57]:

Right? So we want to help you, empower you to create stability so that you just go, I want to make your accounting boring. Like, I want it to be so boring. It’s like, causes no emotional trauma. Like, I just want it to be easy. That world is possible. It just requires prioritization. And also, people do have to want to educate themselves on a certain level, because the more financially literate you become, your advisors can provide you higher level strategies. And we could talk about different things in different ways. And then you can also bring ideas to us that pertain to your situation for us to banter about. And those are some of my favorite relationships, is I have clients who bring me ideas. 50% of the time, they’re not even viable. But I’m like, ooh, that’s an interesting thought based on your situation. Would have never thought about that because I didn’t really know you had that and how that could tie together, but they’re connecting dots because they just know more. So we can work together and piecing stuff together. 

Neela [00:07:59]:

What are some of the red flags? Or I guess, said another way, opportunities that you notice when you start working with a new client and you’re like, ooh, we’ve got potential here, right? We’ve got some really great strategic work that we can do. What are some of those big, common ones where you’re like, oh, my gosh, I know I could add a ton of value here. 

Tiffany [00:08:16]:

Okay. So I look at it from two different angles. A the accounting side, operational side, making decisions. So think more like fractional CFO, right? Ooh, do they even know what their margins are? Have they benchmarked it? Like, I’ll just ask them basic questions, well, how are you doing compared to this size restaurant? Let’s say, in your industry? There’s benchmarks for that. You can find that. Do you know what those are? And how are you pacing? How are you deciding how to build things? So I’ll ask them basic things around, how they’re deciding how to price things, whether it’s services or products, what regular information they’re using. A lot of times, nine out of ten times, they’re just going straight on gut feeling. And I will say, I am one of those people. I believe in gut instinct. It’s so important that how you feel about an opportunity or something. But I am such a proponent of you have to marry that with data because I ask clients all the time and I use this as a way to train some of my staff. I’ll say, watch, this is some of the questions I’m going to ask the client. Let’s see their response. When I say, how much money do you feel you made? They never feel like they made money. And I’m like, well, I’m looking at your financials and you made 300 grand last year. And they’re like, yeah, but you know, and I go, this is case in point is they don’t even feel like they made that money. And why is that? So I very often when I’m asking questions around that, I’m looking at how much do they know how to use their numbers? And then on the tax side, are they even providing numbers in a strategic and proactive way? And do they know how to interact on a strategic level? Like, do they even understand the value of that? And then what education components do we need to bring into play? They have to see the value. If they don’t see the value, there’s nothing I can do to help them. So I’m really checking for are they ready to digest the value we can provide and are they coachable?

Neela [00:10:06]:

Right. 

Mary Beth [00:10:06]:

Because what you’re talking about is it’s not overnight. So this, you’re talking, if you’re taxing, have you married it with data that, from my experience, is months of coaching and years probably in some places to get that movement there and like a lot of transition from moving from gut to and even to strategy. And so is that what you’re finding? Are you finding. That’s what I found, I should say. But for what you’re finding, are you finding that people are willing to jump in right away or you’re taking them on an educational journey and it’s kind of a piece by piece puzzle that you’re building together? 

Tiffany [00:10:35]:

Yeah, I mean, currently I vet all new clients coming in because I think what I’ve learned is bringing on clients that are a not at a level of education to where they can see our value or are not coachable because they realize they don’t know these things and this is why they need this and they’re willing to put in the time and effort and prioritize spending time with us, then we usually say they’re probably not the best fit, but we’re willing to take people from ground zero and get them there. They just have to be willing. But I think what also is hard about accounting that’s a little bit different than financial advisory services is so labor intensive. It gives us especially, we work with small entrepreneurs, and so they’re more price sensitive, and we can only charge so much. And within that, it doesn’t give us a lot of room to spend a lot of time educating them and also developing a relationship with them, learning about their life. How are the kids? What is really important to you? And all these questions that are so important to truly give somebody the best tax strategy, because it’s a lot of man hours and clients can’t afford for us to do that. So that’s why we’ve started pairing with really quality financial advisory partners, because that they’re doing that and they have capacity to do that. And when we can share that information, it not only saves our clients money, but we can create efficiencies and create this team around them that’s coming together and providing them really quality information that they can apply to their situation and then ultimately give them agency over making the decisions in their life, instead of people coming to them saying, well, I don’t know, what do I do? 

