Dog training business coaching
Contact us
Expert dog training business coaching
Contact us

Bob

What To Do When You Can’t Pay Your Taxes

· ·

By guest author Marie Poliseno, CPA, of Dollars & Scents Accounting Services.

Don’t have the money to pay your taxes this year, for whatever reason? Maybe you’ve just started your new dog walking business and are struggling with cash flow issues. Or your trusty dog walking vehicle gave up the ghost, forcing you to clear out your savings to replace it. Or it could be that you were genuinely blindsided by the number you owe. Whatever the reason you’ve fallen short this year, you’re not alone. Millions of taxpayers find themselves in exactly the same position, and it doesn’t have to mean the end of the world. There are people and resources available that can help you deal with the situation—and avoid it, too.

Avoiding nasty surprises: Understanding how your taxes are calculated
I often hear clients express surprise when their tax returns are prepared. Perhaps these sentiments are familiar: “I don’t understand. I always got a refund in the past, why do I owe taxes now?” or “I barely made any money last year, how could I possibly owe taxes?” All too often people focus on the amount of the refund or the payment due as being their “tax.” This too-simplistic understanding of liability is often part of the problem.

As a small business owner, you have more than one tax applied to you. Here’s how it works: There’s your personal income tax—what most people think of as the “tax bracket” they fall into. Next, there’s a self-employment tax that is added to your personal income tax. This is where a lot of confusion comes into play. Regardless of the tax bracket you’re in, if 92.35% of your net earnings from your business (your revenue minus your expenses then minus the new small business tax credit) comes to $127,200 or less (note that this number changes annually), your self-employment tax rate will be 15.3%. (Tax on net earnings over $127,200 is 2.9%.) This amount of tax will be due and payable, even if your taxable income is zero. Forgetting or overlooking this key point is what often results in the unpleasant surprise of owing when you didn’t think you would.

If you were paying close attention to the previous paragraph you might be wondering how your taxable income can be zero if your net earnings show a profit. Here’s a quick summary of how taxable income is calculated for a typical self-employed dog pro:

Net Earnings from your business (revenue minus expenses)
Minus: 20% small business tax credit (new for 2018)
½ self-employment tax
Health insurance premiums
Personal Exemptions
Standard or Itemized Deductions

= Taxable Income

Your personal income tax is calculated based upon your taxable income and then the self-employment tax (which is based solely on your net earnings from your business minus the new tax credit) is added to that tax to derive your total tax liability. If you’ve made any quarterly estimated tax payments, that amount is subtracted from your total tax liability to arrive at the amount you still owe.

What to do if you can’t pay
What if you didn’t make any estimated tax payments during the year, or that new vehicle wiped out your tax savings, or you’re new at this and didn’t realize how it was all going to go down? In short, what do you do if you don’t have enough money to pay your taxes? The answer is don’t panic. The IRS offers various solutions for taxpayers who can’t meet the April 15th deadline.

Short Term Extension
If you find yourself temporarily short of cash on April 15th, the IRS provides a 120-day extension to pay, giving you until August 15th to pay your tax bill in full. You actually don’t need to file any paperwork with the IRS to receive this automatic extension, but it’s a good idea to give them a call to let them know your intentions. You can pay a lump sum at the end of the 120 days, or make as many payments as you like along the way.

Note that the IRS will add penalties and interest if you take this option, and be sure to still file your taxes on time even if you don’t include a check. The penalties for not filing on time are 10 times steeper than for not paying on time!

Medium Term Extension
If your current and expected cash flow over the 120 days after April 15th is insufficient to pay your taxes, and you owe less than $50K, you can apply for an installment agreement with the IRS. Over the past few years, the IRS has simplified the process through the Fresh Start program and your application is automatically approved when you submit it. All you need to do is complete a brief online application process and pay a small fee. You’ll then have 72 months to pay off your tax debt.

A few important details: The application fee is reduced from $107 to $31 if you apply online and elect to have your payments direct debited from your bank account. Penalties and interest will again be tacked on to your bill, but the penalty is reduced by 50% (from .5% per month to .25% per month) if you request the agreement before the 120 days expire.

