Small business is at the heart of the Texas Economy.
Every small business owner needs a professional team to keep things moving strong and flowing right. One of those people on your team is your CPA or accountant. It’s so important to find the right accountant for your business and to establish a good working relationship that person so they can fully understand your business’ needs, short and long term goals – and so that they can help with financial strategies and advice to keep you both in compliance with the laws and also aware of the incentives available to you.
As a small business owner I have been through a number of CPA’s and that’s why I can say, my accountant right now Is. The. Best. And although she’s not taking new clients – she was gracious enough to sit down with me for the show for a two part series I’m calling: What Your Accountant Wants You to Know.
This episode of Emerging Texas Strong is sponsored by Texas Mutual Insurance Company, a leading worker’s comp provider in Texas, and is a production of Earnest Media. If you are interested in sponsoring a heartful podcast focused on the journey of Texas business owners for a focused market audience email, contact@EmergingTexassStrong.co
Episode 8 Guests:
Debi Malone, CPA, P.C.
EPISODE 8 TRANSCRIPT:
TXMI Commercial…: 00:00 Support for the Emerging Texas Strong podcast comes from Texas Mutual Insurance Company, a workers’ comp provider committed to helping companies build a stronger, safer Texas.
Host Linsey Lin…: 00:10 On this episode of Emerging Texas Strong,
Debi Malone, CP…: 00:14 Like you said, if you didn’t have good records, if you didn’t prove your income, your expenses, it would be really hard to qualify. So having good records and good tax forms and payroll records and it’s important, it’s so important.
Host Linsey Lin…: 00:31 Welcome back to Emerging Texas Strong, a growing collection of stories, lessons, and advice from small business owners in Texas, working hard to survive this pandemic economy. We follow a collection of businesses and weave their stories together. As we navigate a full season of big picture topics like Disruptions In The Supply Chain, Why Texas? and Opportunities To Shake Things Up In Your Business Model. Every small business owner needs a professional team to keep things moving strong and flowing, right? One of those people on your team is your CPA or accountant. It’s so important to find the right accountant for your business and to establish a good working relationship with that person so that they can fully understand your businesses needs short and longterm goals. And so that they can help with financial strategies and advice to keep you both in compliance with the laws and also aware of the incentives available to you. As a small business owner, I’ve been through a number of CPAs, and that’s why I can say my accountant right now is the best. And although she’s not taking new clients, she was gracious enough to sit down with me for the show for two part series, I’m calling what your accountant wants you to know. Debi Malone, CPA P.C. Has been my accountant for five years now. She’s smart, direct, joyful. And when I tell you this lady loves what she does. It’s evident when you watch her in action. I owe her a debt of gratitude because it was her professional advice that had my financial houses in order before the onset of COVID and what allowed me to apply for PPP grants and financial aid without issue, if it wasn’t for her help before the emergency, I wouldn’t have had the records needed for the submissions and it would have made 2020 and 2021 survival for my company, much more difficult. It was in that moment of gratitude that I realized I wanted to do this topic on the show. I want us all to emerge from this moment stronger. So I got Debi to sit down at her kitchen table to talk, frankly, about what your accountant wants you to know in moments like these.
Debi Malone, CP…: 02:46 Hello, my name is Debi Malone. My business name is D.A.Malone, CPA, PC. And there’s a reason for that because when I started 27 years ago, I didn’t want anyone to know that was a Debi or just Don. And it made a difference.
Linsey Lindberg…: 03:04 Oh, that way you left your identity unknown. So nobody knew if you’re a male or female.
Debi Malone, CP…: 03:11 And then when they see me and they see Malone, there was the other surprise.
Linsey Lindberg…: 03:17 That’s the surprise, that you’re a bubbly Hispanic lady.
Debi Malone, CP…: 03:22 Exactly. So it worked for marketing purposes. I hate to say 27 years ago. I don’t think it matters today, but back then it did. Wow.
Linsey Lindberg…: 03:31 I did not know that about you. I just thought it was uber-professional.
Debi Malone, CP…: 03:35 No, there’s always a, like a cost benefit to doing things. So it was okay. It opened the door, got lots of clients. And then they realized I was qualified. I could do the work and they stayed. So…
Linsey Lindberg…: 03:51 Absolutely. So I was brought to you by somebody who we’ve never figured out whom, but I came to San Antonio and started working with a more local bank and said, I need a new CPA. Who’s good with small businesses. Who, who should I call? And they recommended you. And so that’s how I found you as, as a CPA, who is good with small businesses.
