174: Importance of Finance Management for Interior Designers

Michele  00:00

Hello, my name is Michele, and you're listening to Profit is a Choice. With us today is Damari Gold owner of the Gold Standard Accounting and Tax Firm in Huntington Beach, California. Damari is passionate about helping small business owners understand their money, so you can easily see why I am excited to have her on today's podcast. We will be talking about the yeses and nos for items that you might be considering for tax deductions, the importance of creating CFO days in your firm, and why we need a tax plan. Enjoy the conversation. 

Michele  00:40

Every day, empowered entrepreneurs are taking ownership of their company financial health, and enjoying the rewards of reduced stress and more creativity. With my background as a financial software developer, owner of multiple businesses in the interior design, industry, educator, and speaker, I coach women in the interior design industry to increase their profits, regain ownership of their bottom line and to have fun again in their business. Welcome to Profit is a Choice. 

Michele  01:13

Hi, Damari welcome to the podcast. 

Damari Gold  01:15

Hello, thanks for having me.

Michele  01:17

Oh, I'm so thankful that you're here. And we had a little technical glitch before we started. So I'm thankful that you held on long enough for me to to have good space cleared out to be able to talk to you today.

Damari Gold  01:31

Oh, of course things happen. 

Michele  01:32

Exactly. You're awesome. And that you, you have a creative flair about you. You are approachable. And you do tax accounting, things that don't always go together like that.

Damari Gold  01:49

That's true. So true, thank you. Thank you for saying it so eloquently. But yes, there is a side to me that is creative. I love decor, if you take a look at our tax office, it's nothing like any other tax office you've ever seen before. And it's because I thrive in spaces that are free and flowing. And just all that great stuff.

Michele  02:14

That's fantastic. So start off, if you would tell us a little bit about your history, your journey, what brought you into creating a tax firm?

Damari Gold  02:25

Yeah, for sure. So I'm a first generation American, and I grew up in California, in Los Angeles. And then as I was growing up, I realized that I have a talent, a gift for problem solving. And believe it or not, it is a talent, because I'm just great at finding solutions. And so as I was growing up, I didn't necessarily like school. So guys don't think that I was always like a numbers person or nerd or anything like that. Because normally what people think about accountants is that they are a numbers person. And that could be the case, too. I mean, I'm analytical. But over time, when I was growing up and try different jobs, I just realized that I wanted to be in a space where it wasn't, it was like a different type of customer service, if that makes sense. Just because I realized that I was great at problem solving. And so I had the opportunity over 10 years ago back in 2009, to intern with someone doing taxes. And so I went ahead and dove into that. And I was good at it. And I enjoyed it. Because there was not one situation that was ever the same. So since that time, I decided to pursue a degree so I got my master's degree in accounting and finance. And then I worked for many different firms. I learned so much I did contracted work and built my business on the side. Honestly with a desire to one day have my own tax office, that has always been my dream since I started this career. And lo and behold, in 2021, everything was wild. I just knew that it was time it was time for me to to make the dream come true and to finally find my space and create the space that I want because oftentimes, I don't know if you've experienced this, you go into tax offices, they're all gloomy and gray and just not fun. So I set out to be different and set myself apart from that. And that is in short, my journey to now where we are in having a tax office in Huntington Beach and making my own space.

Michele  04:48

I love that. That's a great journey. Curious, there are multiple areas in accounting, right?

Damari Gold  04:56

Yes.

Michele  04:56

And what was it do you think about the tax accounting piece that drew you in?

Damari Gold 05:02

I think, honestly, for me, I like change. And that's something that I think maybe I just grew up with, it was like a conditioning on my part. And so with tax accounting, not every situation is the same. And I think over time, as I realize that the numbers can mean something, and there's always planning and all of these things, the human element of that piece can never really be removed. And in for me, it's understanding my client and understanding their business and their industry and knowing that it's not just that moment of like, okay, here are my numbers. But it's like, it's almost like helping them create their own picture. You know, and so I think that over time, that's really what drew me to it and, and feeling good about, like, understanding different situations. And the fact that truly not any one tax situation is the same, it really just isn't. And so as tax laws change, we also have to evolve and change as the way businesses are handled change, we also have to kind of move with that. And so I think that that's probably why I feel so attracted to it or just, I enjoy it. 

