137. The #1 Reason You’re Overpaying in Taxes

In this episode of 'Keep More Money,' Kimberly Tara, CPA and certified tax coach, addresses the common issue of business owners overpaying taxes She discusses how many CPAs focus on compliance and volume rather than proactive tax strategy, which results in missed opportunities to save money. Listen to hear the eight key points to evaluate whether your current tax support is adequate, or not. Kimberly encourages listeners to re-evaluate their current CPA services now while it's not tax season.

Connect with Kimberly on Instagram: @kimberlytaracpa

Transcript

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Welcome to Keep More Money, the podcast for profitable women business owners who are tired of overpaying in taxes and tired of chasing down their CPA, deferring to someone else for every financial decision and getting hit with surprise tax bills every April. If you've ever felt like you'll never truly get on top of your business finances, this show is for you. I'm Kimberly Tara, CPA certified Text Coach. Multi-business owner and mom of four littles with over a decade of experience and more than 15 million saved for my clients. My mission is to educate and empower women just like you to keep more of their money, reduce financial stress, and create lasting wealth. Taxes suck, but they don't have to hold you back. I'll show you how to make tax strategy simple, fun and easy to understand. You've worked hard for your success and now it's time to keep more of it. Let's dive in. Welcome back to the Keep More Money podcast. I'm so glad you're here with me today because this conversation is going to change the way you see your current CPA and honestly, the way you see taxes altogether. Most business owners who are overpaying in taxes aren't doing anything wrong. If you're here listening to this podcast, then that's probably you, right? Yes. You're overpaying in taxes. But no, you're not careless. You're not BBB with money and you're not the problem. The real problem is that you don't realize your CPA isn't doing what you actually need them to do as a business owner. They are reactive instead of proactive, and the best part is they don't even realize it either. They don't realize the harm they're doing to you or how much they're costing you every single year that your business is profitable. They don't realize that offering every type of accounting support is doing you more harm than good. They don't realize that by undercharging you, they can't serve you well. And once you clearly see all of this, you'll never look at your CPA. Tax season or your business the same way again, think of this example that someone shared with me in email. They were talking about depreciation, and after we pointed out some inconsistencies and some missed opportunities, this person went back to her CPA and the CPA admitted to them that they were doing what was. Easiest for the CPA firm, not what was best for the client. Oh my goodness. Come on. So I want to fully dive into the expectations you should have for a top-notch CPA. And remember, as a profitable business owner, you want one who's actually a qualified tax strategist. But I do wanna put this disclaimer out first that. Some CPAs, accountants, tax professionals, whatever they call themselves, suck. I could tell you even more horror stories that I've heard, right? Problems I've fixed for clients when they come to us. I mean, come on. Like doing what's easiest for you and not what's best for the client. I file that under. A, a professional who just sucks. Okay? So this episode, though, is more about the CPAs who are nice. They do accurately prepare your return. They generally respond to your emails or calls or messages. They file your return on time. Okay? They're, they're decent compared to the horror stories you've heard from others, right? You feel like you're doing pretty okay, so this episode isn't about the professionals who ignore your emails, your requests for informations or updates, they. don't prepare returns with wrong numbers. They ghost you right before a deadline. speak to you in a condescending and rude way. If that's the type of experience you currently have, you definitely need to find someone new like now. but by the end of this episode, you're gonna know if you have a reactive CPA or not. Um, you're gonna know if they're focused on compliance only, which is really just. Checking boxes, filing forms, and reporting what already happened in the previous year because if they are, then that's why you feel shocked by your tax bill every April. That's why you feel like you're not getting on top of taxes as a business owner. You're gonna know if they're over committed and underserving you. You're gonna realize that sometimes you get what you pay for and that the investment is totally worth it in the long run. To work with someone who's maybe a little bit higher cost, but actually does what they say they're going to do and actually has the capacity for you. So let's dig in to exactly what this looks like. All the details you need to know so you can ditch the CPA. Who is the number one reason causing you to overpay in taxes? I wanna start off with giving you an example of what this looks like in real life. A business owner, she came to us last year. After her CPA had filed her return on paper, everything looked quote unquote fine. The return was filed on time, looked like the forms were filled out correctly, and the IRS didn't send her any notices in the mail. Wasn't knocking on her door, right? No, no jail worries here. By all accounts, her CPA had quote unquote done their job, but here's what happened next. She opened the PDF of the return and she saw a five figure tax bill. She wasn't expecting, no one had prepared her for it. No one had run projections for her during the year. No one had suggested that she make quarterly tax payments. Suggest she change her entity structure. That would be an example of like electing to file as an escort, no retirement contributions, paying her kids through the business. Her CPA simply took