Are Your Priorities in Order?
Who enjoys thinking about taxes? While not many people have this passion, I had the opportunity to sit down with Timalyn Bowens, Enrolled Agent to the IRS, and owner of Bowens Tax and Bookkeeping Solutions, a virtual firm based out of Louisville, KY. A self-professed nerd, she has a unique love and special passion for something that not many people do – taxes and tax strategy.
“There’s an order of priority and business owners need to take a salary and plan for taxes. When businesses become our babies, we sometimes forget the priority list.” – Timalyn Bowens
She found her love for numbers at an early age all the way back to counting the offering at church, and was one of the few people who knew in high school what she wanted her career to be. After a successful track record in a Top 10 accounting firm, her journey turned a different direction.
Timalyn knows that keeping track of money properly is a critical component of being successful in business, and that’s why she wants to help business owners succeed. She is a firm believer in businesses proactively increasing their profitability through strategic tax planning and implementing of tax strategies through budgeting.
“It can be so hard for small business owners, especially women and minority owned business to find the way to make a plan early on and be realistic with it,” she said. “Having good habits at the beginning, by not only taking care of the business, but setting something aside for themselves as well is so important. This gives the proper structure to follow later.” She calls this the “Hybrid Timalyn Profit First Method.” “There’s an order of priority and business owners need to know what they are taking out for salary and for taxes as examples.” Timalyn says, “When businesses become our babies, we sometimes forget the priority list.”
Setting up a forecast is most important and wealth building comes over time, especially for women business owners, because many don’t put money away, and are the last ones to take care of themselves. If you compare what women have in savings to men, a minority woman has literally six cents for every dollar that a man has in his savings.
Also, many new business owners are not familiar with self-employment tax or that Social Security and Medicare taxes are something they have to pay themselves. She commonly sees that business owners have written out wonderful business plans, but no plans for taxes and income. It becomes overwhelming to figure every part of this out. Timalyn stated that the key is to have a solid plan and a team to help you, including a tax advisor and a financial advisor.
She always tells people, “We want to make sure you're not just saving money this year. We want to make sure you’re saving money over the next ten to fifteen years, whatever that looks like. And people don't think that far down the road, sometimes not even five years down the road.”
Timalyn advised that, “As an owner, you need to know how much you actually want to make versus how much you want to pay yourself because they're not the same number.” She discussed that, “You are going to have to earn a lot more than you think you need to make to keep your level of income going. There are some people who work in their businesses for years without taking an official salary. Putting all the money right back into the business isn’t ok.” She finds herself warning clients that after years of hard work in the business they could walk away with nothing.
“Many small business owners who are just starting out don’t realize that everything they bring in is considered profit and they will be taxed on it,” she cautioned. “If you’re not used to that, it’s really going to hurt. They don’t realize that they will be taxed not only on the money they make take out for themselves, but on all of the profit and that can be a huge “ouch”.”
Timalyn stated that a good rule of thumb is to set aside 30%, but to look at the whole picture of income and what tax deductions or other debt, like student loans, the owner may have. There are a lot of different factors that play a part. Just because you are self-employed, doesn’t mean you have the option to opt out. Try making bite sized tax payments right from the start.
“I always have felt that every penny counts, even to the point that I've been told by my clients that I am the “nicest mean person” you'll ever meet.”
I asked Timalyn what advice she would give her younger self, based on where she is today and what she’s experienced.
“As a business owner, it's okay to not be perfect,” Timalyn said. “When you're first putting yourself out there. I think, especially as women, we get into analysis paralysis. Some of my worst [YouTube] videos are the ones that got the most traction, just because people could relate to them. We aren't perfect people. You don't have to be perfect to attract people to connect with people in your business. Now we get better over time. But it's okay to not be perfect. Fail forward. Just go do it.”