Michele  06:20

Yeah, it's not stagnant. That is for sure. Yeah. Yeah, one of the things that I always tell my clients when they come to me, and I guess one of the very first things I do when we start working together, just look at their financials, right? Like you give me your p&l. Give me your balance sheet, I need it for the last couple of years. I want in cash, I want it in accrual. And let's look at it. Yeah. Simply because as long as the numbers are being input correctly, they don't lie. 

Damari Gold  06:45

Yeah, exactly. Yes.

Michele  06:48

That is it. They really, it tells the story, right. Yeah, the numbers tell the story of the decisions that the business owner has made.

Damari Gold  06:58

Yes, has made and can make. 

Michele  06:59

Exactly. And so what I always try to say to them is, again, just like tax law is not stagnant, your your numbers aren't stagnant, they're moving. And if you don't like the story that the numbers are telling, we need to change the decisions and the inputs and the choices, so that we can create the new story so that we can tell them what to do and where to go and how to get there. I know, with a lot of my Elite clients, I work with them and their tax accountants and bookkeepers and their financial investors, because the business is just one piece of probably their entire family input right into the financial picture that they are creating. And so it is important, you know, Demari, one of the things that I think is interesting about it is what I when I and I know, you see it when I look at people's books sometimes, and I think that maybe not everybody understands what can and cannot be considered a deduction. 

Damari Gold  08:00

Oh, yes. happens often. 

Michele  08:02

Yeah. And I like to tell my clients that I want them to work with an accountant that gets them up to the edge, but doesn't push them over, right? In other words, let's get up to the edge but to the edge of the of the cliff that says we've pushed it as far as we can go, without putting you at risk your business at risk or raising a flag for an audit. That's right. And how do we how far can we go where it's legal and moral? And it's not in a super gray area? And I see a lot that I would consider in a very gray area, like weekly manicures and pedicures like that you don't you really don't need that to run your day. Like that's not what we need. Right? 

Damari Gold  08:46

That's right. 

Michele  08:47

No, or I had had designers write off on this their entire wardrobe, not brand new wardrobe, just wardrobe and I'm like you can't do that. Talk to us a little bit about deductions, what counts, what doesn't? Where are some flags for things that we should be watching and looking out for? You know, more, way more about it than I do. But I know enough to know, some of the things that come through, then I'm like, Yeah, that's not really the way that yeah, that's not

Damari Gold  09:17

Definitely you know, what were the key, the really what everybody needs to kind of come back to is what industry are you in? And that is very important to really associate what type of cost and what things what deductions are allowable for your business. And the reason why I bring it down to industry is because, like you said, you can't a manicure and pedicure if you are a let's say, designer, then how is that associated with your business, right? Or some sort of online entrepreneur like how are those things associated with your business? 

Michele  09:58

A hand model? Yeah, make sense? 

Damari Gold  10:00

Yes, exactly, exactly. So if you were a hand model, yes, that would make a little bit more sense. Now, your tax accountant needs to know understand your industry so that we can have those guidelines to say, Okay, this would be allowable, or this wouldn't be something like you said, a wardrobe. Actually clothes are not tax deductible, and it's just not. And if you get audited and you get caught doing something like that, then you really haven't a chance of getting other things looked at, because you're obviously taking a deduction that's not allowable.