Long Term Extension
Long term extensions, called Offers in Compromise, are a way to settle a large tax debt for less than the amount owed. This is not an easy row to hoe, however, and will likely require the help of a tax professional and/or an attorney to navigate you through the process.

When the IRS contemplates a settlement they look at all the available equity in your assets, including your home, your 401K, and any other assets you own that could be liquidated. They could, for example, require you take out an equity loan to pay down the amount, or withdraw your 401K savings or sell what they term as non-essential assets before accepting your offer to pay less than the full amount you owe.

But if you’re suffering from more than short-term cash flow problems and the IRS determines your financial condition renders you unable to pay the full amount within a statutory period of time, this could be an option to help you hit the reset button. Do note that there are additional criteria to be met, including having paid all your other payroll and estimated taxes when due. You also cannot be in an active bankruptcy proceeding. As you can see, this is an extreme measure for an extreme situation.

Non-IRS solution option: Borrow elsewhere
If you owe the IRS and find yourself unable to cover your debt, another option is to look into borrowing money from a cheaper source than the IRS, such as from a low-rate or interest-free credit card. If you can find the right deal you’ll save yourself in interest payments.

How to make sure you have enough at tax time
Planning ahead and paying estimated taxes is the first line of defense against getting hit with an unexpected bill at the end of the year that you might not be able to pay.

Budget for your taxes throughout the year. Put money into a savings account each month for the purpose of paying your taxes. This can be hard to do, but if you discipline yourself to live on less than 100% of the income you take in, you’ll have an effective cash management strategy.

Last but not least, engage the services of a CPA or tax professional who can help you plan, estimate, and budget so you’re always on top of your tax liability. This is especially important for growing businesses, as your tax numbers will change as your business grows.

 

Marie Poliseno is the Managing Partner of Dollars & Scents Accounting Services. She is a Certified Public Accountant (CPA) who works exclusively with dog pros, as well as a professional dog trainer (CPDT-KA) and honors graduate of the SFSPCA Academy for Dog Trainers (CC). To work with Marie to create a plan to get out of a tax pickle or avoid a future one, e-mail [email protected] or visit www.dog-pro-cpa.com to learn more about her services.

 

Building a Great Dog Pro Website Part 1: Great Writing

· ·

Your site is your most valuable marketing tool—and one of your most valuable business assets. Created properly, your site should do most of your selling for you. If you’re like the majority of dog pros we know, that’s welcome news.

So let’s dive in to what makes a great site! In this article we focus on what makes great website copy:

Create your copy firstWebsite writing
Most people prioritize the design of their website, the look and feel of it. This is a mistake. Design is important, but without great copy design is irrelevant. It’s your copy, ultimately, that sells your services. And the best site designs are driven by good copy; your copy will do more for you if your designer builds around it instead of treating it as an afterthought.

It’s all about your marketing message
Your marketing message(s) should be front-and-center on every page of your site, and returned to throughout your copy. To do this, you have to understand what a marketing message is: Think why, not what or how.

Too often dog pro sites focus on the what—what services they offer (dog daycare, group dog training classes)—or the how—how those services are provided. The how includes service details (like how many training sessions or the activities included in your daycare) as well as your training methods or care philosophy.

But what service you offer and how you provide it only matters if you offer a compelling why—that’s where your marketing message comes in. Telling people what you do isn’t enough. You must explain what will happen as a result. How will their lives with their dogs be improved? How will they feel better? You aren’t selling dog training or dog walking or pet sitting. You’re selling change, relief from guilt/stress/frustration/fear, peace of mind, a calmer household, more enjoyable walks or evenings with their dogs, etc.

What you actually do for people—how you make their lives better, easier, less stressful, more productive, etc.—it’s this picture you must paint with your copy. Think of your copy as a story, as a narrative that takes potential clients from where they are now to where they want to be as a result of working with you.

Show them your empathy, show them that you understand why they might be looking for a dog trainer or a dog walker. It’s not to solve leash reactivity or make their dog’s day better. It’s because they’re walking their dog at 3am out of fear or embarrassment. It’s because they’re sitting at work worrying about their dog home alone all day, or what kind of destruction of energy they might come home to.