Mary Beth [00:12:18]:

Right. 

Tiffany [00:12:19]:

I always say, I don’t know, what are you going to do? Here’s the information. So I think that has kind of been a big change, at least that I’m seeing in the accounting industry, is that we’ve got to work together because we can help clients with taxes and accounting. But if we aren’t helping them get to the finish line, then there’s not actually a whole lot of satisfaction and less value. I think in my eyes, particularly with what technology is doing, is taking, hopefully reducing some of that labor so that we can help people move the needle educationally. 

Neela [00:12:53]:

And on our side, we feel that clients tend to just get better outcomes when we have that strong relationship with the client’s team, and that’s generally strong CPA, probably an estate planning attorney, but we are in communication with client CPAs all the time, because as much as everybody wants to call tax planning, like a once a year kind of event it’s year round. 

Tiffany [00:13:16]:

Especially for a business owner. Right. Because they’re, what they think happened was going to happen in May, maybe didn’t happen by October. Absolutely. And then we don’t want to overpay and all this kind of stuff. So, yeah, I think planning for business owners, because a lot of their values and equity of their company, it requires more. 

Mary Beth [00:13:33]:

So, two questions. One entrepreneur is just starting out. So business registration, I know you’re not an attorney. So business registration comes up a lot with entrepreneurs like Sole prop, LLC, S Corp. Election, et cetera. How important is it in your perspective to make the right call tax wise initially, and then how easy, difficult? What are the implications, really of having to update it at a later point? What are the considerations we should be making on the front end? 

Tiffany [00:13:57]:

So I always tell people, start as a sole prop. Unless you legitimately have outside partners other than yourself or spouse, be a sole prop. Make sure it’s something that you want to do and it’s viable and you’re going to invest in it. You’re going to go full steam ahead and it’s going to provide what you need from it because it’s expensive to set up. So there’s a practical approach I take when we’re advising people on entity selection. So obviously taking into account how risk adverse they are and the liability exposure in their industry that we’re usually talking with their attorney about. But if that is really low, then it’s really about administrative cost and how proactive they want to be and all the administrative differences between the different types of entities. I have some people that come in and they have wildly different plans than others. Like, some people just want to be a solo person, whether it’s like a consultant or a design contractor or something like that. They don’t want to employ people. They’re like, I am done working with other humans. I want it to be me. I don’t want to do that. And then when, I mean, I always joke, I’m like, oh, you thought growing company. You go on Instagram and YouTube and all that, and people are like, oh, buy these boring businesses. And I just, I spend 4 hours a week managing my 17 companies and I’m like, no, you don’t, because humans work there. I’m like, humans are complicated. And I always laugh and I’m like, oh, you thought employing people was going to be easy? I mean, if somebody comes to me and says, oh, I want to grow and sell this to a VC company or a large manufacturing company, and I know exactly who my buyer is in five years, completely different entity selection, right? So a, we got to know what you, without having a crystal ball, what you think your goal is today and what you’re building this company for. And timing is everything. You don’t want to spend money and create this entity that has a bunch of administrative things you need to do and cost annually for tax prep, payroll, secretary of state filing fees, you know, minutes and all that kind of stuff. If you don’t need it, like, that’s not the best thing. So I think at least spending $300 to have somebody guide you on that, I think is worthwhile investment. I have a lot of people who come to me and say, I did LLC. I’m like, great, you spent $800 and now you have $800 to the state and all this stuff for no reason. 

