How are you investing your money for retirement? In this practical financial episode, Linzy and Kaci dig into what it looks like to wisely invest our money as private practitioners so that our money can grow for us.
“If you notice that you’re starting to make your tax plans, and you’re thinking, ‘Well, I didn’t do it all year, so now I’m just going to have to make it happen and push through…’ If you’re noticing any kind of propensity towards making this a painful punishment, I’m going to ask you to stop and think about how this could look different for you this year.”
In This Episode…
Does the tax season fill you with dread? Rather than being unkind to yourself for the things you didn’t do the way you thought you should this year, listen in to these tips and action items that Linzy shares.
Take steps today to make this tax season more manageable. Check out this solo episode where your host Linzy talks with us directly about things we can do to manage our taxes as therapists in private practice, and reduce the stress that comes with tax time.
Free workshop: Setting Enough Aside for Taxes (in 5 Easy Steps)
A FREE workshop that teaches private practice therapists how to teel totally calm about your private practice finances knowing you have more than enough in the bank to make tax time a breeze!
In this pre-recorded online workshop, I teach you:
Linzy [00:00:03] If you notice that you’re even starting to make your tax plans of like, Well, I didn’t do it all year, so now I’m just going to have to like, make it happen and push through. And if you’re noticing any kind of propensity towards making this a painful punishment, I’m going to ask you to stop and think about how this could look different for you this year.
Welcome to the Money Skills For Therapists podcast, where we answer this question: How can therapists and health practitioners go from money shame and confusion, to feeling calm and confident about their finances and get money really working for them in both their private practice and their lives? I’m your host Linzy Bonham therapist turned money coach and creator of the course Money Skills For Therapists.
Hello and welcome back to the Money Skills For Therapists podcast. Today we have something a little bit different. Today I’m doing a solo episode. You may have picked up on the fact that I really like talking to other people and I always love being able to have peers and colleagues of mine and people who have done significant work around their own relationships with money or who are helping us work with money in different facets of our business. I love the opportunity to connect with those folks and bring them on the podcast. There’s nothing like a good conversation in my books.
But today I want to dig in to a topic that is very much just like I just want to impart to you some information that will hopefully make your life easier, if this is a problem that you have, and this is how to make tax time bearable, comfortable. Okay, maybe even kind of nice. I don’t know if I can go that far, but I want to talk to you about tax time prep because we are coming into that time of year and the time that I’m recording this, end of February, we’re going to be sharing this episode in March. It’s like taxes are in the air. There’s that swirl coming around.
I know in Canada we need to get our, you know, documentation is due at the end of this month. If you’ve had employees, you need to get all your stuff out to employees. We are definitely like getting into tax season for most of us. If you are a sole proprietor, you’re going to be filing your taxes. Your year-end would have been the end of December. So we are coming into that tax season where taxes are due in April. And this is a time of year that is just rife with opportunity for pain and headache and negative stories about ourselves. And I’m also about to argue our self-punishing behaviors.
So let’s talk about how to actually make tax time work for you. First, we want to talk about the mindset. If you’ve attended my Saving Enough for Taxes workshop, which is an adjacent topic but different than we’re talking about today. If you’ve attended that workshop or if you have done Money Skills For Therapists, you know that I start with mindset – and my vacation workshop too. We always start with mindset and the reason for that is so much of what is difficult about money is the stories that we tell ourselves and that emotional relationship that we have with it that really sets up and informs how all of our tasks go. If you tell yourself that getting ready for taxes is tedious and stupid, or if it’s evidence of how you failed as a business owner or you don’t know what you’re doing, you are obviously creating conditions in which you’re going to feel really shitty, more or less. So the very first thing I want to talk about is don’t make tax season a punishment for yourself.