her numbers and put them on the piece of paper and. When she found us, when she found my Instagram account, that was originally how she connected with us. She told me, I thought this was just how taxes worked. I thought surprise bills were normal. Feeling overwhelmed by taxes as a business owner was just part of it. And here's the thing, she's not alone. I cannot tell you how many women come to us, especially sending me a DM on Instagram saying the exact same thing. And they didn't realize. They didn't know that it's because their CPA is reactive and proactive, and they certainly don't know there's a different way to go about it and handle their taxes. So when we stepped in to help this now client, we started with the basics. Quarterly planning. We started running her real time numbers throughout the year so that she wouldn't be blindsided again. Then we actually dug into tax strategy. We reviewed her entity structure. We asked her more questions. We learned where her business was going in the next couple of years. We learned what her family goals were. And we were able to come up with a plan and make changes that started saving her thousands of dollars. So she didn't even have to wait for next tax season to roll around to start paying less. Because not only did she know what her tax bill was gonna be months in advance, but she actually didn't even need to pay as much in quarterly estimates because we were reducing her overall payments. And her relief was immediate. Immediate. She told our team that for the first time, she felt like she actually understood what was happening. She wasn't just waiting for bad news in April. She told her she finally felt like she was in control, mostly because she had support behind her. And that is the biggest difference between working with a team who's reactive and a team who's proactive. And again, it's, that's why it's the number one reason so many of you are overpaying in taxes because you don't realize that your CPA is re reactive instead of proactive. And you don't know how to fix it. And you don't know where to start because you don't know what you don't know. And you didn't realize that there was another option out there, but now you do. And look, I know you feel like you've been burned. You have paid a CPA to advise you, but maybe you've only paid a CPA to prepare no matter what. You trusted that they were going to guide you, that they were gonna answer your questions, that they were gonna offer strategies when they saw that you needed them. And so when you open up that return and you see this huge balance due, it feels like betrayal. And so here are two things that I want you to know that I wanna make really, really clear. Number one. Your CPA was doing exactly what you paid them to do, which is file your taxes. Their role as it's traditionally defined as we are essentially taught in school, if they went to school for this, which hopefully they did, is compliance. They take your numbers, they put them on the right firm forms, and they send them to the IRS. So in a sense, they did their job, they checked the box, but to me and to the TCPA firm, compliance is like the bare minimum, right? Because compliance is good for the IRS, it's not good for you. And compliance alone certainly won't save you money. The second thing I need you to know is that even if you asked your CPA about tax strategy, and you're like, they never answered my questions. They never got back to me, they never offered this to me. It's because they're not in a position to give it to you. They're not in a position to advise you on tech strategy. Because that's not their focus and that's not their expertise, their business model. the typical, CPA accounting firm model is built on volume file as many tax returns as possible, as quickly as possible. Answer questions only when asked. It's reactive work. They're not sitting down midyear to look at your numbers. They're not even really paying attention when they're filing your tax return for opportunities. Even though we have been planning with our clients all year long, we are still really looking at. The numbers and what's going on on the tax return. And I cannot tell you how many times we've gotten to, have everything for a tax return in our software and we're like, something's not right. This number should not be this high. Like we're using our brains, we're actually digesting. We're not just hamsters on a wheel, typing in information and relying on whatever the software spits out. We're humans actually. Really looking at everything on there. Okay? And so that's why your CPA is not proactively suggesting entity changes or retirement contributions or how to pay your kids. They're not thinking about your long-term wealth. that's not what they're paid for. That's not what they're experts in. I'll say it again. You're probably gonna get tired of hearing me say it in this episode, but this is the number one reason you're overpaying. And again, I remind you it's not because you failed. It's not because you're bad with money. There's nothing for you to be embarrassed about. But it's because you've been relying on a reactive model that wasn't designed to help you keep money, and it's gonna be hard to achieve this if you don't have a true CPA partner who actually cares about you, your business, your success, and, really developing a customized strategy that meets you where you're at. And there are a lot of misconceptions out there when it comes to tax advice, so I totally get how it can be so confusing because no one has ever proactively brought ideas to you, shown up to a meeting with, Hey, here's, here's what we're gonna do, here's what I wanna bring to your attention. No one's taken the time to explain things to you in an easy to understand way so that you can have a conversation back and forth and feel confident in what you're telling your tax strategist. No one simply just checked in with you throughout the year when they haven't heard from you in a while. You've probably tried out a few different CPAs and they were all the same, so you're sitting here thinking