919 Melissa Broughton :

Wings of Inspired Business Podcast – EP919 Melinda Wittstock with Melissa Broughton

Melinda Wittstock:

Coming up on Wings of Inspired Business:

Melissa Broughton:

The tax system as, as it stands now is a little bit, I like to say it’s rigged. That’s one of my favorite soapboxes. It’s set up to where most tax professionals have been trained to and act in the capacity as order takers, where they take down the information from their client who don’t know what they don’t know. You know, my, my clients that are auto mechanics are not keeping up on the latest and greatest in, in tax code, right? So, if they don’t have somebody that’s saying, hey, watch out for this or watch out for that or are you doing this or kind of prompting them with those questions or having conversations with them throughout the year before the year comes to a close and you really can’t do anything after the years come to a close, that’s where we’re different.

Melinda Wittstock:

Yes, it’s tax time. Oh, the joy of it all, am I right? And with all the news of Elon Musk’s DOGE taking his team of young bro coders armed gradually fade music here with hard drives deep into the Treasury and IRS in recent weeks, there is a lot of unease and fear about our privacy, and how all the myriad changes will affect us personally and in business. Melissa Broughton is a tax expert advising entrepreneurs and small business owners as founder of Busy Bee Advisors, and she says the good news is, there won’t be much change when it comes to your 2024 filings. All the same, Melissa shares some tips you won’t want to miss, plus advice about how to be more proactive about your taxes.

Melinda Wittstock:

Hi, I’m Melinda Wittstock and welcome to Wings of Inspired Business, where we share the inspiring entrepreneurial journeys, epiphanies, and practical advice from successful female founders … so you have everything you need at your fingertips to build the business and life of your dreams. I’m all about paying it forward as a five-time serial entrepreneur, so I started this podcast to catalyze an ecosystem where women entrepreneurs mentor, promote, buy from, and invest in each other. Because together we’re stronger, and we all soar higher when we fly together and lift as we climb.

Melinda Wittstock:

Today we meet an inspiring entrepreneur who is a tax and accounting specialist and the founder of Busy Bee Advisors, helping business owners and entrepreneurs get savvy about complex, even frustrating, tax and bookkeeping situations. Melissa Broughton has a background in corporate accounting and auditing and is on a mission to serve as a financial translator, of sorts, to sole proprietors and small business owners so that they feel confident in their financial decisions. With her husband Eric, a tax professional, Melissa also co-hosts a popular podcast, The Real Buzz: Taking the Sting Out of Taxes.

Melinda Wittstock:

Melissa will be here in a moment, and first:

[PROMO CREDIT]

Eight years ago, I started this podcast because I wanted to help women succeed as entrepreneurs. Over the years, I’ve driven more than $10 million in sales to the women I’ve featured on this show, and this year I’m taking my investment in female founders to a whole new level as a venture partner of the new firm Zero Limits Capital, where we’re dedicated to investing in highly scalable seed stage startups founded by women and diverse teams – a mission more important than ever as the Trump administration cracks down on anything and everything DEI. We’re looking for innovators with exciting new applications of AI, Blockchain and other emerging technologies that make a social and sustainable impact to change the world. Is this you? If it is, take a moment and tell us about your opportunity at bit.ly/ZLCintake – that’s bit.dot.ly/ZLCintake – capital ZLC lowercase intake.

Melinda Wittstock:

Ok so before we get down to the business of tax season, a quick check in. Are you doing ok? I ask because I’m putting my best face on it, but honestly what’s going down in our country is making me more than a little bit uneasy. Too many thing coming at us all at once, and too little time here to talk about it all, so let’s focus on the attack on DEI that’s resulting in women’s achievements simply being removed from government websites and research grants getting denied because they contain the word “female”. I wish I was joking. I’m not. There’s a distinct Handmaid’s Tale vibe in the air as we celebrate Women’s History Month. I’m worried about the impact on our rights, freedoms, ability to grow our businesses and create wealth. So, I’m thinking about setting up monthly calls for anyone that wants to join with me to discuss how we can best support each other as we navigate these uncertain and turbulent times. If you’re interested, please email me at melinda@wingspodcast.com. That’s melinda@wingspodcast.com. I’d love these meetups to focus on our self-care as well as ways we can collaborate to support each other. Once we have 12 women, I’ll spin it up.

