Busting Tax Myths & General Misconceptions with Bookkeeping with Kenesha Coleman

What's the tea, friend? My name's Hunter Donia, industry business educator for hairstylists, but my friends just call me Hunty. Whether it be growing your clientele, making more money, or automating and streamlining your systems, in the next 20 minutes or so, you'll be hearing realistic, actionable strategies to create a beautiful career for yourself behind the chair. So, if you're ready to get into it, welcome to the Modern Hairstylist podcast.

Hello, my friend. Welcome back to the Modern Hairstylist podcast. Today, I have a very freaking special guest with me to share tons of beautiful value with you, and value that we all too often as an industry do not have access to, or have a very, uh, low sense of confidence or experience with. And I think that's why it's so important and so beautiful to have other industry experts who are knowledgeable within this space and bring them on here and share that info with you.

And I'm just so grateful that there are people who recognize the need within this industry for financial understanding and planning and education, and people such as KaNesha, who can help people make that happen for themselves. So, KaNesha Coleman, welcome to the Modern Hairstylist podcast. Absolutely. Thank you so much for having me.

Yes, uh, we are freaking so excited to have you here, my friend. Before we get into it, all right, we're gonna be talking about some misconceptions and myths and, like, things that maybe people get wrong when it comes to tax planning specifically. But before we do that, I would love for you to share a little bit about your background, why you're doing what you do now, and yeah, just a little bit about yourself, if you wouldn't mind. Oh, absolutely.

Okay. So, again, I'm KaNesha Coleman, and I'm known as the Beauty CPA all over Instagram. I am a licensed CPA. I am an IRS-enrolled agent and a certified tax coach, and I own an accounting firm called Coleman Tax where we exclusively serve beauty entrepreneurs.

Now, I started my career off the first eight years as an IRS auditor, okay? So, I was the ones sending the mean notices to small, mid, and large-sized businesses announcing, "I'm coming." "I'm gonna be all up in your business and I'm gonna audit you." And that wa- and that's truly where I fell in love with tax.

The IRS was an amazing opportunity. I learned a lot, so much, so fast, so deep into taxes. But one thing I did identify right away was there was a big difference between, like, small businesses and the way their audits turned out and their tax bills and, like, the big guys. Like, a huge difference.

And it was, it was kind of like, you know, it, it was a, a imbalance there. The small businesses who had less resources was paying a lot more in tax. Mm-hmm. A lot, a bigger share of their income in tax, versus, like, say, the big guys who was paying, like, little to nothing.

They was even getting multimillion dollar refunds if you wanna be honest, okay? And a large reason was that was literally just 'cause of knowledge. It was literally just 'cause of knowledge, just 'cause the small businesses just didn't know, and the big guys, they had, like, a whole army of CPAs and tax lawyers on their team. So, I left the IRS because I was looking for, I was looking for the butterflies out of my career.

I'm one of them people that, like, I need to feel directly fulfilled from what I do for a living. I gotta know that I'm making a positive impact in some way. And so I decided to turn the tables. I didn't wanna work for the man anymore.

Mm-hmm. I was like, "Nope, nope. IRS got enough, you know, government got enough money." "They do.

Now, what they, what they do with it is debatable, but they got enough money." "Okay?" "They got enough money." I wanted to help the small business owner, okay?

And I specifically chose, um, the beauty industry because I was thinking to myself, "Okay, if I'm gonna go it off on my own, I'm gonna do this my way, how I wanna do it." And I was just thinking to myself, like, "Where am I, where am I spending my money? Like, like my disposable income, right?" Mm-hmm.

"I'm spending it on nails, hair, skincare, makeup, all of those type of things." So, I said, "She betta gurn it, I'm gonna go into the beauty industry." Yes. And just a, just a huge, huge thank you to the beauty industry.

Y'all really are just accepting of people for who they are, and then you help them to realize, "Hey, there's beauty in you. I'm gonna help you see it on the outside so you can recip- when you so, you feel it on the inside too." Right. That's truly what y- what the industry does.

So, I decided to s- you know, to specifically serve the beauty industry for that reason, for that reason alone. It's been an amazing journey ever since. What a beautiful journey. Thank you so much for introducing yourself like that.

I love that you shared that, because, you know, I have a strong why behind what I do. And when you recognize, like, how much of an impact that this industry makes in communities, but also the world, right? And a, and, and domino effect, it really makes you sad. I don't know if you agree with me.