to yourself, this is it. This is what it is. You've talked to your fellow female entrepreneurs and it seems like this type of service that support is normal. And it does seem normal because this is, this is the norm out there and it's so sad when I hear somebody tell me, oh my gosh, I'm so glad I found you and I have. Dozens, tens of other women who are like, Nope, I don't have a good one to suggest, like someone is in the Facebook group, in the school community, in the mastermind asking who has a good CPA and tax strategist referral? And everyone's like, not me. Not me. Let me know. If you find someone like, what? Okay, but I'm here to tell you it can be different. It can be better, and you are worthy of this. So we are about to dive in here. I wanna give you, let me count how many I have. I wanna give you eight things. specific things to look for in terms of tax support and what to consider when you're thinking about if the CPA you're currently working with is providing you with the type of service. That you deserve. Okay? Because again, you don't know what you don't know. So I'm gonna tell you, in today's episode, what you need to know so that you can figure it out for yourself. So number one is, are they a one stop shop? There are so many accounting firms out there that do everything, the bookkeeping, the payroll, the CFO, the taxes, the tax strategy, but they don't really do any of those things particularly well. Or if they are a big enough firm to have specific departments who are experts in each of those areas, you're gonna get lost in the shuffle and you're not gonna have a personal relationship. And so I'm not a fan of either of these things. that's why, I admit openly that I outsource my bookkeeping. and we have, 13 bookkeeping firms as tax strategy clients. Like that is how much I believe in this accounting stuff. the separation of these accounting, services. All right, so number two, credentials and qualifications. So I'm gonna try not to, I have a whole episode about this and out, I'm coming out with another one. But look, listen to me here. The person who owns the firm. Should have credentials, qualifications, licensure, a board of someone that they answer to, and the people under them should also have some sort of degree qualification credential. CPA, which is a certified public accountant, EA enrolled agent. They should not have an art degree and be doing your tax strategy.'cause let me tell you, they're not. I'm a certified tax coach, for example. In addition to being a CPA, you cannot get the licensure of a certified tax coach if you are not either a CPA or an ea. Qualifications and credentials matter in this industry and this line of work. Number three is experience. Okay? Experience matters in this line of work. We specialize in tax strategy. For service providers, so we're not for you. If you are looking for bookkeeping, we're also not for you. If you are looking for tax strategy and you're a restaurant, and I'm not afraid to tell a prospective client no and help them find the right fit. Okay? Number four is the investment tax planning, proactive strategy, and good educated financial advice that is accurate. And customized to you is one area where you really feel like you get what you pay for. And it's not something that you should cheap out on. I'm not saying you need the most expensive person out there, but going with the cheapest will not get you ahead in the long run. Okay. I've seen this and fix this time and time again. Just last week I was talking to someone in the dms about this and she's like, oh, I'm getting what I pay for, right? Like when I heard, when she was like, I don't think they're doing what they're supposed to be doing, and I asked her how much she was paying for all of that, and I was like, well, that's your problem right there. One, they figured out that they can't be profitable. At that price point and offering everything that they are to you. Which is funny because they called themselves CFOs, right? And they just can't do it. Okay? So realize that you have unrealistic expectations as, as a business owner, if you are expecting tax strategy when you've only engaged and paid the tax professional for preparation services. Investment matters. Number five is the relationship. so once you've made sure that they're qualified and educated at their role, you really need to see if they're a good fit for you and your business. How do they view the relationship you're going to have together? Do you like their personality? Have they made good business and personal choices? Like, are they offering services for$600 a month? That should be$2,000 a month, I know it seems weird to think about this partnership as a relationship, but it really, really is because it's important that you feel completely comfortable being open and honest with this person because money and tax conversations, they can be hard. They can be vulnerable, and you wanna make sure that your CPA, your tax strategist is creating a safe, supportive space for you to share even the most difficult things and that you can really rely on the advice that they're giving you. Number six is communication. You want and you need ongoing communication and support. Your CPA should respond clearly and quickly. You should be able to get in touch with them to ask questions within a reasonable timeframe, and I don't think that they should nickel and dime you each time they have a question. So what's what's reasonable? We have a 72 hour response time, like that's our policy. And the only reason we talk about this is because I realized so many. Clients were waiting three weeks. Three months to get a response. And that's just not acceptable. And look, I'm here to tell you that sometimes our response is, Hey, we've received your question and this isn't urgent, and the deadline is five days away. we're gonna have to get back to you, but we've got your question. We've acknowledged you, and we'll get to it, we promise. And so I also want you to think about here, and this is kind of gonna lead into our next one, is, are they checking in with