Melinda Wittstock:

Ok, back to business and the business of tax. Melissa Broughton brings important insights to us today as a tax and audit specialist just in the nick of time as you prepare your personal and business taxes.

Melinda Wittstock:

Let’s put on our wings with the inspiring Melissa Broughton and be sure to download the podcast app Podopolo so we can keep the conversation going after the episode.

[INTERVIEW]

Melinda Wittstock:

Melissa, welcome to Wings.

Melissa Broughton:

Hey, Melinda, thanks so much. It’s great to be here.

Melinda Wittstock:

Well, we can get all geeky about tax. That’s exciting, right?

Melissa Broughton:

It is exciting. Tax time is my, is my favorite time of year.

Melinda Wittstock:

Well, you know, there’s so much uncertainty in the world right now with our political situation, but also just what’s going on, on all these executive orders. Like, things are like, okay, we’re going to get rid of all SBA loans. Oh, wait, no we’re not. Or like we’re going to do this, or wait, no, we’re not. And it’s really confusing and everybody’s wondering, you know, what is the new administration going to do? What do we need to know, right, to protect our businesses, let alone grow our businesses in this really uncertain time. So, tell me a little bit about what’s going on with your clients. Like what kind of questions are they asking you right now?

Melissa Broughton:

You know, it’s so funny because the biggest question that we get is, is kind of the generic question. And I would say we probably get five or six of these a day from either current clients or prospects that come through our website. And that’s like, what’s the one thing I can do to reduce my taxes? And it’s such a broad question, but I’m excited to, to, to jump into it.

Melinda Wittstock:

Yeah. Okay, so everybody wants to reduce their taxes; it’s kind of like a no brainer. Some people are super excited about the new administration because of those talk of tax cuts and whatnot. Most of those are going to advantage large corporations and very wealthy individuals, not necessarily small business. We don’t really know. Right?

Melissa Broughton:

Well, we don’t, we don’t really know. And I think that that brings up, not to interrupt you, but I think that that brings up kind of the most important point and the, the one thing I would like your listeners to, you know, to understand is that with this 24 hour news cycle that we now have, there’s so much information that they’re putting out there on, you know, this story and that story, and this may be happening and that may be happening, but really what I want listeners to understand is that none of those things have come into play yet. Right. So yes, we do have a new president. No matter how you feel about it, we do have a new president in our, in office, in administration. And you know, yes, there will be changes, but we don’t know what those changes are yet. There’s nothing that’s been put into process and there’s certainly nothing that’s happening that will affect their 2024 tax filing.

Melinda Wittstock:

Yeah. So, for 2024. Okay. Everybody’s like getting ready to file their 2024 tax returns right now. It’s a busy time of year for you, so let’s talk about that first. What are some of the things that people should be doing or should not be doing, at least for the 2024 year?

Melissa Broughton:

You know, I would say one of the big things that you should be doing is looking at who you’re using. And this is certainly not a pitch to have all of your listeners call us and, and you know, have a consultation with us. But, but this is really the, the, like your sweet spot of time to reach out to your tax professional who you’ve been using for years or maybe you’re thinking about switching and you have a new person that you’ve chosen. But now, until I would say the end of February is this sweet spot of about six weeks before they get really busy where they can answer your specific question. Questions. And I say that because if we, you know, in March hits and we’re in the thick of it, it becomes really difficult to have those one-on-one conversations, or at least as many as we would like to have with our clients. So if there’s something specific that’s going on with your tax situation or if there’s, you know, been a major life change or something like that, have that conversation with your tax professional now so they can advise you on if there’s, you know, anything that you need to do to make sure you’re capturing all of that so you can take advantage of the deductions, if that’s possible.