Then paint the picture of what could be instead, of the results of using your service. Tell them about walking a dog who looks at you for direction when she sees another dog, and invite them to imagine the relief and enjoyment of bark-and-lunge-free walks. Describe the peace of mind of being able to focus on their job, knowing the dog is having a great afternoon with you.

Trainers, you’ll stop well short of any specific behavior guarantees. But you must tell people in some way or another that you’re going to make things better. If you don’t feel sure you can do that (provided of course that the client follows your instructions), you shouldn’t be offering your services.

Writing good copy
Website copy should be created for easy scanning. Some visitors will read every word on your site, but many will only scan through. Website usability stats say you have only 2-3 seconds to convince someone to stay on your site, and the average visit by those who do only lasts 2-3 minutes. While you want plenty of copy for readers who want a more in-depth experience, your copy should be accessible to people in a hurry, too.

This means largely avoiding long, bulky paragraphs that look like too much work. It means chunking your information into headers, sub-headers, bulleted lists, numbered lists, and pullout boxes or strips of color to break things up for the eye. It means writing in short, jaunty sentences that read smoothly, using active verbs and avoiding unnecessary extra verbiage. For example, consider these two sentences:

  1. We will help teach your dog to respond to your requests so that you can enjoy a well-behaved companion.
  2. Enjoy a well-behaved dog who responds quickly to your requests.


Page structure tips

Your home page. In addition to your marketing message, your home page should include short, easy-to-scan summary overviews of your services, with easy ways to click deeper into your site to learn more. You might also include a short introduction to yourself or your staff, with a link to learn more on your about page.

Your about page. Speaking of which, your about page should be primarily about your clients and what you’ll do for them, not about you. Yes, it should focus on your qualifications—that’s part of making this page about them: What qualifications do you have to do this work to make their lives better? It’s okay to tell your story or talk about your own dogs, as some potential clients will want a sense of who you are personally. But do that further down the page and keep it short. Your bio should never begin with any form of “I’ve loved dogs since I was five.” Do not confuse your life story with your professional bio!

Your service page(s). If you offer more than one service, give each service its own page. This allows you room to share your marketing message, explain the details of your service, and even provide a bit of education about the topic to your site visitors if you’re so inclined. (For example, sharing information about puppy socialization on your puppy training page, or tips for how to choose a dog walker on your dog walking page.) Be sure to include all details potential clients need to make a decision about your service—including your pricing. To leave your rates off your site is to lose clients. That said, too much detail can be a deal killer, too. In most cases you’ll want to leave most of your policies to your service contract rather than your website.

Getting it done
Just as we recommend serious dog guardians hire a qualified, professional dog trainer, we recommend serious dog professionals hire a qualified professional to write their websites. A well-written site means calls and emails from potential clients ready to become actual clients, saving you time and discomfort during sales calls. As we said above, your site is your most critical marketing and sales tool. If you don’t have a background in marketing and writing (specifically the unique niche of website writing), the money you spend on a writer will come back to you many times over.

Once you have your writing ready, it’s time to think about design. Read Building a Great Dog Pro Website Part 2: Great Design.

Building a Great Dog Pro Website Part 2: Great Design

· ·

As we said in Part 1 of Building a Great Dog Pro Website, your site is your most important marketing (and sales!) tool. In Part 1, we looked at the role of engaging website copywriting. In Part 2 we turn our attention to creating great design to showcase your great copy.

Make it easy to readwebsite design
Given our emphasis on the importance of copy last month, it only makes sense to open an article about effective website design with an exhortation to make sure your copy is laid out for easy reading. While this may seem like a bulletin from the DOD (Department of Duh), a designers’ bias for design can lead to compromising readability for looks.

Two simple things can make your website more readable. Be sure your text is at least 12-point, and that there’s enough contrast for easy reading. For the latter, avoid large blocks of colored copy, even if it looks good.