Michele  10:34

That's, that's let's stop right there. One second, I want to if you don't mind, Damari, I'm going to put a huge exclamation point on that for my listeners here, then you open the door for mismanagement of funds, whether it's commingling or putting them in the wrong classification, like marking it as something that is a business expense, when it's clearly owners compensation of some type, the minute you open the door, that says you're not handling one area of your company correctly financially, they now have the option or the opening to look at everything. And I want to tell you, it's right from having supported multiple businesses through it. And tomorrow, probably even 10s of hundreds and 1000s more than I have it, even if you do it, all right, it is a painful process. And it is an expensive process. So the more that you can try to play by the rules, and by the book as much as you possibly can, the better off you're going to be. So I just want to put a big exclamation because you said it and I've seen it happen. I've even Yeah, with one of my clients where the IRS owed her money when it was all said and done. But it was nothing compared to what she had to pay for the accountant, the bookkeeper to dig out all the years of information. Yes, yeah.

Damari Gold  11:54

That's why preparation is always better to do it in the during the year as opposed to doing it at the end of the year, or trying to piece it together at a time when you're getting audited. Like that's not the way to do it. So I often encourage clients to make sure to keep their receipts to keep good records, take pictures of their receipts, organize them in a Dropbox, put certain things or if you have QuickBooks Online, keep those for every year because especially if you report losses, that's another important thing. But just as we were mentioning when it comes to clothes, okay, well, I know a lot of online entrepreneurs have to do a lot of marketing when it comes to photoshoots. And things like that. So what I say to them is I encourage them, although clothes is not tax deductible, you can rent clothing, and that would be tax deductible to you. Because it's it's a one and done. So an expense has to be ordinary and necessary to the business. Now, if you are doing a marketing campaign, if you have pictures that you need to take, and the clothing that you purchase wouldn't be tax deductible, because you can use it outside of that photoshoot. But if you rent the clothing, then it's just for that period of time. And it is a tax deduction to you. Because you're not taking advantage. It's not going above and beyond that you returning the clothes. 

Michele  13:15

So it's just for one time would that be similar to like, let's say that you were doing a brand photoshoot. And you then you paid for hair and makeup and rented clothing so that you could write those things off for the branded photo shoot, because it's for that one time doing it. You just can't like write it off every other week when you're going to get your hair done. 

Damari Gold 13:33

That's right. Yes, it needs to be it has to be an occasion it doesn't. It can't be like all the time. So again, the same thing hair and makeup. Yes, if you are doing a photo shoot, if you're doing some sort of filming and things like that you're it's those one offs. So you're not constantly doing it. And those are allowable because they're a marketing expense. But obviously, if you're just getting your nails, manicure and pedicure, that isn't going to be unless you're a hand model, right? So understanding your industry, then that wouldn't necessarily do it. So there is those aspects of things of understanding your industry, what you're doing for yourself if you're hiring like independent contractors, someone to clean, okay, so like a good one would be like someone to clean your house. Well, if you have a home office in your house, then maybe half of that can be a deduction if you pay them from your business now, what I often say is if you have a really good tax accountant, because not all of them are the same, okay, so not all of us are made the same. The thing that makes I guess me or our firm special is that we have an immense amount of experience, doing bookkeeping and accounting and understanding all of those parts. A lot of times what happens is that people do their own bookkeeping and so on and they send it to their tax accountant. And the tax accountant does not review the financials. They, they are not meant to review the financials, believe it or not, it's not an obligation. They take the numbers, what you give them, and they base the tax return off of that, as long as everything looks consistent, they're not going to question it, they might not even make suggestions, they might not even make changes. Now, to me, I personally don't like that approach, because I believe a lot of things can get miscategorized. And really, it's not doing the client, any like you're not doing them any favors, you're really just not even taking them into consideration based on their business. So with us, I'm very big on reviewing financials beforehand and seeing what expenses you have, and seeing the type of categories that you're expensing certain things in to break certain things apart as well, because sometimes people will dump a lot of expense in one given area. And that shouldn't happen either. Like a common misconception about meals, right? So that meals are tax deductible. Well, not just any regular meal is tax deductible, you have to be meeting with a client with a vendor with a potential client or vendor with visiting, you know, anyone that could be a business meeting or meeting with your employees meeting with a contractor. So things like that can be taxed at a meal like that can be tax deductible. So keeping those things in mind, if I'm looking at your financials, and I see your meals look ridiculous, I'm going to say something, right? The other aspect is that I tell people, sometimes I rather you use your account, I mean, if you know that something's personal, like clearly don't use it for personal reasons. But if I rather you use the maximize the most, instead of missing something, because oftentimes what I find is a lot of business owners are too afraid to use their business account. And then they're using their personal account, and we miss a whole lot of things. One example is like automobile expenses. If you have a corporation, and you're using your vehicle to go to your office, like you have a home office and you're going to another office, you can pay gas from your corporation, you can pay maintenance from your corporation, you can make the vehicle payment from your corporation. So there are certain things and as an accountant, we could back out anything that's an excess if we need to. But we rather you have it in there. That way we know Okay, is it? Is it justifiable? Or do we need to back out anything,