Melinda Wittstock:

Yeah, like different tax credits or things like that that you might not have been aware of or any changes. Like, can you get an R&D tax credit? Can you do this? Can you do that? Like I, in my experience, a lot of business owners don’t even know about some of these things that they can take…

Melissa Broughton:

Correct. Yep. Research and development is huge. ADA compliance is another one that’s huge. You can get a, a big credit for your business’s website if it is ADA compliant. And the easiest thing, without me putting everybody to sleep on that one, because that one’s a little dry, is to do a search on the IRS website for ADA compliance or ADA compliance on their website. But it’s a, it’s a lovely tax credit that’s out there that’s available that I think a lot of business owners don’t know about.

Melinda Wittstock:

So that brings me to something that I’ve always been frustrated with, I guess, or have struggled to find tax folks who are a lot more proactive, right? In suggesting things that are going to help and thinking about the business kind of from a long-term perspective with a good tax strategy rather than just sort of after the fact doing, doing the preparation because sometimes you just miss things because you didn’t know. And you could have made your website ADA compliant, but like you didn’t know so you didn’t do it. Right. And so where do you land on that, you know, with your practice? Do you really focus on a lot of that proactive advice or is it really, well, operation?

Melissa Broughton:

You know, you, you touched on another interesting thing, and I don’t think you’re alone in your frustration. The, the tax system as, as it stands now is a little bit, I like to say it’s rigged. That’s one of my favorite soapboxes, I guess you could say, to get on. But it’s, you know, it’s set up to where most tax professionals have been trained to and act in the capacity as order takers, where they take down the information from their client who, like you said, they don’t know what they don’t know. You know, my, my clients that are auto mechanics are not keeping up on the latest and greatest in, in tax code, right? So, if they don’t have somebody that’s saying, hey, watch out for this or watch out for that or are you doing this or kind of prompting them with those questions or having conversations with them throughout the year before the year comes to a close and you really can’t do anything after the years come to a close, that’s where we’re different. So, we really are proactive in working with our clients. We’re what I would refer to as a boutique tax firm. We, we deal with generally between 4 and 500 returns on a yearly basis and we do that so we can have that one-on-one attention with all of our clients.

Melinda Wittstock:

I have a question for you because this comes up occasionally and I’d like you to explain it. The difference between basically a CPA and a tax attorney.

Melissa Broughton:

So, you have a CPA who is like your surgeon, right. If you think in terms of medical terminology. And a surgeon is generally very specific in the area that they practice in. CPAs are licensed from state to state. They can generally have a higher bond, they can have a higher level of, you know, errors and emissions insurance, things like that. So, a CPA will, will be able to maybe take on a larger client or a larger corporation, things along those lines. But again, they’re only licensed by state.

Melissa Broughton:

Now if you’re, I don’t know where you’re out of, but in California, there are some other states and that, that will allow CPAs to practice. You still have to register for a license, but you can practice in other states. But then there’s states like New York. If you’re a CPA and you’re licensed in other states, New York does not see you as a, like, you’re not registered in New York. So, you would have to take the test in New York itself. A CPA can represent someone in an audit whether they’ve prepared their taxes or not. And that’s, that’s pretty much, that’s pretty much the scope of what a CPA can do. The next, the next level down would be an enrolled agent.

Melissa Broughton:

So enrolled agents are generally licensed in all 50 states. They’re a little bit of a higher level or they may have a specialty. There may be an industry that they work in special specifically, but they can practice in all 50 states. They can also represent you in an audit, but only if they’ve prepared your taxes. And then there’s the lowest level down, which is a certified tax preparer and a certified tax preparer. And I, I guess I shouldn’t say the lowest level down, but the next level down, whatever you want to say would be a certified tax preparer. And a certified tax preparer is kind of like your general family physician where they have a variety of knowledge. They may choose to educate themselves in a specific niche, but they can also practice in all 50 states.