you ever or is it always on you? You need touch points throughout the year if they only. Schedule a call or answer an email. When you reach out to them, you're probably missing opportunities. before I jump into number seven, which is proactive, which is why I said this kind of leads into our next one, I also want you to just reflect on, do they explain things to you in a clear way, in a way that you can understand, or do you feel more confused after you talk to them? Do you feel like they're speaking down to you? Right. You should always feel super clear on what they're doing for your business, why they're recommending something for your business, something that you're agreeing to and why. Don't be fearful to ask questions. Number seven is proactive. You want to make sure you're taking advantage of all the write offs that you can, but you don't necessarily know what to be looking for. So you want a professional who not only understands advanced tax strategies well, but also takes the time to ask you the right questions so that they can take a holistic approach to your overall business. You want someone who's organized and going to hold you accountable because when you work with someone who is proactive and not overextended with too many clients. You are going to gain clarity and confidence in your tax strategy and truly be able to start building the wealth because they've got you, they know you. And the last one, number eight, is do your due diligence. A qualified professional, so someone who knows what they're doing, someone who has a growth mindset, someone who's proactively reaching out to you should absolutely be saving you more money than what you're paying them. Even if it's not always quantifiable in tax savings, I kind of think it should be, but sometimes it's not Their knowledge, their proactive planning, their business advice, the stress that they take off of your plate, right? That is the person who's a partner in catapulting your business to success. So I think that you should always interview more than one candidate so you can see how they're similar, how they're different, how they answer things, what's their approach, and make sure that you are choosing the one who is the best fit for you. So as we kind of round out this episode,'cause I don't want it to go super long. I've shared with you some considerations, and so it's time for you to determine if you're actually getting the support that you deserve and that you're worthy of in your business, especially as your business continues to grow and become more profitable. So first and foremost, your current CPA should be offering you a personalized tax strategy based on nuances to your unique situation, your business, your family, your income levels. There should be open communication, quick response times, and a collaborative approach, as well as education and creative ideas being brought to you throughout the year. And most importantly, it should be viewed as a relationship by both of you because that's what makes your life easier. And they can hold you accountable and ensure that things don't slip through the cracks. Because I know that while my life and my team's life and our firm's life, we revolve everything around tax deadlines. You don't. You have your own deadlines. You have your own goals in your business that you're focused on, and you shouldn't be focused on the taxes. So the question is, how do you fix it? if you're like, this is me, but what do I do next? I think that step one is to recognize and acknowledge where you're at right now. Just be aware of it. Say it out loud in the mirror to yourself. you don't have to say it to anybody else, But say, I'm definitely not getting what I need in my business. So step two is to honestly. Evaluate your current CPA. Are you just getting compliance from them? Are they capable of providing tax strategy for you? Do you have a relationship with them? Because if not, it might be time to start looking elsewhere. And I don't want you to think that that's scary. I don't want you to think that that's more than you can handle. It's not just bite-sized pieces. And then step three is stop believing that strategy is a luxury. It's not just for bigger businesses. It's not just when your CPA decides to tell you something about it. It is for you right now. If you are running a profitable business, there are smaller strategies if you're under 50 or 60,000 in net income, and there are more strategies, the more profitable you become and the earlier you implement it, the more you save in the long run. And that means you get to keep more money in your pocket. So, as I sort of close out the episode today, I want to really make sure that you know that the number one reason you're overpaying in taxes isn't because you failed, or you're not good enough, or you're not capable of this. It's simply because you don't realize that your CPA is reactive instead of proactive. And until now you didn't know how to fix it. But now you do. And so the moment that you step into proactive tax strategy, everything else starts falling into place. And so if you've been listening today, and realizing that you've been relying on a reactive CPA, someone who files your taxes but never actually helps you fix the problem of high taxes, then this is your moment to change that. I want you to send me a DM on Instagram at Kimberly Terrace cpa and tell me the one thing, just one thing that you realized from the eight action steps that I sort of gave you the eight things that I want you to reflect on, right? And tell me. I realized that I'm getting this and that's what's holding me back and that's why I am overpaying and let's have a conversation about it. Honestly casually, but let's find you some help, okay? Especially because it's still September. We've still got some time, and now is the time for you to take action and move forward and no longer have we still have time so that you don't have a surprise, bill, next April, I'm cheering you on. I can't wait to see you next week on the Keep More Money podcast and I hope you have a great week ahead. Bye.