Michele  17:41

I think that's a good point to Damari is that it can go both ways we can have a set of books that are over deducted if you will, right, they have way too many expenses on there that are not really company expenses. But we can also kind of lean on the other side of having our family pay for things that are really the business. So here's another big one that I want to throw out and get your input on. In our industry. What I have also run into is designers who buy all of the furniture for their own home and try to write it all off as cost of goods or as a marketing expense. But they keep it in their house and live with it.

Damari Gold  18:31

Yeah, no, that's unfortunately that is very much very borderline. And chances are because there is no clear definition that the furniture is being used for business purposes, then chances are it would get thrown out. It's just the same like you have to see like what we're talking about manicures, and one a good one is Botox. So trust me, many people have gone to court with the IRS and I'm talking people that are in the entertainment industry, that clearly they need to have a presence or something they have to take care of their skin, their face and all of these things. And yet still the IRS denies it. Because there is no clear indication that that is a necessary thing that can that absolutely needed for your job. It's a cosmetic situation. So sometimes people don't understand that with these cosmetic procedures or anything that's very borderline, most likely the IRS will not be in your favor when it comes to those things. So understanding your industry again and then knowing Would that be okay to put that in there? If you're if you're let's say a designer, if you're a Home Designer, then I could see you probably thinking that in there here and there. Right. But if that is not your industry, then no.

Michele  19:56

Right, usually what we what I suggest on my side is If you are outfitting your office space, that's one thing. If you are outfitting a building outside of your home, totally go for it. When you are doing your family room and writing it off as a business expense when you clearly have an office in the office space, and you certainly can't write off your kids bedrooms and bathrooms, like it just doesn't make sense. Yeah, I think you're putting yourself in big danger to me that's jumping off the cliff. Yes. And so what most of the accountants that I've worked with, and Damari, I think aligns with exactly what you're saying, have come back and said is you cannot write off, let's say, the main pieces of furniture. But if you needed to accessorize or buy flowers, or buy fruit, or do small things like that, so that you could photograph it, you can pay for the photographer, you can pay for all those little things to stage it for that day, which is the equivalent of renting the dress and all for a person, right? That's right, those things you can easily write off because you can explain them. But if it's if it's furniture that you're buying to put in for your family to use on the day to day, that's not really an asset of the firm, you cannot do that?

Damari Gold  19:59

No, yeah, you can't they have to, it really has to be clear that you're using it for your business and not obviously not taking advantage of anything.

Michele  21:29

One of the other things that you had mentioned is something that you love to do is to help people while we're talking about deductions and taxes is really how to take the stress out of tax season. It's funny. On this side of things, I like to help business owners be prepared so that when they go talk to people like you, their accountants and bookkeepers, that they're in a good place, right? So I'm trying to help them understand what they're doing and how it all fits together. And I know I, I subscribe to Profit First I've been doing, I've been Profit First certified since 2015. And it has been one of the best best tools to, to know what you owe in taxes and to save that money out so that it doesn't get spent somewhere else. Just that is huge, and helping relieve tax stress. What are some of the ways that you jump in and help them or equip the people that you come into contact with to reduce that tax anxiety?

