TAXES, ACCOUNTING + FINANCIAL WELLNESS
Jessie Susannah Karnatz is an Intuitive Financial Coach, small business alchemist, and tax preparer bringing Capitalism-Critical financial education to clients in the Bay Area and online and doing it all with impeccable business lady style.
Bringing in PPP, tarot, astrology, finances, and personal budgeting, we sit down with Jessie Susannah Karnatz, aka $Money Witch$, to talk about losses, taxes, and financial wellness practices.
STOP ASKING, ‘HOW ARE YOU,’ AND INSTEAD ASK THIS.
We all know that 2020 and the start of 2021 has been tough for everyone. And depending on how your year went, inane questions like these can be tough to answer. Instead, Jess has come up with a couple of alternatives for you to ask instead. “[I always forget to ask but love to when I remember] What themes have been trending for you lately? And sometimes when people ask me this question I reply with: I'm experiencing the full range of human emotion every day. I am all of that,” she says.
Like many people, the biggest themes for Jessie was loss and grief. During the last year, Jess also felt that one of the biggest benefits was giving herself permission to move more slowly and holistically. “Maybe a little revaluation of productivity and sort of like really focusing on understanding the way that I work and the way that my business works, so that I can create more with less effort—which we're always all trying to do,” Jessie discusses.
For Jessie, the hardest part of the past two year, came two months into the pandemic. During that time she broke up with both of her partners, which she explains was really challenging. Outside of that, during the last 12-months, Jess has really focused on racial healing and exploring the shame and ways that she, as a white woman, has internalized and embodied white supremacy. Jessie mentions how this reckoning has been a lot of deep and emotional hardwork.
Regarding her business, Jessie says she took this time during the past year to really slow down and look at her business and work more holistically. “[I] Feel like I see a lot of people taking [a more ] holistic experience within their business, within the way they do work, a lot more seriously.” Jessie mentions.
SO WHAT THEMES CAME UP FOR YOU IN 2020?
WHAT WAS LIKE THE HARDEST THING WRAPPING YOUR HEAD AROUND THE PAST YEAR/ BUSINESS OR PERSONAL LIFE?
TAROT + ASTROLOGY + AND HEALING FROM 2020
We as a society had an existential crisis in 2020, and had to grapple with a lot. In tarot speak, 2020 could have been a Tower card year. With the Tower card, we’re always looking introspectively about what structures are not serving us, what structures did you have to cobble together to get your need met, and is there a more holistic version to the systems that we create?
When we bring some astrology into the mix, we get a fuller picture of the past couple of years. We just moved from Saturn in Capricorn for the last two and a half years and have now moved into Saturn in Aquarius. When we moved from one house to another, Jessie says it was basically the universe telling us it was time to level up. Leveling up in terms of the structures we've built within our lives and looking at how those structures support everything we do in our lives. Because of these extreme circumstances, it’s really forced us to look at the coping mechanisms that were holding us together and deconstruct them in a way we’ve never had the opportunity to before.
Jessie mentions that she’s done-ish, when it comes to her book. From negotiating a book deal, to writing a book, to the creative and business process of this venture, Jessie has learned so much from this process and could probably write a book about it.
Jessie’s book, which will be available sometime early next year, is based on a workshop that she started teaching in-person four years ago—Failure to Finances. One of the hardest things she experienced when writing this book is translating all of the information from an in-person course to a book format, and making it so it’s digestible for everyone to comprehend. It’s really interesting to look at how your “message and your knowledge translates into a completely different, business medium. “ Jessie says .
YOU HAVE A BOOK COMING OUT? WHAT WAS THAT PROCESS LIKE?
Jessie Susannah Karnatz
“I feel like [last year] was a lot of deep emotional work, which was the hard thing and also the silver lining, in the way that hard work, when you go through it, you do get a prize”
Jessie believes it’s really important to have a great definition of key financial terms, like this, in order to not only help you get motivated to do this work, but also contextualize what it can do for your business and why you should be doing the right way.