It makes you sad when you think about the fact that these big guys are paying nothing, but then us small businesses who are making such a huge difference, and we are the ones, like, working our asses off, like, from the ground up, right? We're the ones who end up, like, shelling out all of this freaking tax money, you know, when it's hi- when April comes around. I'm really excited to hear maybe some of the things that you see where people go wrong, and then maybe some suggestions that you have for people to go in the right direction to be set up for the most success. So, I'll let you start wherever you'd like to start.

I'm down to hear it. I'm excited. All right. Absolutely.

The first thing I am gonna say when it comes to tax planning, and again, and we're talking about this because, remember, tax planning needs to be done throughout the year, okay? It needs to be done throughout the year. So, that's where I'm gonna start. I am gonna start with saying tax planning is not the same thing as when you go get your taxes done.

Okay? I'm gonna repeat that. Tax planning is not the same thing as when you get your taxes done. So, when you find a tax professional to prepare those taxes, please do not assume that they are also looking for ways to save you money, 'cause they are not.

They are taking literally the financial data that you provide to them and sticking that on a tax form, and then filing it with the IRS in your state taxing authority, okay? Because true enough, there is very little you can do at tax time to actually save on taxes. You gotta be doing things throughout the year to reduce your tax bill, 'kay? And I think that's one of the huge misconceptions.

People go to their CPA or H&R Block... Oh, God, H&R Block. Okay? They go there, and they're like, "Oh, they're gonna save money."

Mm-mm. They're just filling out tax forms. Yeah. I think that that was a rude awakening for me at the beginning of my journey as an entrepreneur, that, you know, you have financial planners, and then you have tax preparation, and then you have people who, like, file your taxes, and then you also have bookkeepers, right?

Like, there are so many different fields and expertise when it comes into the financial support that you're looking for within your business, right? So, then, so then, break that down even further. Like, what do peop- what do you think that people need? Or, like, do people...

Like, yeah, break it down further. What would your advice be then at that point when somebody understands that? Yeah, absolutely. You made a very...

You have a very good point, is, is layers to this, right? It is... Just like within the beauty industry, it's layers and levels to the types of professional that will serve the different needs. That's the same way with your finances.

Just like in beauty, you need, like, a glam squad to get you together for an event, when it comes to those finances for your small business, you need a finance team. And I suggest that that, at a minimum, should be comprised of, you got a bookkeeper. And the bookkeeper, what they do is, they'll track all money in, all money out. That is their primary core function, is to say, "Okay, w- how are you earning this money?"

And make sure it's recorded in your accounting records, and then how much money are you spending and to record that. That is it, okay? Then the next step up is you will have an accountant, preferably a licensed CPA, okay? The difference between the two is just educations and licensing, but the core function is the same.

That accountant or that CPA then will take that data that the bookkeeper was keeping organized for you, and they will do two things. One, they could obviously prepare a tax return and file it. And then two, even besides tax, we gotta know what them numbers mean, right? The bookkeeper just did all that organizing and prepare financial reports.

What does it mean for your business, and what decisions should you be making because of those numbers? Your accountant, your CPA can help you with that, okay? And if you lucky, my clients are lucky, okay? My clients are lucky in that I am a licensed CPA, so I can extract those financial analysis out of those numbers, and I am also a tax planner.

So I'm kind of dually functioned here. I can play both sides of, of the fence. But at a minimum, you need those two. You need an account, no, a bookkeeper, which we have in our firm, and then you also need a CPA that can tell you what those numbers mean, file those taxes, and show you ways to save money on those taxes.

I love that. You know, I, I found a really big peace of mind once I found a CPA who does offer, like, an all-in-one service that can help me with all of the above. And then everything's so much more seamless and connected, like, right? Like, you're not, like, reaching out to this person or having to get your QuickBooks to your person, right?

Like, it is nice when everything is all in one, and it's beautiful that you offer that. Specific to our industry, do you think that there are differences or advantages with working with people who are specific to this industry versus, like, a general experienced CPA? Yeah, absolutely. Absolutely, because...

And I'll give, like, some... This is, like, a real example I just experienced yesterday. So, yesterday I had a discovery call with a young lady, and a part of our call is I do a review of your last tax return. And so when I looked at that tax return, I see a couple of things I, as a person who specialize in the industry, would have done differently, just because I have a different understanding of the industry.

So, for example, um, on this lady's tax return, I saw that she wasn't expensing all of her back bar. Why not? That general person that she was going to likely, in a general sense, thinking that, like, "Oh, well, she got some left on the shelf, so we can't expense that till she use it." No, no, no, no.