Neela [00:16:08]:

Right. What’s that inflection point look like? You’ve got someone, they started as a sole prop, they start making money, and then they’re at a point where it’s like, do I go the LLC route? Do I go the S Corp? Maybe a C Corp. But, you know, I feel like so often we hear about LLC versus S Corp. At what point are you like, okay, this is a serious situation and we’re ready to grow up the entity. 

Mary Beth [00:16:30]:

Talk about the election too. I think a lot of people don’t know the S Corp election versus, like, LLC registration. S Corp is an election on it, right? 

Tiffany [00:16:36]:

So I think the thing, that most common thing that people don’t realize is a single member LLC, meaning you’re the only owner of that LLC, is completely unhelpful from a tax perspective. It’s literally just for liability protection. All it’s going to do from a tax perspective is cost you administrative money to file with the state and that dumb $800 to the state of California, if you’re in California. They’re always like, wait. And I’m like, yeah, it’s, you’re a sole prop. That’s basically what it means. 

Neela [00:17:02]:

They’re like, but it’s a magic unicorn tax entity, right? And so it’s going to save me all of this. 

Tiffany [00:17:06]:

Maybe, yeah. So I think when it comes to tax savings, what most people and small business owners are thinking is when do I make the jump with my LLC or my corporation to make the S election, which is a tax treatment only and it can be revoked. And I have done that for clients that I think rule of thumb, it’s pretty widely known. People say around 60 grand of net income. It depends a little bit based on your industry and things like that. And I think also that 60 grand rule of thumb has been around for over a decade. I probably think it probably needs to go up some. 

Mary Beth [00:17:43]:

It’s changed. It doesn’t go anymore with some of the tax law changes too. I’m like, it’s pivoted. 

Tiffany [00:17:47]:

So I’d probably say inflation, 75. We need to start looking at that. And when I say 75, I tell people that’s when the administrative cost of having it kind of breaks even with potential tax savings. But also, I always tell people it’s not just about tax savings as well. It’s also audit exposure reduction. So if you’re in an industry, I do have some clients, heavy travel, and that is one of the most highly audited. So we don’t want that on a sole prop. So for them, part of the benefit is the exposure reduction, not necessarily just tax savings. 

Mary Beth [00:18:22]:

So with the S corp, what does that look like? Just for those that might not know, what does that mean when you make the S Corp election, what does that do for the split of your income? 

Tiffany [00:18:30]:

It now says that you are no longer self-employed. You’re employed by a company you happen to own 100% of. So that means you have two different relationships with your company. The main purpose of the S corp is to save on self-employment tax. So if you are in a profession or an industry or whatever you’re doing for your company, you have to pay yourself more than the Social Security max for the year, which I think is hovering around 160-170 grand. You’re not going to save a ton in self-employment tax. So you’re already maxed out. So really then the conversation comes around audit exposure reduction and potentially just having the entity separate from you because you want to admit new partners or something to that extent. 

Mary Beth [00:19:14]:

So going back to audit exposure, two things, Neela alluded to this. So one, two parts are business owners more likely to get audited by the IRS? And then second part, we’ve all had those people in our lives who just. I run that through my business. Yeah, I run that through my business. So what are the rules in terms of that? What is black and white? Is there actually any gray or is that gray really just dependent on somebody’s risk appetite for I might get audited. I don’t think I’ll get audited. So that’s gray. And therefore my individual choice is to run this through. So how likely is it for a business to get audited? And then is that an opportunity to run things through your business? I’m using air quotes. Nobody can see me. 

Tiffany [00:19:51]:

Totally. Okay. So I’ve been doing this for 20 years. Essentially, I can say sole proprietors are the bread and butter of the IRS. Those are more frequently audited because they don’t need sophisticated training for the auditors to do that. They don’t need to understand balance sheets and basis schedules. It’s just income statement, what you make. How many expenses did you have? Great. It’s easy. Yeah, it’s just right there on the schedule c on the primary return. If it’s a flow through entity like an S corp or a multi member LLC. Less audited historically because the unit that audits them just had less manpower to do so. I’ve seen maybe like a quarter of those compared to sole props. Now I can say over the years with COVID and everything, we’ve all seen the news stories. They’re understaffed. They can’t even pick the phone. They’re burning files that they’ll never get through, things like that. And we’ve definitely seen a reduction audits. Like, I haven’t seen an audit in quite a few years, but that does not mean they’re coming. The IRS just hired 2500 new auditors specifically to come after s corp owners because there is that separate line item on the tax return line ten for officers compensation. That’s highly abused. When I review tax returns, I come in and I go, you paid yourself $1,000 to run a million-dollar company. That seems a little greedy. 