Melissa Broughton:

They can assist in an audit through the IRS, but they can’t necessarily represent you independently. If they have not prepared your tax filing in front of the IRS. So, you have those three in one camp and then you have a tax attorney. And a tax attorney can of course they can prepare taxes. Their licensing, as far as taxes go, is going to be similar to what a CPA’s is. So, they can prepare taxes in whatever state that they’re licensed in for their attorney’s license. So whatever bar they’re in front of, a state licensing agency that they’re a part of, they can represent with the IRS. But you would want a tax attorney in the event that, you know, in the event that you were audited and it felt like it was going to be a really sticky situation, that would be where we would start to recommend a tax attorney.

Melinda Wittstock:

So, so the tax attorney is more you, you regard them as more defensive, not necessarily proactive.

Melissa Broughton:

Correct.

Melinda Wittstock:

You know, it’s so interesting all the different things that business owners, especially when they’re starting out, I’ve seen a lot of people get it wrong in terms of just even the entity that they set up or where they register their company like that can have so many different things like, so you, you could create a simple LLC or a multi member LLC. Very, very different in terms of tax or an S Corp. So, for anyone listening here, that’s at the early stages of entrepreneurship or maybe they organized in a way that’s not the most tax beneficial and they might want to make a change or perhaps they really should be a C Corp. Can you walk through some of those differences from a tax perspective?

Melissa Broughton:

So, the default and the big mistake that we see a lot of business owners make, the default business entity type is a sole proprietor. So, if you, you know, you start a business, you don’t make the decision to become an LLC, you don’t make the decision to become an S Corp or a C Corp. The default is going to be that sole proprietor. Now as a sole proprietor, you’re of course hit with that self-employment tax. And in California for, for example, self-employment tax is 15.3%. So, if you’re able to, I generally will recommend to my clients and my partner recommends the same thing is to look at either an S Corp or a C Corp.

Melissa Broughton:

We generally will recommend C Corps. For clients that own businesses that have either multiple partners or they’re larger entities. You can have more shares with a C Corp. There’s just, there’s, think of it as for a larger company. But an S Corp really can be the, the fit and the solution for somebody who’s, you know, a single owner that they pit a profit level. We use the $60,000 profit or above as kind of the benchmark. And you know, if we were talking about $60,000 in profit, you know, 30 years ago, that would seem huge. But now that’s really not that much.

Melissa Broughton:

And the only reason why we say that as a benchmark is because you do have the, you know, the state fees of wherever your corporation is based out of that you’ll have to pay every year. So, in order to make it truly worth it, we look at that 60 to $80,000 profitability mark. On the other side of things, you have the LLC. So, you can have a single member LLC and still be a sole proprietor. What the LLC does is it adds a level of protection for your business’s activities and protects your business’s activities or I should say protects your personal self and your personal, you know, your home, your, whatever your personal belongings are. It protects them from your business’s activities. And, and we’ll be honest, you know, we’re in a very litigious society and having that level of protection is important. I will generally recommend that clients establish an LLC as soon as possible, even if they’re still operating as a sole proprietor.

Melissa Broughton:

But really my favorite combination is that S Corp with the LLC. So that adds like you’ve got a double level of protection, so to speak.

Melinda Wittstock:

Right. What about the multi member LLC?

Melissa Broughton:

So multi member LLCs, obviously because it’s multi member, you generally aren’t going to see that with a sole proprietor. We’ll see it with partnerships and usually if we’re talking to somebody who somehow has managed to become a multi member LLC and they’re not a corporation, our, our recommendation is usually for them to either decide to become an S Corp or a C Corp as quickly as possible.

Melinda Wittstock:

Interesting. And so, what are the tax benefits like the, the difference between say, say my own company is a multimember LLC because we are, you know, venture backed.

Melissa Broughton:

Right, right.

Melinda Wittstock:

…just from a tax perspective you have all that pass through.

Melinda Wittstock:

You have a number of different advantages there. But we’re not an S Corp. So, talk me through that, that difference.