Design around your copy
There’s a reason we wrote about copy first and design second—the most effective website designs are those built around good copy, with the purpose to enhance it. Too often designers create beautiful website frames, plugging copy in as an afterthought. Sites built for the copy, by contrast, are more likely to create a compelling user experience where design, images, and text work together to tell your story and sell your services. Consider these sites, for example—you can see right away that the designers took their cues from the strong copy. Note how the layout guides you through the content, keeping you reading.

www.letusdothewalking.com

www.pawscompanion.com

www.melanieceronephd.com

Keep it clean
Don’t fear blank space. It’s okay for a site to be visually dense with purpose, but it requires higher level design skills to pull this off well. Clean-looking sites with plenty of breathing room are more likely to feel professional and approachable. Resist the temptation to fill open space just to do so, particularly with bones and paw prints or background wallpaper—these things can quickly make a site feel homemade.

Make services easy to identify and get to
Give your site visitors at least two ways to make their way to your service pages. One path should be via a clear menu with separate tabs for each service you offer. For example, forego a generic “Services” menu tab for separate service options such as “Private Dog Training” and “Dog Training Classes.” If you offer classes for different audiences, consider breaking your tabs down further. For example, tabs for “Puppy Training Classes,” “Dog Training Classes,” and “Dog Sports Classes.” This gets your visitors where they need to go faster, and breaking your services out onto separate pages provides you richer key wording opportunities for search engine optimization, too.

The second navigation pathway to offer your site visitors is featuring each service in your home page copy. List each, providing a brief description (remembering to focus on marketing benefit rather than service details) and a link or button to each service’s page for more details. Using a picture, icon, or other graphic for each service can help draw the eye to this more visual menu, and add visual interest to you home page as well.

Include plenty of visual interest
Speaking of which, your site should look inviting. Sites with lots of copy and little to no visuals are much less likely to keep and engage visitors—they just feel like too much work to get through. Remember that people tend to scan sites more than read them. Visuals are part of that scanning experience. This includes not only high-quality photographs (of your own taking and/or carefully chosen stock photography), but also pull-out boxes, color strips, and the like.

Also create visual delineation between sections of copy on each page, making it that much easier for visitors to scan and find what they’re looking for.

Brand it!
One way to add powerful visual interest to a site is playing off your branding. Good designers will find creative ways to use the colors, fonts, and shapes from your logo to enhance the branding and visual appeal of your site. Done well, you should be able to cover up your logo and still be able to tell at a glance whose site you’re on.

Part of achieving this is the use of your brand colors, shapes, and fonts where appropriate. It’s also key to avoid the use of extra colors and visual elements not related to your overall brand look and feel. Forego colors that don’t appear in your logo unless your logo is very simple and requires a contrast color for design reasons. (As Gina says, keep your extra crayons in their box!) And don’t add canine iconography like paw prints, bones, and collars unless they stem directly from your logo. Less is more is almost always a good design tenant.

Beware the bling
Website user research shows that many impressive website design flourishes actually discourage visitors from staying on a site. This particularly applies to any moving parts that a visitor doesn’t put into motion herself, including automatic banner slideshows, self-launching videos, and animations. Your designer may want to offer such bells and whistles, but in most cases you’d be wise to decline.

Make contact easy
Put your contact information on every page in an easy-to-find location, such as the upper-right corner of your site and the footer—or even both. Include either a live email link and your phone number with every call-to-action, or a button linking to your contact page.

And even though your contact info is riddled throughout your site, offer your visitors a dedicated contact page, too, as many will look for it. Your contact page should be yet another place where a potential client can grab your number or fire off a quick email. If you include a contact form, keep it very brief and do not require its use—research is clear that doing so will lose you business.

Don’t leave money on the table with DIY
The recommendations we’ve shared in this 2-part series are basic guidelines for a strong, effective dog pro website. There are, of course, many more considerations in building a site that really goes to the mat to do your selling for you, including good, up-to-date search engine optimization practices.

But between the writing and design guidelines here alone you can see why hiring professionals—just as your clients seek your expertise to get the best results for their dogs—is well worth the investment. After all, your website is your most important marketing and sales tool. While it’s tempting to save money by building your own site, in most cases the money saved is far outweighed by the money lost in failed new client conversions. This is one time where the old adage “Spend money to make money” rings true, as every cent you spend to get your website right will come back to you many fold.