Neela [00:21:10]:

Is that below market? 

Mary Beth [00:21:12]:

Yeah. 

Tiffany [00:21:12]:

I was like, reasonable compensation. I know that’s a gray area. 

Mary Beth [00:21:17]:

It comes up every time. Reasonable compensation. 

Tiffany [00:21:20]:

So I said, it’s not black and white. The IRS doesn’t have a table that says, if your company makes this much, you must pay yourself in this range. It’s more subjective than that because as an owner, you might be doing 20% administrative $20 an hour stuff, you might be doing a high-level consulting, you might be doing things in between. So you can come up with some blended rate, but you have to have some reasonable measure or idea of how you’re coming up with this. So do I think there’s going to be an uptick in that? At least that’s what they want you to believe. Have we seen it yet? I haven’t. Do I think it’ll happen? Yeah, because if I were the IRS, that’s exactly what I would do. 

Neela [00:21:55]:

You’d be like, that’s a heck of an ROI. Yes, I will hire those people. 

Tiffany [00:22:00]:

I do know they’ve invested over the last decade heavily in AI, and that’s only going to get better. And so what that means is we’re going to see a lot of correspondence audits where they don’t even need a human to go out and audit you. They’re going to send you a notice and say you have the obligation to send us all this information and you need to prove business purpose and that you paid for it. Please send all this stuff in, good luck to you and put all of that on you. So I think for small business owners, document retention is going to be a huge thing. I mean, traditionally, I think even I am sometimes pretty sloppy with our meal receipts and travel, like all of that day to day stuff. But there’s good technology out for that. You just have to train yourself to use it regularly and actually care about it.cBecause let me tell you, if you’re audited and you don’t have that, you’re going to wish that you did. Because if there’s adjustment over roughly, I think, rule of thumbs, around ten grand, they will open the prior year and the subsequent year and they’ll look at you and say, do you want to apply the same error rate to those years and call it a day? Or do you want to go through the hassle of getting audited in three years now instead of one? And that gets really expensive and time consuming. And if you think you don’t have time now to keep your receipts, imagine the hell your life will be for the year, year and a half that it takes for you to gather all that information. 

Neela [00:23:21]:

Oh, my God, I’m like getting chills. 

Mary Beth [00:23:23]:

I know. I was like, okay, I’m good. I have my receipts. And I was like, the business line, I will do that if I have a spreadsheet. 

Tiffany [00:23:30]:

But I always tell people, listen, this is a cost benefit rewards thing here. Should you go and keep every receipt and catalog and spend hours a month doing that? No, because the likelihood of being audited is still really low and you’re not going to get an ROI for all that time being spent. It can be used better elsewhere. But what you can do is be smart. Save the big ticket things if you’re going to Best Buy, to buy a computer, they don’t know if you’re buying a tv or computer. So common sense, save that receipt. Obvious things like Office Depot, you’re not going there generally to buy personal stuff. You’re going there to buy office supplies. And if it’s small in dollar amount, they’re not going to really pull that to say, provide me the receipt for that, most likely. So save the big things. Save the things that are hard to tell if their business or personal. Do at least that on a bare minimum is what I say. 

Mary Beth [00:24:16]:

That’s great.

Neela [00:24:17]:

So in terms of the deductibility question that Mary Beth’s talking about, and I know you get this a lot because people are watching Instagram, they’re watching YouTube, and you see the influencer who’s like, I just leased my Lamborghini and I’m doing it through my business. While also paying my kid. 