Mm-mm. We're expensing that. We're getting the tax benefit from the, from that in this current tax year. We're not waiting just because you have...

it's left sitting on the shelf at the end of the year. That's something that someone who doesn't know this industry wouldn't know. You know what I'm saying? Or, uh, for example, that you guys can have home office.

A lot of beauty entrepreneurs have been told, "Oh, you can't have home office because you have a workspace that you go deliver your service to your client." You s- you standing behind a chair. How you doing CEO stuff standing up behind a chair? Right.

You gotta go do that at home in your home office, you know? Even if you have an office in your salon, you still can have a home office. But general practitioners don't, don't know that. They don't see it that way.

Right. And I do. We do at Komment Tax. Yeah, no.

That was y- So, we met at Ember Retreat, and it was so awesome to see you speak, because you really blew my mind about things that I would never even think about with ways I can save money with my taxes, and planning, and what I should probably be expensing, specifically as a hairstylist. So, I mean, you absolutely blew me away. And even just the home office thing, totally wild and I think a massively missed opportunity. So, I think, yeah.

I mean, it just proves it right there. There absolutely is a massive difference and advantage for sure. Then let me ask you this, 'cause I know this is probably a question that you get all the time, all right? And then I'll go back to your...

I'll stop being selfish, 'cause I'm, like, s- curious through with these questions, and I'll let you give us the rest of the, of what you believe people need to hear.When do you think somebody is financially ready to invest in a financial team or delegate their financials or get help with these types of things? That is ... Oh, that's a tough one.

I am, I am rarely stumped, but that's a tough one. But I'm gonna give you the best answer I can, okay? So I think I'm gonna, like, twist the question, and it may not even be, like, a financially ready thing. It may be a point where you're self-aware and you know that you can best spend your time somewhere else making money versus playing accountant, okay?

That's what I'm gonna say to that, right? So like, for example, if you wanna say, "Hey, I'm gonna do, DIY my bookkeeping," and let's say it takes you, I don't know, five hours a week. That's 20 hours out of the month to do that. How much money could you make in 20 hours a month doing what you do, doing what you love, versus if you outsource this to an accountant who could do that in a fraction of the time and do it correctly?

That's how I want p- people to think about the decision to delegate, to delegate out. Now, again, I'm not discouraging folks from leaning into this function. I'm not discouraging that at all. But what I'm gonna say to you is, your investment in a finance team is gonna pay for itself.

It's gonna pay for itself 'cause number one, you're gonna spend your time best making money doing what you know how to do, okay? No shade, but you don't know how to do accounting stuff 'cause you didn't go to school for accounting, okay? You know, okay? And then secondly, who you invest with, it will pay for itself, I promise you.

A good tax planner, a good tax strategist, a good pe- bookkeeper, it will pay for itself. Oh, yes. So I see this all the time, and you know what I think s- things come down to a lot is as business owners, don't think that we nearly often enough think about the value of our time. Like, the saying that time is money, we prop up the value of money so much higher than our time when in reality, like, you ...

If you have much more time and you invest that time in the proper things that you do the best, then things will ... You'll get a much better, bigger ROI versus spending a bunch of time on things that you may not do correctly that's gonna take you a lot more time. I say I would rather you sacrifice maybe, let's say, squeezing two or four more clients into your month to pay for your monthly bookkeeper and financial team so that way you can save money on the backend, right, and you can afford doing this. 'Cause you're gonna be spending the time anyway, right?

Yes, yes, yes. So you might as well spend the time making money doing things that you're good at, you know? Yes. Yeah.

I completely agree. I love it. Okay, so sorry that I, like, derailed. What are some other myths that people maybe have or misconceptions or things that you see go wrong or maybe things that people don't take advantage of?

Absolutely. So I think another thing that people ... I think this is just a huge oversight, is bookkeeping. Oh, I'm finna say the B-word.

That's the B-word. They, beauty professionals hate the term 'cause they're like, "Ugh," right? Keeping track of all money in, all money out, messing around with accounting software, looking at financial reports on a monthly basis. But you gotta do it.

Before I or any other tax professional can come in and save you tens of thousands of dollars, we gotta have a good set of financial data to analyze to be able to see what the opportunities are and to take full advantage of them, all right? Taxes aside, though, you gotta be doing regular bookkeeping and looking at it consistently for yourself. Like, how do you know how to make money goals or whether you're progressing toward the money goal or whether, you know, the money you spent on this thing was actually worth it or not? The money you're paying this person, are they a good ROI, right?