Damari Gold  22:30

You know, a lot of times sometimes people think that tax planning is just for people that are wealthy, or that have a business or, you know, whatever their reasoning is, but there is a way to create a tax plan for yourself, no matter where you are in business or in life, that can help you ease some of that stress. Because I don't know about you, but I don't like surprises. So if a tax bill is a surprise to me, I would not like that, you know, not knowing what you owe before you owe it. I mean, that can be very scary and very crippling, because who wants to come into the new year and be like, oh, yeah, you owe $10,000. And you did not save any of that. So it's very important to understand your financials and create a habit for yourself early on. And that for me, I call them like CFO days, you know, if you're a business owner, and you want to feel like a badass, I'm not sure if I'm allowed to say that word. But if you want to feel like boss and you want to show up to your tax appointment with confidence, then you really need to schedule those days. And for me, I say, make it make it simple for yourself so that you're not stressing out at the end of the year or at the beginning of the year or feeling like oh my gosh, you know that that anxiousness that fear that like overwhelm of having to figure out what you did for the year. If you create for yourself, I say like two hours on a Friday every other week or something like that, where you take a look, you enter in your expenses, your income, I use a business expense worksheet for my clients super easy, simple to use Excel worksheet, where you input your expenses for the month, the different categories, and then it gives you a net profit. And then from there, you can just move on and organize your financials, so that when you get to the end of the year, or when you talk to a tax accountant, that's the first thing they are going to ask you Can we see the financials, they can't tax plan for you if they don't know what your financials look like. You can't have a peace of mind if you're not doing this on a consistent basis. So making the process simple and fun for yourself is what's going to be key to get you prepared before the end of the year. 

Michele  24:54

But it's such a good point with nobody wants that surprise. I mean, I want the surprise to be thery're going give me money. Yeah, yes, we're looking at this, that's not the way that it happens. And I want to just really hit on that point that you made about it being crippling, not just crippling because you aren't sure what it's going to be and don't have the money, you could have the money and it could still be crippling because you don't know what you can spend and what you can't spend. And out of an abundance of caution, most people would choose not to spend anything. So there could easily have been 1000s of dollars that either could have come into your home or that could have been spent on the business that we hold back on. Because we just don't know.

Damari Gold  25:39

Exactly yes and not keeping track can definitely hurt that whole scenario, because you're just not paying attention to what you're doing on a regular basis. Like I'll give you an example a client that just we just brought on board. They hadn't filed a corporate tax return. And I'm going to tell your listeners, if you open a corporation, whether or not you made money, even if it's a loss, it is a requirement for you to file a tax return it is an IRS requirement. So it does not matter.

Michele  26:13

Does that mean just for clarification, right. Are you talking about an S corp and a C Corp?

Damari Gold  26:20

Any Corp LLC, S Corp, C Corp? All of them? Yes. Okay. Just making sure because, for example,

Michele  26:29

An LLC is a limited liability company. And so some people don't think of that as a corporation. It is it is a corporation, they only think about right, but they only then think about it if it's an S or an LLC, doing taxes as an S corp. Right? So that's what I just wanted to be really clear, we're talking about if it's anything other than a sole proprietor.

Damari Gold  26:48

Pretty much yeah. Because see, you can be an LLC and be addressed as a single member, LLC. And that one, depending on the state that you're in, will have different filing requirements. But let's say you're in California, now in California, you're a single member LLC. Well guess what? California requires for you to file a single member LLC, corporate tax return for state purposes, California, and you have to pay $800 for that tax return for the franchise tax fees, we have the highest franchise tax fees. Not every state is like that. But we do. So that's why it's important for you guys to know what your state requirements are. And so I had a client that she didn't they didn't file the tax return, because she just thought, Well, I had a business loss, or really, I didn't make any money. And so we talked about it, I'm like, Well, you know, you're missing out that loss can really potentially get you some of your tax dollars back for your nine to five, because they're a couple married couple. And so I said, you know, I could amend your tax return. And then there's a couple of things that were missed, because they did it themselves when it comes to these new tax laws and 2020. And so I went ahead and amended their tax return. So I filed the corporate tax return with the losses that they had, which are justifiable losses, guys, you can't be scared of a loss, like a loss doesn't mean that you're a failure, or that the IRS is going to come get you, you have to do the loss within your industry within your guidelines. And if you have the expense, expense it because you're investing in your business. So we did that. And how much would you guess that they are now that so their original return? They were going to they got back like $900? How much do you think that changed? How much more do you think they're getting back?