Something that I’ve noticed is when therapists and health practitioners, when we have avoided taxes throughout the year, when we haven’t been doing that kind of tracking work as we go that we know we’re “supposed” to do. I’m putting that in quotations, but it is actually very helpful to track as you go. When we haven’t done that work as we go, we end up with this mountain of work, or at least a small, unpleasant hill of work to do. And the tendency that I see is that therapists turn this into a punishment for themselves. They make themselves do it on the weekends. They make it like for a whole day they have to just like, compile all their tax stuff.
Sometimes I’ve heard of people like closing themselves in a room, so it’s just like this intense, unpleasant experience of basically what you are doing is you’re doing a whole year of financial work in like one or two days, which sucks. Even if I did that, that would suck. I would not have fun with that because I just don’t think the human mind, it’s not really built for us to do that kind of task for that long.
So if you notice that you’re even starting to make your tax plans of like, Well, I didn’t do it all year, so now I’m just going to have to like, make it happen and push through. And if you’re noticing any kind of propensity towards making this a painful punishment, I’m going to ask you to stop and think about how this could look different for you this year. What do you need for it to not be a punishment? How can this just be a normal, neutral part of your business? Taxes are just what happens when we have a business that is successful.
If you have a business that is generating money and then is giving you an income that you’re going need to pay income tax on, taxes are just part of that, right? It is a normal part of doing business. And if we can start to think about how to bring that more into a neutral space, you don’t have to love it. But if you can bring it to a more of a neutral space, there’s going to be a big shift in what this looks like.
So if we want to talk practically about that piece of not punishing yourself, part of it is just like, okay, this part of my business, maybe I didn’t take as much care of as I wanted, and there’s more tasks than I need to. Or, you know, if you have taken care of it. They’re still going to be kind of a little pile of tasks that need to be done. How can you spread it out so that it’s just another task on your to-do list that you work at little by little, rather than making this big, terrible mountain task?
You have time right now. If you’re listening to this podcast at the time that it comes out, you have at least a few weeks to compile this stuff together. At least two weeks. So is it that you work on it half an hour on Monday, an hour on Wednesday and an hour on Friday. You know, for a couple of weeks. Is it that you work on it in the evening? We’re going to get into more of these details later. But just start to think about how do you just make it this neutral, rather than a burden or a punishment or setting it up as something that, again, invites all those parts of you that have negative things to say, to just go nuts and have their say, making it neutral.
The next piece is a practical piece, and this is: create a central spot for all your tax-related stuff for your business to go. You’re going to have one physical spot and one digital spot. So I noticed this time of year, you start to get receipts being emailed to you from like charitable donations that you’ve made. I got a receipt the other day from the Globe and Mail newspaper, which is a national newspaper here in Canada. Apparently, I got a tax credit for having a newspaper subscription. So in my email inbox, for example, I have a tag that I’ve created called Taxes. So I also have a receipt tag where I tend to tag all my receipts.
But now when I’m getting things that I know are specifically for tax time, like that end-of-year charitable receipt or this newspaper tax credit receipt, which I was not expecting, I just put the taxes tag on those. So when I go to put together my tax information, I have now put it in the right spot as I went along, little by little. And so it was all going to be there. When I do that search for that tag in my Gmail, there’s all my taxes stuff in one place. I don’t have to go searching and be like, Wait, did these people send me a receipt? Do these people send me a receipt? It’s all together already.
Same goes with your home when mail comes in the door. I mean, this is a great habit to have in general. If mail tends to go missing in your house. My partner and I just created a mail drop spot in our house. Have a spot where tax-related stuff can go, right? Maybe you have a mail spot as the first step, but as soon as you open that and you realize it’s a tax thing, having a folder that’s out somewhere visible that just says taxes, where any W-2s or T forms that come in, whether you’re American or Canadian, any kind of receipts that are being mailed to you, again, like charitable stuff, any investment income that you’ve had, you’re going to get a receipt from that from your bank or your investment platform. Just put them all together again.