In essence, bookkeeping is three actions:
The first step is noticing and reporting the details of every financial transaction that takes place in your business. Which is why it’s important to keep track of all your receipts.
The second step is to pare each transaction with it’s purpose for your business. [16:19]
Once you’ve done the first two steps, then you’ll have all the info you need to synthesize all the data and give a better picture of your businesses finances.
Essentially they are the same thing! In its simplest form, deductions are basically all of the expenses that the IRS says are qualified to reduce your profit and can be subtracted from your gross income. Profit for those who aren’t familiar with this financial term, is income minus your expenses. So when you’re filling out your taxes, essentially what you as the business owner are telling the government is here’s all of my income and my expenses that I need to run my business.
CAN YOU DEFINE WHAT BOOKKEEPING IS?
NO LET’S GET INTO THE NITTY GRITTY OF THIS STUFF.
DEDUCTION VS. WRITE OFF?
I WANT TO DO THIS MYSELF? WHAT ARE SOME OF YOUR FAVORITE BOOKKEEPING PROGRAMS?
In short, Jessie recommends Quickbooks for your bookkeeping. For those unfamiliar with this program, Quickbooks has several options but the two most common that small businesses use are Quickbooks self-employed or Quickbooks plus. “Quickbooks self-employed is a great program to start with, and it's the best if you are using one bank account for both business and personal,” says Jessie
A pro-tip that Jessie offers for those taking a DIY approach to their taxes—if you think you need to switch from Quickbooks self-employed to Quickbooks plus, do it at the start of a new quarter or a the end of the year, as the information from one program will not transfer over to the other.
Mark your calendars for January 31st, the date that 1099’s are due for anyone who did more than $600 of work for you as a either a contractor or service provider which can include people like, virtual assistants, web designers, accounts, etc.
And this year, Jessie mentions for this year, we’ll be using the 1099 NEC instead of the 1099 MISC. Why the big change? The gig economy! Over the past year, there were several legal battles dealing with contractor labor and now there are so many gig economy jobs and that number is expected to grow. “You have to imagine just from the IRS perspective like the number of people who are contractors instead of employees probably, I don't know the numbers, but I would imagine, like has at least doubled in the last 5 years or so. Because it's become so much more common,” she discusses [25:28]
WHAT IS THE FIRST TAX-RELATED DUE DATE?
Jessie Susannah Karnatz
Don't become an LLC or S-Corp because some guy said so, I see a lot of that.
BUSINESS STRUCTURE 101: LLC VS. SOLE PROPRIETOR VS. S-CORP
Firstly, “business structure is at its core a legal issue,” Jessie says. Here’s how it breaks down:
Sole proprietor: A sole proprietor is essentially what everyone is by default. If you haven’t filed paperwork with your state then you’re a sole proprietor.
C-corp: Most people who are running a small business are not looking at a C-corp model, nor is it beneficial to them.
LLC: People choose to go through the LLC route for a lot of different reasons. However, LLC is not a tax delineation. You are either getting taxed as a sole proprietor or you can file a petition with the IRS to get granted S-corp taxation status. LLC’s are also great if you’re looking to separate your business entity from your personal assets.
S-corp: An LLC taxed as an S-corp means the owner’s salary will be a business expense so the owner will report salary and other business profit on their personal income tax return. But, the owner will only pay taxes on their own salary (not on Social Security or Medicare).
For tax purposes, in the past, Jessie discusses, if you had more than $50,000 in profit then you could see a benefit from an S-corp status and receive a credit. But with the Trump tax code that we’re currently in, now it’s $100,000 in order for you to get that small business credit.
Jessie also notes that she’s seen a lot of small business owners get pushed into becoming an LLC when they might not need to be. “ If you're going to make that decision I would talk to a lawyer and I would really push them to give you clarity, what exactly would this give me protection from.” Her biggest tip for small business owners when it comes to this business structure decision, “don't become an LLC or S Corp b/c some guy said so, I see a lot of that.”