Mary Beth [00:24:32]:

I love those. To the kids, I was like, the kids also.

Neela [00:24:34]:

To tire rotations. I’m like, what is happening here? And how is this person not audited every second? 

Mary Beth [00:24:39]:

Well, paying their children models on their website. I think advisors do that. 

Tiffany [00:24:43]:

So, yeah, it’s really interesting, and it depends on how somebody is risk tolerant. 

Mary Beth [00:24:48]:

This is gonna be a two part episode, by the way. I feel like we’re gonna go on as we go on. 

Tiffany [00:24:51]:

But with that being said, yeah, there’s things have to be ordinary and necessary in your business. So, like, we have to remember that. But here’s the thing. That line is being tested because people are earning money in interesting ways that the IRS has not kept up guidance on. So, for example, I have clients who, they get paid $100,000 contracts to be cool on Instagram.

Mary Beth [00:25:15]:

Yes. Oh, you have influencers, too. Those are always fun clients. Influencers are fun clients. 

Tiffany [00:25:19]:

But it stemmed from other jobs. Right. They used to be a high level DJ or whatever, an artist, and now they’ve switched into that. And we’re seeing, like, celebrities have this now that we’re in the Olympics, like the athletes and things like that. Endorsement deals that are for their likeness. But some clients, if they get all their contracts from luxury goods, so how can we tell them you can’t have a Chanel bag in your thing? And she’s like, I have to sell that because that’s my marketing to get the contract. So I think we’re going to see some new pushback and guidance of what ordinary, necessary, and extravagant really means. But that’s where I think experience and our accounting ethics and all that have to come into play to really guide a client based on their nuanced situation. So when you see these people on social media influence, I love it. Bring that, those questions to us. But now let us apply the nuance to your specific situation, and you take into account your personal risk tolerance and priorities and the lens of life you’re looking through to make the ultimate decision. 

Mary Beth [00:26:15]:

Oh, my gosh, this is so fun for me because I’m like, okay, the accounting side of it, right, from the numbers and, like, what’s deductible? And then me, I’m always like, okay. But, like, the stability of the income and the ongoing planning around it, like, how much do you have? Do you have those cushions? And what can you do this year versus next year? I mean, it’s just like, we work with a lot of creatives at Abacus as well, but it’s always fascinating for me, from a business perspective, from the. The variable income component. 

Tiffany [00:26:35]:

Yeah. A lot of the people out there with advice, it’s like, yeah, this is for people of really stable, static situations, which is not a lot of people anymore, because how people make money is so different now. A lot of people have multiple sources of income, which makes it more complex, even real estate, they’re using real estate in very mixed use, complex ways. And the reporting and tracking of that is complex. The depreciation strategies are all different. They’re constantly changing the rules. So it’s not a set it and forget it plan. Like with anything, whether it’s insurance, your financial strategy, whatever it is, you have to take into account all the changing environments I guess. 

Neela [00:27:16]:

I love the ordinary and necessary so much, because when I was going through, like, CFP school 15 years ago, I remember being like, Nordstrom, that’s totally deductible because it’s necessary clothes, right? Super necessary. And they’re like, well, but can you wear that in other things, or is this like a Hot Dog on a Stick outfit that you are obviously not wearing that elsewhere? So that’s in my mind, I’m like, if something is Hot Dog on a Stick, I can deduct it, but otherwise, I can’t. 

Tiffany [00:27:42]:

Listen, IRS agent, I will never wear a suit anywhere but to see a client, ever.

Mary Beth [00:27:48]:

Right? 

Tiffany [00:27:48]:

So. Correct. That is a clown suit to me at the end of the day. So I’m good. 

Neela [00:27:54]:

I’m either wearing this suit or I’m not working so back off. 

Mary Beth [00:27:55]:

And I’m like, look through my social media. Not here, not here, not here. 

Tiffany [00:27:59]:

Although I can say I laughed when I put this on, because every time I put on a dress shirt, my team goes, you look like the Quaker oats. And I was like, you know, I love me a ruffle and a big collar. 