What we’re doing here is we’re taking something that could become this huge, painful mountain. If we ignore it, ignore it, ignore it, and then just like dive headfirst into it. If we pay attention to it a little bit as we go and just make that habit of putting the things where we need to find them, when it’s time to find them, then you’re breaking up the work and you’re making it small, little easy micro tasks rather than this big pile of tasks that you’re going to have to do all at the same time. That’s going to be very painful.
Now let’s talk about what you actually need for taxes. This is not going to be an exhaustive list because it’s going to be very specific to you and your family composition and what credits you are eligible for. But let’s talk about the business side of it. So basically speaking, what you’re going to need to gather together for your accountant for tax time is your income information and your expense information.
Your income information can usually be pretty easily found if you are using an electronic EHR like Jane app or simple practice. I believe therapy notes. Anything that is gathering together the information of when your clients have paid, you will have the ability to do a report where you can just pull that number to say, Yep, this year I billed $75,000, $80,000, whatever it is, that is where you get your income information. Pretty simple.
Your expense information, what you’re going to want to do is gather together all the physical receipts for things you bought. I’ve noticed in the time that I’ve been doing this work with therapists, physical receipts have significantly reduced. There’s just not as many of them anymore. We don’t tend to do things in person as much anymore, for better or for worse. I think I would argue for worse. But any paper receipts that are around, getting those into one spot, and again, this can be something that you can set your mind to doing over time. It doesn’t have to be one big massive task, but you could set a half-hour task for yourself one day of just like rooting through that pile of stuff on your desk and putting aside everything that’s a work-related receipt. Find the drop spots in your house, go through your cupholder in your car if things get crammed in there. Start to just be curious of where that stuff can be and pull it together. Having receipts, the actual receipts that show what you bought, is helpful.
I’ve had people asking for whether or not what’s on a credit card is good enough for your receipts and my understanding – and again, I’m not an accountant – but my understanding from accountants is if you get audited, the IRS or the CRA, or if you’re in Europe, whatever your regulatory tax body, they’re going to want to actually be able to see the information of what the money was for. Just having a charge on your credit card that says Amazon does not prove to them that it’s actually an eligible work expense. So the more that we can gather that information again as we go and as you’re getting ready for taxes, gather that information means that you literally have the receipts should you ever get audited.
Don’t forget to grab your credit card processing fees. That’s one that is often missed. So if you use something like Stripe or Square, you can go in there and just grab a year-end report from January 1st to December 31st. How much did you pay in credit card fees? Put that information down. Look through your personal Amazon. If you tend to buy things for work on your personal Amazon or any other places where you’ve got personal and business mixed.
Take a casual, curious look through there and again, gather all that stuff into one digital place and one physical place. Digital place, I should say, maybe there’d be two. Sometimes I have to save some stuff to my desktop. Other stuff is in my email and then one folder which ideally you’re putting stuff aside throughout the year and if you weren’t able to do that, then you can gather things together over the next while as you’re getting ready for taxes.
But remember, not in a punishing way, in a metered, little-by-little gets-the-job-done kind of way. And then the other portion of expenses to track is home office expenses. So this is something that can sometimes be confusing because now so many of us are working at home.
When I started doing this work with therapists in 2018, no one was working from home and now most of us are working from home.
So home office expenses are that other category of expenses that you have to gather together for taxes. And we’re not going to put those in the same spot that you’re tracking your business expenses because they’re not just straight business expenses like your website or your supervision that you get. Those are things that are just straight business expenses, but your home office is written off as a portion of the space that you use. So you don’t get to write off 100% of your rent or you don’t get to write off 100% of your electricity bill. You get to write off a certain percentage.
So put that information together again, broken out over time, little by little, in a different spot, a different spreadsheet or different page in your ledger, because your accountant is going to put that into a different portion of your taxes, like a different area of your taxes. And it’s going to be written off as the percentage of your house that is for home office use. So, for instance, in my house and my partner Rodrigo also works for me in the business. So we have our home offices that we use for the business and they make up 25% of the square footage of our house, which is the maximum, by the way, that my accountant has said that we can write off. So we wouldn’t want to write off more than that because that might flag us. But what that means is. When we have the interest on our mortgage. Your mortgage is not a write off, but the interest on your mortgage is in both Canada and the U.S., as far as I understand.