Making the Right Travel Deductions for Your Dog Walking Business

· ·

As a dog pro CPA, dog walkers often ask me what types of business expenses are deductible on their tax returns. Vehicle-related tax deductions seem to cause the most concern and confusion. Common questions include “I use my car for both business and personal use. How much of my insurance can I deduct?” “I drive 50 miles per day picking up my clients’ dogs, taking them to the beach, and then returning them home. When does the mileage start to count and how much can I deduct for the gas and tolls I pay during this time?” “Because I’m driving around so much I had to buy new tires for my car. Can I deduct them?” These are great questions, and getting the answers right matters. So let’s take a look to clarify what about your car is—and is not—tax deductible.

Good records matter.
First and foremost, the records you keep are the most important factor in determining the tax deductible portion of your vehicle’s expenses. Your records don’t need to be pretty or even very sophisticated, but they do need to be accurately maintained. You don’t need a printout from a fancy computer program or an Excel spreadsheet to document miles driven for business purposes to justify the expense. A handwritten notebook or log is a completely acceptable record. There are also easy-to-use mileage apps like Mile IQ that make tracking business and personal miles easy. But whatever form of documentation you choose, you must at a minimum keep a record of these three things:

  1. Total miles driven
  2. Miles driven for personal use
  3. Miles driven for business use

Every time you get in your car, note the date, beginning odometer reading, end odometer reading, and how many and what kind of miles you drove—business or personal. If you did a bit of each (for example, a detour for personal errands on the way home after dropping off the dogs), be sure to note how many miles for each. (Apps like Mile IQ do most of this work for you.) If you do this every day (work and non-work days), you’ll have a complete and accurate record of the miles you drove and their purpose, to calculate the amount of your tax deduction at the end of the year.

How much can I deduct?
There are two different methods for determining the amount of your tax deduction. Comparing the two will allow you to choose the one that gives you the greater deduction.

  • The standard mileage method
  • An allocation of actual expenses

Method #1: The standard mileage method. The mileage method simply multiplies the number of business miles driven by a pre-set amount-per-mile the IRS determines each year. For 2016, the amount is 54 cents per mile. In order to calculate your deduction, all you need to do is multiply your total business miles driven by the mileage rate. Easy? Yup! For most dog walkers with vehicles more than a few years old, or for walkers stacking up a ton of business miles driving dogs to and from the park or trailhead, this method will likely result in the largest deduction.

Method #2: Allocation of actual expenses. Still, it’s best to check both methods to make sure you get the biggest tax benefit. To calculate the amount under the allocation method, you’ll still log all your miles. But in addition you need to keep track of the actual amount spent on:

  • Gas
  • Tolls
  • Parking
  • Garage rent
  • Repairs and maintenance
  • Insurance
  • Property tax
  • Tires
  • Rental fees
  • Interest (if you are financing your car)

In addition, your accountant will compute depreciation on your vehicle, which is another deductible expense when using this method.

Again, record keeping is paramount. If you are of the George Costanza variety and like to keep receipts in your wallet, that will do the trick. But using a business debit or credit card is the easiest way to track gas purchases and the like—and your card is much less likely to blow away on a windy day.

How do I know whether miles are personal or for business?
Here are a few typical situations to help keep your personal and business miles straight:

  • Travel from home to pick up or drop off your clients’ dogs is of course business.
  • Travel between clients’ homes is business.
  • Travel to the location you take your clients’ dogs for walks is business.
  • Travel to the gym after you drop off your last dog but before you go home would be considered personal (and should be subtracted from the total miles driven that day for business purposes).
  • Travel to the store to buy harnesses for your dogs would be considered business, but travel to the grocery store for food (unless it’s for making dog treats for your walks) is personal.

Situations in which mileage or a vehicle-related expense could be considered business or personal (or a bit of both) may require careful reasoning and judgment. Keeping good records and discussing them with your tax professional will help guide you when the answer murky, keeping you out of trouble and making sure you aren’t missing any legal deductions.

 

Marie Poliseno is the Managing Partner of Dollars & Scents Accounting Services. She is a Certified Public Accountant (CPA) as well as a professional dog trainer (CPDT-KA) and honors graduate of the SF/SPCA Academy for Dog Trainers (CC). To work with Marie on your financial and tax matters, e-mail [email protected] or visit www.dog-pro-cpa.com to learn more about her services.