Melissa Broughton:

Well, yeah, so, so what’s super interesting about what you’re talking about, and I’ll say we, we don’t have a lot of people that are in the position that you’re in because what’s, what’s interesting and unique about your situation is you have you know, investors coming in from multiple sources. So, you have so many different moving parts from what, you know, what a standard, let’s say brick and mortar business would have where their source of income is their clients. And it’s really simple and straightforward.

Melinda Wittstock:

Like it’s basically revenue only.

Melissa Broughton:

Right.

Melinda Wittstock:

We have people who’ve invested based on convertible notes and SAFEs and they’ll convert, you know, at our priced equity round at that point, you know, we’re going to, you know, convert to a C Corp and such but we still have like a profits interest unit plan. Right, right. From you know, an options plan or stock. They’re awarded but they have, they’re not taxable because they’re not really, they’re sort of phantom equity, right?

Melissa Broughton:

Yep, yep.

Melinda Wittstock:

But they’re there, they’re in the cap table. You know what I mean?

Melissa Broughton:

Well, I do. And so, so you in your company would be an excellent example of you establish the multi member LLC. Maybe you for whatever reason didn’t decide to do the C Corp because you, you didn’t see the, the actual revenue, the realized revenue hadn’t quite happened yet. But you would kind of be the perfect example of what we would recommend for a C Corp and not an S Corp. Because an S Corp for you would be far too limiting. You’re limited on the number of shares that you can have. So, the number of potential partners in, in the business, you have far more flexibility with the C Corp as far as that goes. So, I think that if you, if you were somebody who were to look and I’m, and you know, I’m just trying to keep this as, as like easily digestible for the ears as possible.

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Melinda Wittstock:

And we’re back with Melissa Broughton, tax specialist and founder of Busy Bee Advisors.

[INTERVIEW CONTINUES]

Melissa Broughton:

If you were trying to, if you were imagining your business and you were thinking, you know, how do I have a lot of moving parts for from the top of my business? Do I have a lot of different revenue streams from different types of maybe Realized or unrealized income. So investors, things like that. Or do I have a single revenue source? That’s a really good place to start to determine if you want to go the C Corp route or the S Corp route. The huge difference between the two is a C Corp is taxed as its own entity and an S Corp is truly supposed to be a pass through. So, you essentially want to have it kind of balance out to a zero at the end of the year. You don’t want to leave a ton of profit in the S Corp. You want to be able to pull as much out as you can as far as usually payroll, things like that. But in the C Corp, the, you know, the owners of the C Corp or the partners in the C Corp will actually receive a K1 at the end of the year based on the profit.

Melinda Wittstock:

We issue K1s.

Melissa Broughton:

So similar to what you’re already doing. But in S Corp you would not be sending out K1s exactly.

Melinda Wittstock:

Like, it’s just, it’s better for, it’s, it’s just better if you literally are a sole proprietor. Right?

Melissa Broughton:

Correct.

Melinda Wittstock:

Okay, so the, the last part of this question before we move into the new year and everything with Trump and how to plan for all of that when there’s so much uncertainty. Before we get there where you incorporate can be very important. Is it Delaware or is it… How do you advise your clients on that?

Melissa Broughton:

So, we use Nevada corporations. That’s just where the attorney that we are partnered with is based out of. We see that there are tons of advantages to having the Nevada Corporation. That’s the direction we advise our clients. A lot of it is going to be based on the professional that you choose and, and where they’re based out of. So, what they can offer you. Now what I will say is there are of course places online that you can go, and I won’t name any names, but there are places online that you can go and maybe you’ll save yourself a few dollars to set up a corporation through the online places. But what is missed in that is the benefits.

Melissa Broughton:

So yes, there are definitely benefits to the different, you know, states. There’s of course, the Nevada one is the one I’m most familiar with. But I would say talk to a tax professional who’s truly, who’s truly understanding of your full financial picture and have a frank and honest conversation with them about the, you know, the benefits as they would apply to you.

Melinda Wittstock:

Thank you for all of that.