Michele  28:40

Maybe $2000?

Damari Gold  28:42

I love that because everybody thinks it's like $2,000. I had somebody comes out with that. Okay, you guys ready? $6,000 They're getting back! Oh, yeah. And this is just from not knowing what you don't know. And that's why it's so important for you to talk to an accountant that understands you understands your industry, like you said, brings you up to that line, but doesn't push you over understands that, okay? These are things that can be justifiable expenses that are correct for your industry that isn't just saying, You're crazy, like no, like, I don't know what you're talking about. Because that does happen to especially the way the world is moving with the online space. So understanding what like when you don't know what you don't know you're missing out. You're essentially giving your own tax dollars are not coming back to you. So why would you want to do that for yourself? Why didn't why would you want to do that to yourself?

Michele  29:38

You know, as much as I'd love numbers, and I love financials, I love all things money. I have my own tax accountant. I have my own financial advisor because they know even more in specialized areas than I know right? Because it is so deep and so wide to understand not only the running of the business financials but then the bookkeeping Then the business, the accounting and the tax prep within the business, and then the tax planning, which is different than tax prep, because there are plenty of accountants out there to your point that will help you do tax prep, but they don't want to help you plan, they don't want to be advisory, and then you've got your financial people on top of that. It's just a lot to manage. And so I think we need to not be fearful. I also loved what you said a minute ago, I didn't worry about creating a tax plan. And you said, it's not just something that rich people do it no matter where we are creating that tax plan, right, both for your business and for personal because that for more for all of us in some way, shape, or form, whatever happens in that business feeds into, personally, what your tax situation looks like, even if it's just because here's how you get paid on a W2, or a K, you know, K1, or straight pass through whatever it is, it feeds into our personal tax situation. And so being able to handle the taxes of both the business and the family, the earlier we do it, the better off we're going to be.

Damari Gold  31:12

Exactly, in that is exactly right. Because guess what, sometimes we might be stuck on thinking that we're not growing or business isn't going anywhere, and so on. And it's just simply because we're not really paying attention to what it's doing. And that has to do with the financials. And as much as it can be painful. And it can be a sore subject or something that just isn't pleasant for us, we have to little by little overcome that obstacle because this will enable us to make decisions about our business that can help us expand and grow or realize if we are doing something that isn't working out for us. So understanding our financials is just another part of business that although we it might not be our favorite, but it is something that we have to master.

Michele  32:06

Okay, so, you know, I agree with that. We absolutely have to and again, I think one of the separations here is to master an understanding of it is different than mastering the doing this. Mm hmm. And so as business owners, we must understand the numbers, but it doesn't mean that we're the one having to make them go into the right buckets, right?

Damari Gold  32:28

That's right. Yes, it doesn't, it doesn't mean that you have to know the whole shebang. Right. It's just more like, Okay, what, what part of it do I need to understand in order to make better decisions, take that forward, to grow my business, and so on. And over time, you'll realize that as you're learning and understanding these things, you'll continue to learn and understand more and more, that all it's doing is enabling you and giving you more power to make better financial decisions. 

Michele  32:59

Now, I have another question for you. Yes, I may have some listeners that are starting off their design as a side hustle, it happens all the time, right. So they are, let's say, either working a corporate job, or maybe they have been staying home with their families. And they're on the side, kind of starting this side hustle of, I'm going to kind of dip my toe in the water of starting, you know, a small design firm or an online Etsy shop, or perhaps doing some custom draperies and, you know, doing some things like that something creative on the side, what is it that they should be thinking about and looking into? Or maybe some of them I know, there are quite a few of our listeners that subcontract to other design firms. In some of that space, what should we be thinking about as it relates to taxes?