Mary Beth [00:28:10]:

I think I have a yellow one. Very similar, by the way, with the ruffle. I have something very similar. Okay, so one of the questions you actually just alluded to, I think, earlier, actually, you did? 

Tiffany [00:28:19]:

Yeah. 

Mary Beth [00:28:19]:

What are the differences in how you address tax planning with a company that’s stable? They have their study margins year after year versus a company that’s skyrocketing throughout the year. What should an owner be concerned about? So if you’re stable, what’s your tax planning look like? If your company is just on a total growth trajectory, what should you be doing? 

Tiffany [00:28:36]:

If they’re stable? We’re looking at just tweaking. Assuming there’s no major changes in tax law or entity types, things like that, we’re just looking at tweaking their existing strategy, making sure it’s still appropriate and take into account current changes in their life. Did they add a new baby? Did somebody pass away? Did they get an inheritance? Are they looking to exit? Whatever. If you’re growing now, we’re talking about full accounting, not just tax strategy. So we have to be way more forward looking, because what we don’t want is to make decisions today that are irrelevant six months from now. So we have to talk more about the future because it’s going to change more rapidly. So that’s really about how are you looking to grow this company? Are you going to get debt? Are you going to have equity partners? Are you looking to change entity types, locations, that type of thing? And then also because case in point, you know, I have clients where we made the s election and literally two weeks after that got an offer from one of the largest companies in their industry to purchase them and had to revoke it, and it caused a bunch of hoopla. They almost lost the deal, which was life changing money for them. But if we had known that they were even shopping, then we would have made a different choice. And it usually requires significantly more collaboration with outside partners because there’s a lot of factors that need to be considered. Accounting infrastructure, we’re looking at that too. Not just taxes. 

Mary Beth [00:29:54]:

Yep.

Neela [00:29:55]:

So that kind of brings me to the question. You know, on your bio, you’re listed as a certified exit planner. What does that mean? 

Tiffany [00:30:02]:

You can have your certified exit planning certification. A lot of different types of professionals get that just so that we’re educated on how to identify when a client has needs and also help hold their hand through that process. So some certified exit planners actually advise you on the exit. I more so just wanted to be educated because our clients are getting older and looking to get out of their companies. And I wanted to understand what was important for them to have in place and to think about well in advance. Because I’m smokey the bear, I like to prevent forest fires. So I’m going, okay, this client’s indicating that they’re five to ten years out and they’ve got family involved. Okay, do you have a development plan for that? I help ask questions so that they can start proactively thinking about what things they need to educate themselves on, what team members they need to start collaborating with. Like do they need EOS implementer like to help them come up with strategies for their business and works through some obstacles that they have. Do they need a business coach? Because they need to grow as a leader or to develop one of their family members to take over the role. But it’s going to take five, six years because they’re pretty young, all of those things. I’m just here to ask questions to help them be successful, because ultimately, I don’t just care about if we’re saving you taxes today and giving you some infrastructure. I genuinely care, and my team cares about getting you to the finish line. What is the whole point of spending all this time, energy, love, curiosity and creativity, and building these companies and having no transferability or not getting what you need out of it to live a very fulfilled, joyful life. Those things shouldn’t need to go hand in hand. So I’m trying to educate clients well in advance so that they can start preparing for those things, because I saw that as a need essentially. 

Neela [00:31:57]:

So important. I feel like, having worked with CPAs for the last decade and a half, I feel like there’s two kinds, and you can totally debunk this, but there are CPAs who are looking in the rearview mirror of like, oh, these things happened, this has happened. And we’re just going to kind of record that. And it sounds like kind of work that you’re doing is super collaborative, it’s super future focused, and there’s like, a thought partner component to it of, hey, absolutely. Working with entrepreneurs, you might not have been asked this question. Other people might not have access to the same information that you as the CPA have, and you’re like, I’m just here to ask the question. I’m not married to the result. I just want to make sure you’re thinking about this, too, which is hugely valuable. 