Let’s say that we over the course of the year pay, oh, gosh, I don’t even want to think about this number. This would be so painful. But let’s just say it’s like $12,000 of mortgage interest. I really made up that number. Now I want to go look at my mortgage and see how much of it is interest. But let’s say it’s $12,000. We can’t write off $12,000 as an expense to the business, but we can write off 25% of it. So I can write off $3,000 is actually what’s going to be applied on my taxes. But I can keep track of it and say, okay, this year for our house, we paid $12,000 in mortgage interest and then the accountant will put that into our taxes. And ultimately what will be claimed is 25% of that would be 3000. So thinking about your rent, your mortgage interest, your bills like your hydro phone and Internet are a little bit different. You can write off more of those, but again, put those in a separate spot too.
These are all things that what we’re doing really is like pulling together the information so we can have conversations with our accountant. You don’t have to know all the answers or make it perfect. If you’re looking at stuff and you’re like, Wait, what category is this? Is this dues and subscriptions? Is this computers? I don’t even know- like what categories exist. Don’t worry about those things, really. I know that that might seem a little weird to say, but the most important thing is that you pull all that information together so you can ask your accountant, Hey, this subscription that I have to this professional magazine or this website service that I have, what category should that go in? And they can just answer you. And then together you’ll be able to add all the numbers that you compiled into that category.
So I say this to students in Money Skills too, like finding the exact right category is not as important as just having the information in one place, because your accountant can answer that question in literally 5 seconds. You can also, you know, do a quick Google search. But what is most important is you just pull together the information so you and your accountant can have the conversation about the information you have on your side. And they will help to fit that information onto your taxes in the right place. Then what you’re going to need to do is put all that information together, Right?
Once you gather your income information, your expense info, ideally, you’ve also been putting aside that personal stuff that’s come in the door. Like we said, that’s going to go in a different spot on your taxes, but your accountant’s going to need, you know, those personal receipts, personal related receipts as well. Now you’re going to put it all together.
And my suggestion is always to put it together in a way that makes sense for your brain. There’s no one way to put together your tracking for your business, which is basically what we’re talking about right now. We’re talking about doing tracking that maybe you did a little this year. Maybe you did none. Maybe you did all of it up till November and you’re just doing the last little bit. But using a tool that just makes sense for you is the best way to do it.
So whether that’s a spreadsheet, you may have a spreadsheet. I have a spreadsheet that’s out there through the Abundance Party. In the Abundance Party, there’s a spreadsheet available that I’ve made, which is also available in Money Skills For Therapists. You might have your own spreadsheet that you’re to use or a spreadsheet that, I don’t know, your partner made you. I find a lot of therapist types are with engineering types. So if you have an engineering type person in your life who has made you a spreadsheet, if you like it, that would be a good place. Or a paper ledger is totally fine. You know, if you are really a paper person and technology is part of the friction, grab a notebook. You can make each page on that notebook another category of expenses. If that’s how it works for your brain, you can make columns. If you want to make a traditional ledger, you can look up what a ledger looks like, if you’re not familiar, just get the information down, get it together, and going through your bank statements from your business line by line.
Again, just using curiosity and just making sure that you’ve captured all those expenses. This is what we would call reconciling. Reconciling is where you’re double-checking to make sure everything’s been captured. The numbers match. Going through your bank statement and your credit card in a curious, measured way will help you to gather all of these things together.
And then the last thing in terms of how to make tax time bearable – enjoyable – is actually to make it pleasant, have a warm beverage on hand. I’ve got my giant bucket-sized mug of tea next to me right now. It’s just my constant companion, whatever that is for you, whether that’s having a nice coffee, picking yourself up a coffee out, whether it’s just water, whatever is going to help you stay grounded, put on music, think about what do you need from that music? If you do want music, is it something to is it brown noise to keep you focused? Is it Lizzo to pump you up because you tend to get sleepy when you’re stressed? Or is it classical music? Like is it calming music? Maybe a little bit of like sad music, whatever it is. Think about what you need to make yourself comfortable. You can take care of yourself while doing something that you don’t want to do.