Damari Gold 33:56

When it comes to first starting out when you're doing a side hustle, and you're running as a sole proprietor, again, not if you haven't incorporated or anything like that, just continue to keep track of what you're spending. Even if you have a business loss, that is fine, you can claim the loss, but keep track, keep receipts. And if you're hiring independent contractors, what you need to know about that is that if you're hiring an individual and you're paying them more than $600, you have to issue them a 1099. So getting what's called a W9, I'm having them fill it out and at the end of the year or beginning of the year, you issue them what's called a 1099 stating how much you've paid them. And this is an IRS requirement. A lot of people don't do this. Now. So if you hire people to help you, yes, it is tax deductible. But if you ever again were to get audited because it's a requirement for you to file a 1099 If you don't, you can get penalized or you can get the expense dismissed or even thrown out. So, it is one of those things that, again, talking to a tax accountant to help you understand what things you should have prepared ahead of time before the year closes, it's very important for you to get to know how to track your expenses. So that when you get to the end of the year, you are prepared for tax time. So if you're just starting out as a side, hustle, keep track of everything, anything that has to do with your business, if you're making an expense, and you're like, This is for my business, then it could possibly be tax deductible.

Michele  35:39

That's a good reminder, I helped one of my best friends start a business. And one of the things that I had mentioned to her was just create an Excel spreadsheet when you're first starting and just put everything in there. And you can sit down and I love, like you said, understanding the industry you're in because there are certain things that she would need that she could get by with as an expense for her industry that I couldn't claim as an expense in my industry. Right? That's right. I really love that that you said at the beginning. I mean, I wrote that down and have it circled right now. Yeah. What industry? Because it does, it makes a big difference. Anyway, what I what I suggested was the same thing that you said, just write it all down. Even if you're just if it is in the realm of I wonder if this counts, just write it down at the beginning, and then share it with your accountant. And they will help you figure out what is and what isn't. I know I just hired two more contractors this week. And one of my first terms is they have to sign a contract an employment agreement. And they have to give me a W9, I will not write the first check without a completed W9 on file. I just don't do it, simply because I have done it in the past. And at the time that we had to do a 1099 tracking somebody is just like just be that. Because that's when you're up against that January 31. Deadline. And you forgot you didn't have it and you don't have the information. You're trying to get it all done and you don't want. It happens all the time. Tomorrow, you have one other question that just came to my mind. I don't know if everybody knows that. Last year, the 1099 changed, there is not just a 1099 MISC or Miscellaneous Form, there's the NEC forms, right? Can you just take a minute and explain the difference between the two of those for anybody listening? And because if they're doing it themselves, and you know, not paying attention is easy to mess that. up?

Damari Gold  37:44

Yeah,

Michele  37:45

And to have fusion there. Because last year I was like, what is that?

Damari Gold  37:48

Yeah, the NEC. It's non employee compensations. So normally, when you would fill out 1099 miscellaneous, the box seven, where you would put this non employee compensation, they basically removed that box seven, and now it's a form on its own. So that's what you would fill out a 1099 NEC for anyone that is a non employee contracted services, that's where you would you would fill one of those out. A 1099. Miscellaneous is for rents, royalties, any other like there's like fishing in there, health care services, and so on. So those still, the rest of the boxes still remain in the miscellaneous. It's just that box seven is now its own form. And that's the 1099 and NEC, non employee compensation. And really, I think that the IRS and the state did that so that they can really have a hold of who is accepting money as a non employee, especially like with California, because we have to file one for California, as well as the IRS. And my thoughts are because California has very rigorous laws about hiring independent contractors. So I really think that this kind of gives them that bucket to where they don't have to look at alternate and I miscellaneous, they look at 29 bases.