Tiffany [00:32:34]:

Yeah. Thought partnership, I think, is a huge part of what we look for in working with other professionals as well. And you’re right. But I think the two types extend to all professional service professions. Right? Not just accountants, as you guys know. And even what you do, there’s a vast difference in the type of service that you’ll get. And I think that’s what people forget is we may be accounting firm, you guys may be financial advisory, you may be a real estate agent, but because of the people that are creating these companies, there’s a vast amount of creativity involved. Yes, I know accounting firms that offer such different services, we don’t even seem like we’re on the same playing field. Like we’re on the. We’re on different sides of the planet. So asking questions, and also, I was telling my clients, when you’re looking for people to work with, are they asking you a ton of questions. If they’re not asking you a ton of questions, they’ve created this cookie cutter story, and they just want to give you the cookie cutter solution. And if that’s what you want, great. But if you want something more tailored and specific, and that’s going to help you grow and really get the most out of whatever service it is, you need to work with somebody who’s more holistic and collaborative and asking you questions, but it’s going to require time on your behalf. 

Neela [00:33:49]:

Such a spectrum. That’s a really good point. It’s like, what are you looking for? And we’ve all heard that. We’re like, oh, no, I have a financial advisor who does holistic planning. And I’m like, I want to see that holistic planning because you keep using that word, holistic planning, and I don’t think it means what you think it means. 

Tiffany [00:34:03]:

People love the buzzword, and people, good salespeople, know what you want to hear.

Mary Beth [00:34:08]:

Yep. 

Neela [00:34:09]:

Sprinkle that in. 

Tiffany [00:34:10]:

Yeah. Does actions, words, does it all line up? And I think as you kind of go along that process with somebody, you can really feel that. 

Mary Beth [00:34:20]:

Okay. This has been an amazing conversation. I think we will pivot to the closing questions. Okay. Tiffany, what is the best financial advice you’ve ever received? 

Tiffany [00:34:32]:

I don’t know that a lot of people are like, my accountant needs advice. They usually are coming to me. But I can say the best thing I ever learned was from. Have you guys read Lynne Twist, The Soul of Money? Oh, man, it changed my life. I remember sitting on the couch, and when I read it, it felt like I got hit by lightning. I just stood up and I went, and, oh, I have a relationship with money. I need to acknowledge. I didn’t even realize that was a thing. And I go, oh, mine is really wrapped around scarcity and fear. I am terrified. I am the Scrooge McDuck. If you ask anybody that knows me well, when we go to a restaurant, they’re like, you knew exactly what you wanted the instant you open the menu, but you’re staring at the cheapest thing on the menu to decide if you should get that or the thing that you want. I feel like I walked around in life, and everything had a dollar sign hovering over it, and it’s ready to take all my money. So for me, I realized I had a relationship with money, and that’s when I started working on it. And her book changed my life. I looked for it in my bookshelf the other day, and I was like, oh, I sent it to my friend. She needs this. But yeah, I loved it. 

Neela [00:35:46]:

Oh, that’s awesome. I need to add that. But I love that because if we don’t acknowledge what the relationship is, we can’t actually work on it.

Tiffany [00:35:50]:

It taught me to be intentional and actually live life with money. Those two things changed my life. It changed how I spend my money, through my business, through my personal everything. 

Neela [00:36:03]:

Oh, I love it. 

Tiffany [00:36:04]:

Love it. 

Mary Beth [00:36:04]:

We’re linking to the book in the show notes.

Neela [00:36:07]:

Perfect. Okay, question number two. What is your favorite money mistake you’ve made and why?

