The Ambitious Bookkeeper Podcast

195 | Bookkeeping in the Fair Tax Era

• Serena Shoup, CPA • Episode 195

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In this mini-episode, Serena shares her research on the Fair Tax Act and what it could mean for bookkeepers. She explains how this potential legislation would eliminate income tax and the IRS, replacing them with a national sales tax. Serena offers practical advice for bookkeepers to prepare for this potential shift and future-proof their businesses.

In this episode you’ll hear:

  • A breakdown of what the Fair Tax Act actually means (goodbye income tax, hello 23-30% national sales tax!)
  • How bookkeeping services would evolve rather than disappear in this new tax landscape
  • Three actionable steps to prepare your bookkeeping business for this potential change
  • Why this shift could actually be an opportunity for ambitious bookkeepers to expand their services

Resources mentioned in this episode:

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Don't judge me, but sometimes I avoid watching or reading the news. Okay. Most of the time I avoid it. Sometimes I'm even surprised by the weather. Like today when I'm recording this episode, it was snowing after it had been 70 degrees last week. I'm not proud of it, but yeah, you know, life gets busy. Things are happening in the world that I just kind of don't wanna know about, but I know a little about what's going on. The other night I was falling asleep. I started to feel a little bit guilty for putting my head in the sand, and then I started to wonder, am I avoiding some crucial developments that could really impact my industry and all of the accountants and bookkeepers that I help could this affect my business was starting to kind of freak out, to be honest. So I did what anyone in my position would do, and I turned on a meditation podcast and went to sleep. Problem for tomorrow, Serena, I let it simmer for a couple days and I decided to do my own research, not listening to the news, not reading from sources that lean one way or another, but true unbiased research. I turned to chat GPT. Before you hate on me, chat really does speed up the research process and I had a good little convo with it. I asked it all the questions. I was wondering like explain to me the Fair Tax Act and who will be responsible for administering this if there is no IRS. So on. And now I bring to you in honor of the upcoming tax deadline, dun dun dun, the fruits of mine, and chat GPT's labor for anyone else who wants to hear about how to actually handle this potential change. I did add a lot of my own 2 cents in with this research, so please don't be fooled. This podcast is AI driven, but it's not 100% AI created. Hey there, ambitious bookkeepers. If you've been keeping up with tax news, unlike myself, you've probably heard about the Fair Tax Act, the bill that could eliminate income tax and the IRS replacing it with a national sales tax. And leaving tax collection up to each state because they are so good at it. If this happens, it's going to be one of the biggest tax shifts in history and as bookkeepers, we need to be ready for it. So today that's what we're talking about. We're gonna be talking about what the Fair Tax Act actually means for businesses. How it will change bookkeeping services and what you can do right now to pivot and prepare, even if the fair tax doesn't pass these shift in tax policies, give us a peek into the future of bookkeeping. So let's get ahead of it shall we? alright, let's break this down. If the Fair Tax Act passes, Here's what would happen. No more income tax for businesses or individuals. This is pretty big. No more payroll taxes. That means no social security or Medicare deductions. I have questions about this actually, like I'm just gonna have to dive a little deeper and no, IRS. Yep. IRS would be gone. I mean, it's half gone right now anyway, with all the layoffs. Instead, a national sales tax. Every business would collect and remit 23 to 30% federal sales tax, which is inclusive on all goods and services. Right now we have more of an exclusive tax process with our states. Inclusive tax is kind of how other countries handle sales tax, so instead of. Income tax compliance. We'd be living in a sales tax driven world, which means bookkeeping wouldn't go away, but it would change dramatically. I would venture to argue that our positions would be even more important in this case. So what this means for bookkeepers, contrary to my midnight spiraling fears as bookkeepers, our work isn't disappearing. It's evolving. Here's where the shifts will happen. There will be less demand for income tax support, obviously. So if businesses aren't filing an income tax returns, there's really no need for estimated tax payments, tax deductions, or year end tax preparation. This means some of us might lose the clients that only show up at year end for the sole purpose of getting their business p and l to file their taxes. This could be a blessing for some of us, honestly, but it does provide an opportunity to educate those clients on the importance of monitoring their profits throughout the year. Instead, those businesses will likely need our support throughout the year for sales tax compliance. This will be huge. Bookkeepers really will need to help businesses set up track and remit federal sales tax on top of state sales tax. If you haven't specialized in sales tax before and you've been avoiding learning this, now is actually the time to start learning. When the stakes are a little lower, you can head over to ambitious bookkeeper.com/sales tax to grab my sales tax workshop to start getting