If you're not looking at any metrics or numbers whatsoever to evaluate the financial health or performance of your business, how do you know you're, you're in a good state or not, okay? Accounting by way of just looking at the bank balance ain't it. Do you check, you check your bank balance, you're like, "Oh, I got money in there, so I'm good"? That's not enough.

That is not enough and really not healthy way to conduct your business, okay? We gotta look at those numbers, we gotta know what they mean, right, and we gotta use that to say, "Okay, how can we maneuver this? How can we arrange some things to save on taxes?" And that gotta be done consistently, at least once a month throughout the year, so we can catch it before that year close to save on taxes.

But a lot of beautiful, fr- beauty entrepreneurs know bookkeeping whatsoever. Why do you think that is? Couple reasons, and I've heard this from the mouths, the mouths of beauty entrepreneurs. Um, one, they think that it's costly, and they think this before even talking to folks.

Or maybe they talked to one person and they didn't continue the search, okay? Like I said, uh, bookkeeping, bookkeepers, and other finance professionals has levels. So if you go to a, a licensed CPA or a tax attorney for bookkeeping, of course it's gonna cost a ton. That's how much those professionals cost.

But just find you just a bookkeeper and that may be, um, a somewhat of a lower investment for you, like, in the range that you can, uh, reasonably afford. So one, people, they think it's costly. Two, they don't see the value proposition. We just talked about that a little bit.

They value the dollar versus their time more, so they'd rather go off on it on their own. Then they try on their own, they get confused and don't have patience for us, and then they stop altogether, okay? Um, three, they simply just don't think it's important. "Oh, I'll just do it from my bank statements at the end of the year."

They don't, they don't value the function or the value of tax planning at all until they realize, they get onto a discovery call with me, and I say, "Oh, you coulda done X, Y, Z and coulda saved $10,000." And then they're like, "Oh." It's different when you see the numbers actually, right? When you actually see the numbers, 'cause the numbers don't lie, right?

Yeah. Numbers do not lie. So when I'm able to show them that, then they're like, "Oh, wow, maybe I should be doing this and should make time for this and invest in this to save money." Um, so those are the top three reasons that I, I see.

You know, that totally makes sense. And I feel like, I mean, even I'm totally guilty of all of the above. Like, I'm so glad that I, you know ... I'm so glad that from the beginning of being a entrepreneur and opening up my own salon suite years ago, I'm so glad that this stuff gave me so much anxiety, enough to where I was, like- Yeah.

down to delegate it out. But I didn't delegate it to the right people either. Mm-hmm. Like, because I didn't have enough, like, financial literacy and, like, experience and understanding, I wasn't able to really, like, I guess, screen and audit the people who I was working with, and it was also really difficult to find somebody who understood my industry specifically.

And so it's so awesome that people like you are out here, like, helping people get this stuff together for them. And before we get into, like, where people can find you and work with you, because I know that that's what everybody listening to is trying to figure out right now, is there any other things that you think that we should cover and that we think we should go over for this? Yeah, absolutely. So I just wanna mention just, just two more very quick things, and I call these, like, the low-hanging fruit of tax planning.

So if you're listening to this, this is something you can do the day you listen to this, okay? I want you to do two things. I want you to get that bookkeeping together. Together.

And as soon as you do, or even if it's already together, just go take a look at it and see where you are right now in the tax year, and you need to evaluate for yourself, "Hey, if I were to file a tax return today, what would that tax bill look like, and am I happy with that?" And if you're not, it's time for you to start strategizing, 'cause we got so much time left in the year even still for you to do some things to turn this situation around, okay? So go evaluate where you are from a tax perspective, and you need a good set of up-to-date books for that. And then two, one really, really easy thing I see is when beauty pr- entrepreneurs first start out, remember, they, they pick a business entity structure, right?

"I'm gonna be an LLC," and they set it and forget it. That's what they are from, for many, many years, decades, they're just a, a single-member LLC, meaning, you know, they're the only ones that own their LLC. Well, I need you to evaluate whether that is still serving you well. Evaluate whether that is still serving you well.

You can find a calculator online, through Google, or you can get on our discovery call and we can tell you whether that entity is still serving you well, 'cause literally just by filing some paperwork, you can save tens of thousands of dollars, just by filing a form with the IRS. And so I need you to look at those two things. Those are two very big things that you can easy find money from now to the end of the year to save on your tax bill when you file taxes next year. Yeah.