Tiffany [00:36:14]:

That’s so funny. I had to think about this one. I would say, when I was 25, in December of ‘07, I purchased five investment properties, all at the same time. I thought I was genius. My husband and I, at the time, when I was married, we had inherited a little bit of money from a family member that had passed away and were like, what are we going to do with this? And we talked to some of the partners in our accounting office, and they’re like, I don’t know. Real estate’s out of control. If you guys don’t buy stuff now, you may not be able to. So it was sheer, I was like, oh, my God, we got to get in. And I also thought, it never occurred to me at 25, that money has cycles. Economies, markets, there’s cycles. It doesn’t just go up, up and up forever. So I allowed my decision to be driven by fear, anxiety, scarcity, and also the immaturity of not recognizing that there’s cycles to things threw all the money in the pot. And we all know what happened a couple months thereafter. And yeah, it was really, really draining. I think at the end of the day, I learned at my phase of life, real estate is not passive. Regardless of what the tax law says, it is not passive. Investing with my advisor and putting it into the market is passive for me, with the exception of I meet quarterly and we have conversations. But owning real estate, even if you have property managers, is extremely not massive. So I learned a lot of things, and for me, I think it just helped me mature a little bit and go, oh, I will never make an investment decision again based around fear. So I always have to step back and say, why am I feeling such an urgency or anxiety around this? And is this the right decision for me right now? Yes, it could make you money, but is this the right decision for me right now? I’ve had a lot of those decisions, especially around real estate. But I’m a mom running a business, and a single mom at that. Doing that, and I don’t have time to manage real estate right now is not something I’m going to do. So I had to acknowledge that and learn from that lesson. 

Neela [00:38:12]:

And good to learn it at 25 versus 75. 

Mary Beth [00:38:14]:

I feel like there’s, like, a lot. There’s a lot of power, a lot of wisdom in that. And I also want to have that printed at this stage of life. Investing in real estate is not passive. It’s just not. I think Neela and I have said it’s just not passive. 

Neela [00:38:25]:

Totally. 

Mary Beth [00:38:26]:

It’s sold as a passive thing, but it never. Oh, it’s our side of the desk. It doesn’t seem passive. 

Tiffany [00:38:32]:

It’s made to sound so attractive and so simple and easy and obvious. An obvious choice, because the tax. Who knows better the tax laws than a tax accountant? Yes, I see all the attractiveness, but I also see what all of our retail investors go through. And there’s things that these big time guys have access to that regular people like me don’t have access to. Yeah, I don’t own the escrow company, and I don’t have my real estate license. It’s a different world, and I think people sometimes don’t talk about that because they’re just trying to sell the idea of how easy and quick money it is, you know? Right. 

Mary Beth [00:39:05]:

Okay, final question. Fill in the blank. If money were easy… 

Tiffany [00:39:11]:

If money were easy, I think people would be more empowered and it would create more stability and peace in their lives. I think anytime things are complicated, it just makes less access. We’re not teaching this stuff in school. And I also. I do have the general consensus also with health insurance that we’ve made things more complicated than they really need to be. And maybe they don’t need to actually be that complicated because it would even the playing field a little bit. But it would be easier for people to be empowered in their decisions because it’s easier. Easier to understand. 

Neela [00:39:44]:

I love it.

Mary Beth [00:39:46]:

Well, Tiffany, we’re friends now, so I don’t know if you know that, but we’re friends.

Neela [00:39:50]:

Things escalated quickly over the course of the past hour. 

Tiffany [00:39:54]:

Yeah. 

Mary Beth [00:39:54]:

So we’re officially friends. Tell our listeners where they can contact you. 

Tiffany [00:39:59]:

You guys can contact me either through our website. We’ve got a contact page that will allow you to schedule directly onto my calendar if you guys want to chat. It is Encurio www.encuriohq.com. 

Mary Beth [00:40:14]:

Wonderful. Thank you so much for being on the show. 

Tiffany [00:40:16]:

Yeah, it was fun. 

Neela [00:40:17]:

Thanks Tiffany. 

Tiffany [00:40:18]:

I appreciate it. Thanks. 

Neela [00:40:21]:

Most people have formed helpful and harmful habits around spending, giving, and investing head to Abacuswealth.com/Quiz to take our financial archetype quiz and learn your three dominant money types. You’ll receive personalized guidance that helps you have a healthier, more balanced relationship to money. 

Neela [00:41:02]:

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