Melinda Wittstock:

It can be really hard to stay on top of these and you need good advisor. For anybody listening right now who’s concerned, in the first days, first month Trump administration, there has been so much uncertainty because there’s like an executive order issued and then it’s rescinded and then it’s kind of reissued and then it’s not clear and then it’s oh my goodness, like, am I going to get that grant funding or am I not? Or like, am I this or am I that is my government. If you have a government contract, do I still have it? Do I not have it? How is the tax code going to change? Like, there’s so many things coming at business owners that they don’t. It’s hard to know what you don’t know. Right? Because I don’t know if anyone knows.

Melissa Broughton:

So well, you’re so right. And nobody knows as of yet. The first thing you know, we have, we have clients that are avid news watchers, and so, you know, you’ll see some, something on the news and wait, does this apply to me? Has this really happened? Is this something that they’re just talking about happening? So, before you go into a panic mode or even an excited mode about things, because.

Melinda Wittstock:

They think, oh yeah, this is the guy, this is a businessman. He’s, he’s going to be great for me and great for business. And then it’s like, wait a minute, huh? He might be really great for the, the, the billionaires or some of the corporations, but wait a minute, what about me? Or what if I, what if I have a business that has a DEI policy.

Melissa Broughton:

That one might get a little bit touchy, well…

Melinda Wittstock:

Right? Like, there’s all kinds of… I mean, there’s a lot of fear. So, there’s excitement and fear depending on where you sit in the political spectrum. Like, and I get that. And then added to the complexity is people are getting different information from different sources in their relative kind of news bubbles or social media filter bubbles or whatever.

Melissa Broughton:

You see the news and then you maybe look it up on social media to verify it. And then, you know, maybe you talk to somebody. And by the time you’ve gone through those three things, you’re more confused than when you. Even before you even started.

Melissa Broughton:

So if you’ve heard something and your company has a DEI policy in place and you’ve heard something about that, because that’s been a hot topic right now, that would be where I would say it is worth it to pick up the phone, call your tax professional because they’re your partner in this, and talk to them about how it could possibly affect you and affect your business and maybe what plans you might want to put into place to prepare for, you know, if this happens, this is the plan. And if that happens, this is the plan. Because we all have, of course, a desire to have some control over what’s going on. And I’ve found that just having that conversation with clients and giving them the, you know, two different scenarios and what their game plan is puts a lot of the concern and a lot of the background noise that goes on in their heads, it puts it to rest.

Melinda Wittstock:

Right.

Melinda Wittstock:

Even, you know, beyond tax, even with law or even employment law. There have been all kinds of lawsuits. Like, there was one last year that really alarmed me. It was a venture capital fund in Atlanta run by black women to get support, financial support, grants and investment and such to other black female founders. And they sued and they had to shut down.

Melissa Broughton:

Interesting.

Melinda Wittstock:

Right? And. And it was like, wait. I mean, they’re just trying to fund who they want to fund. So, we live ostensibly right in a free enterprise system where private business can do what private business wants to do. But you have this additional layer now with lawsuits and courts, and you could be in a situation where things are coming at you from all different sides of the table here now. So I am also a venture partner in a fund that primarily funds female founders. We do some deals with male founders and such, but we really believe, because we see the returns on capital are much higher when there’s a diverse team hands any data set, a pure investment position, that’s actually like a real upside because that company’s going to do better six ways from Sunday. Like any data, female founders even return $0.60 more on the dollar for invested capital.

Melinda Wittstock:

Like hands down. Okay, so we’re going to make that decision, but then if someone comes at us.

Melissa Broughton:

Right, you know.

Melinda Wittstock:

Right. So, this is off the tax topic. But, you know, it’s just making me think about things that I didn’t necessarily have to think about before. It’s making me think about banking arrangements, it’s making me think about diversifying. Like we close our like 15 million dollar round which is like due to close, you know, sometime soon. Do I need like a Swiss bank account and a bank account in the Caymans and do I need like, do you know what I mean? Right. Like, seriously, I’m really not kidding.