If your business is in a circumstance where you can S corp, freaking do it. Amazing. Like, freaking do it. And it, and it amazing.

It's amazing. It is truly amazing. But I will say that it is a little bit more ... There is, there's a lot of moving parts to it, especially when setting it up, and that's why I'm like, "I will hire a trusted professional to take care of this for me."

Yeah. Yeah. So speaking of all the above, Kanisha, if people would like to work with you, if people would like to get their finances together, where can people work with you? What services do you offer, and where can they find you?

Absolutely. So we are a full service accounting firm. We do your bookkeeping, we will do the financial analysis and the accounting once the reports is done, and then we do tax planning as well, and we get you outta trouble if you're already in trouble with the IRS. So we are full service.

Um, we do have a great value-added discovery call process. You can go to our website, thebeautycpa.com. It's a huge blue button.

Just click that button and book a call with us. Um, and we'll have a conversation. I'll give you some nuggets you can take away and let you know if you have more opportunity to save on tax as well. And then, you know, you can always follow us on Instagram @thebeautycp- @thebeautycpa.

We have a ton of content over there as well. Beautiful. And is that, um, discovery call free? It is free.

Wow. It is free. It is free. I do ask that you come prepared, though, and you will see we got, like, a short intake form where we ask you some questions, you upload your latest tax return, and as long as you can give us all the information we need, by the time we get on the call, it's so value added.

Yeah. It's so value added for you to know kind of which way you need to be going next to get to that next level, whether that's maximizing profit or minimizing tax. I freaking love that so much. You literally have nothing to lose, and we over here at the Modern Hairstyles podcast, we're big fans of digital forms, so I know nobody listening to this is gonna have an issue filling out that form.

One last thing. Do you mind if I ask you one last thing, Kanisha? Oh, yeah. For sure, go ahead.

There might be somebody listening to this and thinking, like, "Yeah, I'd really l- I th- It's really time for me to get this shit together, you know? Like, i- it's time, but I am so ashamed-" Mm-hmm. "... with how I have handled this thus far, and I'm embarrassed of what's going on," right?

Like, maybe somebody has, like, a lot of shame cooped up in them right now and they're nervous to even, like, share anything with you or anybody else. What would you say to that person? This is what I'm gonna say, and I'm gonna get, like, super woo-woo right now, so forgive me for that. I want you to separate yourself from these numbers, okay?

You ... These numbers or whatever situation you find yourself in is not a reflection of, like, who you are as a very human. Like, we're very, we're a very safe space over here, okay? And so-We gotta get you right, and the only way to get it right is if we can have an honest conversation.

But I need you not to... I know why you feel embarrassed and ashamed, 'cause you care, but I want you to separate yourself from the numbers and from the situation. Because you as a human will not be judged over here from me or Comotax for that. You know what I mean?

Just like, just like when I go get my hair done or my skin seen, you all beauty professionals, you're not judging me. You know what I mean? You got... I gotta tell you everything for you to help me with this skin.

You know, sometimes we be lying, like, "No, we don't pick." No, we be picking. Y'all know we be picking. Or the hair, "Do you do, do you sleep with a bonnet?"

Yeah, I sleep with a bonnet. You know I sleep with no bonnet, 'cause you could see my hair. And so, it's the same way over here. It's, it's no judgment, okay?

But separate yourself. Do not judge yourself from the numbers or from the situation. You're human and you're valued. That's beautiful.

Thank you so much. Thank you so much for your time, Keneshia. This was so beautiful, and I know that everybody's gonna love hearing this. And what you're doing for the industry means so much and it's so important, so thank you so much.

From one person who's passionate about helping beauty professionals to another, we appreciate your time so much. Oh, thank you so much for having me. All right, my friend, thank you so much for tuning into the Modern Hairstyles podcast. If you enjoyed this episode, I would really appreciate if you left a five-star testimonial wherever you're listening to this, and make sure to go ahead and check out Keneshia.

We have Keneshia's details in the show notes of this episode as well, and that was the beautycpa.com. Am I correct? Yes.

Beautiful. All right. So make sure to rush on over there and get your ish together with your finances and your tax planning, and we'll see you in the next episode of the Modern Hairstyles podcast. Peace out, girl scout.

Bye-bye.

End of transcript. © 2023 Hunter Donia LLC.