Michele  39:12

And I know it just for the point of every state is different and how they handle all that. I know that California has very, very strict legislation around what can happen. And there are some other states that have followed suit and are similar in that. And so it's always important. I know you would agree to make sure you are I always tell people when they say Michele, should this be an employee? Or Should this be a subcontractor, like go look at what the IRS states if you're doing what they say, and you know how it would be categorized because that's what they're going to look at. So you might as well go look at the same rules and regulations. They have them out there. And then look at what your state says about what you can and cannot do. And then at the end of course talk to your accountant and then make that determination. So It is a little different state by state. But we do we do need to be aware of that for sure. Yeah, people do need to be aware, like what your state laws are. But for the most part, California is the one that has the most rigorous. Yes, you do. When that proposition went through, there's a lot of, because it's very, very restrictive there.

Damari Gold  40:20

So yeah, yeah, I think obviously, they're, they're trying to find more ways to make more money off of us.

Michele  40:26

Yeah, exactly, exactly. And what we want to do is, you know, my whole thing is, pay us pay our fair share what's right for us to pay. But if it's not yours to pay, I mean, if you want to stroke a check to the government, out of the goodness of your heart, feel free to do so. But most people would say, I'd rather you know, be able to be able to contribute to society, in a multitude of ways in a way that I want to do it, we want to take the deductions that are ours.

Damari Gold 40:54

Exactly. And that's it, the tax law is written to, for you to take advantage of it not because it's like, if you don't know what you don't know, again, then you can't take advantage and people get scared. And that's what the IRS counts on, is that you're going to get scared, and you're going to be like, Oh, my gosh, let me just pay to make that go away kind of thing. And so why would you do that if you're missing out on potentially having some of your more of your money back in your pocket?

Michele  41:21

Damari, as we wrap up our conversation today, is there anything that you would like to share with our listeners that you think would put them in a powerful position to understand and manage the financials in their company?

Damari Gold  41:37

Yeah, I definitely feel like for the most part, everyone should really create some space to go through your financials. I know, again, I know that it can seem like a painful process. But if you just put it in your calendar, just like you would anything else. Everybody loves their CEO days, but CFO days are just as important. So if you need accountability, or you need someone to help you with that, definitely hire someone to create the time for you to review your financials to go over it. If that means your bookkeeper or your tax accountant, whoever is in your corner. To do that, schedule that for yourself, because the only way that you're going to get better is by staying consistent with it. And the only way you will have the confidence about growing your business is by understanding it and understanding your numbers. So make that happen.

Michele  42:33

I love that we're speaking the same language. Damari, tell all of our listeners, your website where they can go if they want to connect with you and find you. Where are you hanging out online?

Damari Gold  42:46

They can find me at damarigold.com, or on Instagram @DamariGold as well.

Michele  42:51

Awesome. Well, thank you so much for joining us today. I love the conversation. You know, I think I know both of us have a goal. To empower our listeners, those men and women that are running businesses, they work so hard, we all work so hard in providing product and service to our clients. And while the financials can feel overwhelming, they also were so empowering women, you know them. They empower us to make decisions and to move forward with peace and with ease and to be able to sleep at night. And so thank you for the message that you're putting out that it is actually something that is attainable. And it's the same message I'm trying to share with our listeners. So then everybody gets a good night's sleep and nobody's grumpy the next day, right? Yeah. Well, thank you for your time, Damari. 

Damari Gold  43:45

Thank you for having me.

Michele  43:47

Thanks to Damari for joining and encouraging us to manage our finances as well. I love the idea of adding CFO days to our firm, not just that CEO visionary time of building for those in need of financial understanding from the pricing to understanding the financials to managing the profit. Check out my three online courses, Pricing Without Emotion®, Understanding Your Financials™, and Master Your Profit®. You can find all three of these on my website at ScarletThreadConsulting.com under the resources tab and then the online courses drop down. Be intentional about learning your numbers because profit doesn't happen by accident. Profit is a Choice is proud to be part of the designnetwork.org where you can discover more design media reaching creative listeners. Thanks for listening, and stay creative and business minded.