Melissa Broughton:

Well, no, and you’re not. And you’re not kidding. And so, so I think there’s a couple ways. First of all, I am not an attorney. I, I definitely do not even play one on TV as they say. So, as a business owner myself who have, you know, our company has multiple different things going on and I am such a fan of, from, you know, from day one of starting your business is start creating that toolbox of professionals and within that toolbox you, you need to have a good business attorney. And by good, I mean across all of the ones I’m going to say, I mean somebody that you feel you can pick up the phone and have a conversation with about these little things that, you know, that may be of concern to you, even if it’s just for them to tell you there’s nothing that you need to worry about or for them to point out that, you know, let’s keep an eye on this.

Melissa Broughton:

And on the other part of that, I’m not necessarily a fan of changing everything that you may be doing just because you hear of something that is potentially just a, you know, just a one-off type of a thing. So have your toolkit, have your business attorney, have Your, you know, a good taxpayer, professional financial advisor, those are your top three for sure that I would have that even before you think you’ll ever need them. You know, start, start developing those relationships so that you have that resource to be able to reach out to.

Melinda Wittstock:

Even on the tax side, you know, there’s all this stuff going on about is, is the, is, you know, is the tax, you know, system going to be used to, is it going to be weaponized? In other words, is it going to go after people that don’t fit with the, you know, I mean, there’s this whole, you know, Kash Patel enemies list thing. So if you do have DEI policies or you, you are doing things that don’t necessarily ideologically align with the current administration, I would imagine the advice would be make sure your taxes are absolutely buttoned up. Like, there’s just no way that anyone, like, like really, you probably have to be more prepared maybe than others. Is, is that fair?

Melissa Broughton:

Yeah, that’s absolutely fair. And so, there’s, there’s specific industries too, where it doesn’t even matter who the administration is. Where we are very almost hyper aware that they are watched closer than other than other industries. You know, the one big industry of course right now that is very closely watched is the cannabis industry. And we, I will say we love our cannabis clients. They’re definitely an interesting group to work with, but because they are such a heavy cash based business there are, we recommend that they literally keep paper copies of everything and you know, keep your cash logs, keep your proof of things, make sure that you have backup for all of your transactions because you, you, you know, it’s, it’s not as if, if an audit comes through, it’s right after the year has ended. Generally, it’s several years later that somebody comes, and you know, the IRS will send a notice and have some questions. And so, our, you know, our process, no matter what your, your industry is that you’re in, is the first thing is verify that the notice that you received is correct.

Melissa Broughton:

You can either do that by contacting your tax professional or contacting the IRS directly, not necessarily by calling whatever the number is that’s on the letter because there’s a lot of scams that are out there. But if you do get a notice, don’t ignore the notice and know when it’s appropriate to turn it over to a professional. So yes, there are definitely some industries that are watched, I would say on a higher level. Nonprofits are another one than others. I, I don’t see that There will be. And, and maybe I’m naive. I don’t see that there will be a level of vindictiveness with this administration. But I do see that if you’re, let’s say a completely operates from.

Melissa Broughton:

We’ll use the DEI policy that if you’re a company that completely somehow operates on that, that, yes, you probably will see some changes. And so, you need to be able to pivot and see what that new business model looks like.

Melinda Wittstock:

Interesting. Yeah. Or, you know, I guess if you’re competing with any of the. Say you’re competing. Say you have a social media company.

Melissa Broughton:

Sure.

Melinda Wittstock:

It’s competing with X or something. Right, Right.

Melissa Broughton:

Yeah.

Melinda Wittstock:

So. So just kind of be, be aware of these things. I mean, I suppose on the, on the other side of it, if they’re very serious about firing a whole bunch of like, IRS people. There are less resources in the IRS to actually even do any of this. So, so, you know, what does that mean?