Just because you’re doing a task that might not be your favorite part of your business doesn’t mean that it has to be in these awful conditions. You can signal to yourself that you are safe, that you are lovable, that you are good enough, that you’re a badass who has an amazing business. You can signal all of these things to yourself by setting up an environment to take care of you and meet your needs even while you’re working on something that might not be your favorite thing to do.
And then if your accountant needs more from you, I also want to remind you that that doesn’t mean anything about you. I’m maybe speaking partially for myself right now. I do notice sometimes when my bookkeepers come back and ask me a question, there’s so much opportunity there for the parts of me that want to be critical of me to jump up and say, like, See, you’re not doing a good job. You missed this thing. Cue endless negative stories that I think are possible for most of us. If your bookkeeper comes back or your accountant comes back to you, and they ask you questions or something is missing, that doesn’t mean anything about you. Finances are always a work in progress. And it can be helpful to think about this work with your accountant as a conversation, right? You’re going back and forth.
There’s another mindset piece here, and that is that your accountant’s job here is to be the expert who ensures that your information is as complete as possible to get you the best return that they can. They’re on your team. I think it can be easy for us to go into the place of being like a bad student or feel like we’re being criticized or just feel stressed by the demands of financial professionals in our lives. And I want to remind you that your accountant works for you.
First of all, you’re the one who’s actually paying them, and there needs to be a relationship there where you can feel supported, where you can ask for clarity and information, and where you believe that they’re really on your side and they’re doing the best that they can for you. If you can find evidence of that, then that’s great. Really take that in and notice that – this is mostly I’m saying this if folks have had difficulty with accountants. If you have an accountant you already love and that’s amazing. That’s great. But take in that evidence that they’re on your side and they’re here to help you.
And if you find that, come the end of this tax season, it really wasn’t a good experience and you don’t like how they communicate, then you have another year to find somebody new who is going to feel like a team member who’s there to support you, because that is their job as an accountant. Their job is to do the best that they can for you.
So. I’m going to summarize because I know that was a lot of stuff. So, mindset, don’t make it a punishment for yourself. Think of your accountant as a partner in the project. Ask them questions. See it as a back-and-forth. You’re collaboratively working on this project to get you the best return that you can. Create those central spots: central digital spot, central physical spot, to catch your personal and your business tax receipts as they come in. That makes it way easier to gather that information gradually from your income and your expense stuff. All of this is gradual. Get it into that tool that makes sense for your brain. And overall, very importantly, break down this task into many small tasks. And whatever size bite is good for the nervous system, you will actually make more progress if you get this done in the amount that makes your brain happy.
For some people, that’s going to be 20 minutes at a time. For some people, they’re going to get in the flow and they want to do 2 hours. Rarely is any of us going to thrive and feel great after doing 8 hours of financial tracking. Just don’t do that to yourself.
So think about what you need both in terms of your environment to make this a really nice money time experience and also in terms of length of time to break down what might be a big task right now into small, manageable bites. You’ve got this. I am wishing you a wonderful tax season.
If you’re enjoying the podcast, you can also follow me on Instagram @moneynutsandbolts. We share practical and emotional money content on there all the time and I’m also working on reels so you can see those too. If you are enjoying the podcast, leaving reviews on Apple Podcasts really makes a huge difference for us. I tried to leave a review recently. I had promised on a previous podcast episode I would leave a review for Mike Birbiglia, who is my favorite podcast, and I was not able to as a non-Apple user. So I’m asking the Apple users out there, if you’re an Apple user and you have 2 minutes. Please leave a review. As Android users are looking to you to make this happen. Leave a review because that is the best way for other therapists to find us and be part of these conversations. Thanks for listening today.
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