familiar with it as it stands now. Next payroll tax filings would disappear, as I mentioned before, social security and Medicare would go away, and obviously income tax wouldn't be deducted anymore, so three types of payroll tax would disappear, but payroll services won't and businesses we'll still need help with employee wages, benefits, and cashflow management, which is great news for those of us who don't handle payroll tax filing anyways, and we use systems like Gusto, but there's still going to probably be stuff like unemployment tax or some sort of state level employee filings anyway, so this won't completely go away either. Next, budgeting and forecasting will be even more important. No tax deductions means businesses will need a completely new strategy for managing cash flow, reinvesting and staying profitable. So if you're wondering, what should I be doing now? I've got you. Let's talk about how you can future proof your bookkeeping business, because these are the steps I'll be taking too. This isn't about fear, it's about being proactive. I decided even before doing the research for this episode that I was going to use this and see this as an opportunity. The best bookkeepers aren't just number crunchers. We are trusted financial guides. So here's what you can do today to stay ahead, number one. Start learning sales tax compliance. I already mentioned this before, but I'm gonna plug it again. Head over to ambitious bookkeeper.com/sales tax to grab my sales tax workshop. To get familiar with things you need to know about sales tax 'cause that's not going away at the state level. It's only gonna get more complicated with adding federal to this. This is probably the easiest, lowest hanging fruit for some of us. On a recent episode of the Accounting Podcast, formerly known as the Cloud Accounting Podcast, I heard Blake say Like what you mean to tell me that contrary to what all the gurus have been pushing down our throats, old Blakey feels the same as I do. While I do offer CFO services for a couple clients, that's not how I make the majority of revenue in my firm. We make it from smaller, more straightforward clients teach their own though. So with that, if you've never handled sales tax before, now is the time to learn. I feel like I've said this like three times in this episode. Now the national sales tax will be collected just like the state sales tax, but on a larger scale, and it will be managed by the states as well. So get familiar with sales tax software like Avalara Tax Jar, or the native sales tax functions within your chosen bookkeeping software, whether that's QBO or Xero. These will become essential tools. If you work with service-based businesses that don't currently collect sales tax, now is the time to start educating your clients. Let them know that this could be coming down the pipeline, and don't worry, you'll get practice on filing your own sales tax return at the minimum if this goes into effect, because services will be taxable and we do services. To learn more about sales tax and get familiar with it, check out my sales tax workshop. I've linked it in the show notes. Number two, shift towards budgeting and forecasting services. I know I just said that the majority of our revenue comes from smaller, less complicated clients than our CFO level clients, but this is a skill that you're going to need even for smaller clients, and I will be offering this to all of our clients if the time comes too. So if income tax disappears. Business owners will need a whole new financial strategy. Instead of doing books justify all taxes, which we talked about before, which some of us have been working on getting clients away from anyway. You'll want to help clients plan profit first strategies to ensure they're not overspending sales tax revenue. You'll want to help clients plan profit strategies to ensure they're not overspending. That sales tax revenue, you'll want to help clients plan profit strategies to ensure they're not spending the sales tax revenue that they're collecting, offer budgeting, cashflow planning, and forecasting services to help them navigate a tax free world. To learn these skills, you can check out my program, elevate. Go to ambitious bookkeeper.com/elevate for more information on that. Number three, You want to expand your advisory skills. So if tax prep is your bread and butter, you will need to shift into higher level advisory or sales tax. Think about adding fractional CFO services, financial planning or profitability consulting to your business revenue streams, and focus on educating business owners. Many of them will be confused about this shift. I mean, I'm even confused about this shift, and you can be the one guiding them through it. I always say bookkeepers are the first line of defense and support when it comes to all things business compliance. So don't let this opportunity slip by you. Here are my final thoughts. At the end of the day, bookkeeping is still the backbone of business. Even if the IRS disappears, even if income taxes go away. Businesses will still need financial experts to keep their books clean, manage their cash flow, and plan for the future. So instead of fearing the shift, let's prepare for it. If you're ready to start learning sales, tax, budgeting, and advisory skills, I encourage you to connect with me, whether it's through Elevate the sales tax workshop or just following along for more updates. I'm here to help you future proof your bookkeeping business. All these links I've mentioned are in the show notes. Thank you so much for tuning in today and every week now go be ambitious.

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