Melissa Broughton:

Well, and, and so, so that’s, that’s like, that’s such an excellent point because I remember, you know, back in, I think it was October or November, we actually did a podcast episode on all of these IRS agents that were being hired and what that meant, because that was. Those were the calls we were getting of what does this mean? Does this mean I’m going to get audited? You know, they’re hiring all these agents. I mean, it was front page of everybody newspaper. And now we’re hearing before really there’s even been an effect or all of those agents that were hired really were put into action. Now we’re hearing that there are probably going to be layoffs because of, you know, duplication or reducing costs or whatever the reasoning is. And so that’s where I really go back to the. Wait until, you know it’s a fact or make sure you find whatever it is that you are concerned about or worried about from a trusted source that it’s actually factual and then form a plan together with that trusted source.

Melinda Wittstock:

I’m just going to repeat that, make sure it’s actually factual. Like, this is becoming a bigger and bigger problem to actually know what’s, what’s up and what’s down because there’s so much misinformation, disinformation, rumor, gossip, like just in like, oh my goodness, check your sources.

Melissa Broughton:

You’re so right. It’s not that simple now. And it, it really goes back to the. There’s that, that 24-hour news cycle that has to constantly be filled with, you know, sometimes it’s truth and sometimes it’s funny business, I guess, or rumors. And then somebody picks up on maybe something that is on the edge of there’s a basis in fact and they run with it, and they talk to 10 people about it and then those people talk to people and by the time you hear it, it’s completely different. So, I always will recommend call your tax professional. That’s going to be my first recommendation. If you don’t have a tax professional that you feel you can pick up the phone and call, then I am going to say go directly to the, either your state agency’s website or to the IRS website.

Melissa Broughton:

The search functions on the IRS website are actually incredibly easy and you can look up the information and you’ll have the actual tax code that pops up. Now sometimes the tax code is a little bit, a little bit complicated to read. It’s a little bit ambiguous I think. And that’s where it really goes back to that you, you just as a small business owner in today’s world, you need to have a tax professional that you feel you can have these conversations with.

Melinda Wittstock:

A lot of stuff to process. Thank you for walking through all of this. So, let’s just talk about your business for a little bit. So, you, you help a lot of, you know, sole proprietors and small business owners and tell me about what the challenges are because you’re an entrepreneur.

Melissa Broughton:

Yeah.

Melinda Wittstock:

Tell me a little bit about, you know, the challenges and you know, of running your own business.

Melissa Broughton:

So, you know the challenges. I run tax and bookkeeping firm. My husband, who is my absolute favorite person in the whole world is my business partner and dot, dot, dot, it’s, you know, it’s always an adventure. We definitely have figured out kind of our division of church and state as you, as you, as you could say currently right now we have, we have a whole bunch of different projects in the works. But It’s. It’s always interesting, and it’s. I face the same challenges, although maybe not on the tax side, but I face the same challenges as other business owners do with kind of figuring out the different, you know, the different ways to operate. When we started the company, initially, we were just a bookkeeping firm. And my business plan essentially was to, you know, to be able to grow by hiring independent contractors. Well, then we got hit with AB5, which essentially changed it from, you know, me being able to use independent contractors to it being. I could only use independent contractors and very specific instances. And. And so we’re. We’re just as. As business owners, I am no different than your listeners, where I am keeping myself educated and knowing the things that I don’t know and knowing who I need to reach out to for questions.

Melinda Wittstock:

Amazing. Well, what’s the best way that people listening can find you and work with you?

Melissa Broughton:

Oh, well, we would love to offer a complimentary consultation to any of your listeners, and the best way to get in touch with us is to go to our website, which is busybeeadvisors.com.

Melinda Wittstock:

Wonderful. Well, thank you so much, Melissa, for putting on your wings and flying with us today.

Melissa Broughton:

Thanks, Melinda.

[INTERVIEW ENDS]

Melinda Wittstock:

Melissa Broughton is a tax specialist and the founder of Busy Bee Advisors. She also co-hosts the podcast, The Real Buzz: Taking the Sting Out of Taxes.

Melinda Wittstock:

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Melinda Wittstock:

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