So this came through from the latest stimulus bill, which was 5000 pages long, and was probably thrown in because someone in Congress lobbied for it. A business meal is basically when you have a meal with a mentor, business partner, employee, etc. and discuss business. The 100% deduction only applies to 2021 and 2022.
WHAT'S A BUSINESS MEAL AND CAN YOU REALLY DEDUCT THEM 100%?
PPP AND WHAT’S NEXT.
First and foremost Jessie notes, is that PPP will not be taxed as income and as a business owner, you’ll be allowed to keep the deductions that you paid with the PPP loan money. This year, the government is allowing you to write off anything that you bought for your business this year regardless of whether the money that you used to pay for it came from PPP or not.
Then there’s another round of PPP which opened up on January 11th. Jessie mentions that this is probably the easiest of the application processes because of how many issues and kinks we’re worked out from the previous round. To fill out this new round of PPP application. You’ll need to have your 2020 bookkeeping prepared.
PPP forgiveness happens through your lender not the government, Jessie mentions, and it will look a lot different for almost everybody. It’s your lender that issues the requirements for how much can be forgiven. It’s also important to note that it’s not really forgiveness, but the federal government’s willingness to pay back part of your loan for you to your specific lender. The application process is pretty extensive for this. For an LLC and sole proritiers getting taxed as sole proprietors, that number is based on schedule C aka, what your profit was divided by 52, the number of weeks in a year, and your forgiveness will be based on that.
Jessie’s biggest advice for people when it comes to applying for PPP and PPP forgiveness is, don’t push this off. As a business owner like many in the GGC community, Jessie understands that we all get overwhelmed, and especially with taxes—it’s a lot. But like the saying goes, ‘there’s two things that you can’t avoid—death and taxes.’ We understand that a lot of folks get into running a business because they want to own their means of production, but as Jessie says, “running a business is a whole job!” [55:36] And that means taking charge of and running the finances of your business. Her biggest tip for business owners is that your business should be designed to make you money rather than as a hobby.
HOW DOES PPP FORGIVENESS WORK?
Jessie Susannah Karnatz
[We’re] using tarot as the spoon sugar to have the conversation about budgeting.
ANY ADVICE FOR BUSINESS OWNERS IN GENERAL?
Jessie believes the two biggest keys for success is flexibility and resilience—which is something we think we’ve all realized over the last year. As a business owner, you should be thinking about how you can future proof your business and make it crisis proof. “Cultivating that flexibility so that you have a hustle no matter what is happening, essentially,” Jessie says
Jessie started her financial retreats as in-person events in 2019 and really wanted to bring this experience to people virtually, and she’s doing so with two events, one on January 24th and the other on January 27th.
The retreat on January 24th is all about individual finance and uses the Queen of Pentacles as the archetype. In this retreat, she’ll be working with people to take control of their personal finances and set financial goals. For her retreat on the 27th, that’s Business Coven. Based on the similar premise of her online course, this retreat is for business owners to put their financial pieces in order to set up a really positive and successful year.
WHAT’S GOING ON WITH THESE RETREATS??
DIGITAL ZEEN AND A COURSE?
Jessie’s course, Business Coven is a more flushed out version of what was discussed on this podcast episode. This course is for business owners looking to get a more holistic approach to bookkeeping, accounting, business baking, business structure, quarterly taxes, and much more.
Jessie’s Queen of Pentacles digital zeen is a 50 something page book that uses tarot as an access point to budgeting. “[We’re] using tarot as the spoon sugar to have the conversation about budgeting,” she says [1:08:33]. In this zeen, there are articles about the Queen of Pentacles archetype and we really dig into that earthy, financial, material success archetype that she represents. This zeen is a great tool for anyone who has any interest or curiosity or need about the idea of budgeting in general.
Taxes and accounting course
Business Coven (formally Business Basics for Not-So-Basic Business Babes) is a comprehensive course on Bookkeeping, Taxes, and Business Structure.
So you can finally feel GOOD about the organization of your money, reduce your stress about taxes, and learn how to make important choices about your biz as you see your expenses and income quarterly.