Debi Malone, CP…: 04:17 I bet it was a woman too.
Linsey Lindberg…: 04:18 It was a woman.
Debi Malone, CP…: 04:19 Yeah. Cause we do support each other. And I get a lot of business from local banks that way.
Linsey Lindberg…: 04:25 How long have you been in business in Texas?
Debi Malone, CP…: 04:27 I’ve been in business in Texas for 27 years. And before that 10 years with a local firm. So doing what I do 37 years, this January.
Linsey Lindberg…: 04:40 So, you know your stuff you’ve been around,
Debi Malone, CP…: 04:43 You never know at all, it’s a constant learning curve in this field, which keeps my brain young. Cause I enjoy that part of it.
Linsey Lindberg…: 04:52 I love this about you knowing, knowing you decently well it’s that I can see the joy in your eyes when you get to dig into a really juicy tax return and there is a genuine love for your job. And I, and I respect you so much for that.
Debi Malone, CP…: 05:10 But people don’t understand that, I mean, how can it be? You do taxes. It’s so boring. And I see it more of an art form. You know, I start with a canvas and the numbers and they come together and I can ask all questions about people, which is really my true passion is people when you’re their accountant, you know, every thing. And I’ve always told my clients, I will know more about you than your spouse than your family. And it’s true. I know everything. And it’s, it’s just a big picture of someone’s life on paper. And I, I love to see the success, help them through the failures and just watch them grow or change. And most of my clients have been with me for over 20 years. So, like you!
Linsey Lindberg…: 06:00 That’s a good track record. And I have had a number of CPAs over the years and you have been by far the best and my favorite and just you’ve given the best advice for small business owners for me in my business. Um, when all of this crap went down with COVID, it was your advice that you gave me two years ago that made sure that I was in alignment where I could as a small business, that I could actually be the beneficiary of some of these government programs. And what I realized is that I was kind of doing the typical solo preneur slap dash. You know, you don’t pay yourself. You just take some owner draws whenever you need. And it’s very kind of unofficial. And I watched a number of my friends and fellow business owners really fall by the wayside and get harmed in this kind of moment. This is when you need to have your stuff set up,
Debi Malone, CP…: 07:08 Right? Yeah. It’s important to have good records and your ducks in a row. And what you’re talking about is that we said, okay, you have a corporation, you’re an employee. And to get that mindset off, no, I just want to take draws. No, you’re an employee of yourself. The name in your case, Austin Oddities. You’re an employee, Linsey. So let’s get you on payroll, get your taxes paid in. Cause I used to hate to see you write those huge checks at the end and pay penalties. I’m like, this is one exercise to get you used to pain in the benefits of that. I hadn’t, you know, I didn’t have the crystal wall that it would be beneficial for the PPP loan, but that’s what you’re talking about, how it helped you get government aid because you were on a payroll system that could prove your company paid you, your, your employees. And it allowed you to get more than the normal self-employed sole proprietor. So, but I can’t take credit for that because it just my structure in advising you what’s for taxes, which I think has helped too. It just happened to help again, for taking advantage of the aid that was being thrown at business owners,
Linsey Lindberg…: 08:23 How were you impacted by COVID-19?
Debi Malone, CP…: 08:27 I was impacted just by the amount of work I had to do to help the small businesses. So I had to put aside the due dates, the tax returns, thank goodness. They extended the due date to July 15th during all this, because my focus then was on getting these small business PPP loans. You’re smart enough to get your own, but the majority of my clients needed help. And so I probably spent a month just the loan applications and making sure they got it in on time because the money ran out. And I am happy to say that the 25 or so that I did all got funded. So I felt in my heart, I had to stop doing what I love, which was tax returns during tax season to help the small businesses. And it felt good, but, and everybody was so appreciative and respectful because not all my work is small businesses, my normal 1040s we’re calling in like what’s going on with my taxes. And I just had to say, right now I’ve got to focus on getting these loans through and everyone was so I understand this is horrible. I understand help them help them. So I didn’t really positive reception from my clients, not feeling like I was discarding because they had their tax work in and I had to put it aside because this was a true emergency.
Linsey Lindberg…: 09:48 And yeah, I guess it had slipped my mind, how close. I mean, when I think of the D-day for COVID for me, it was March 6th, cause that was the day that they canceled SXSW. So that was the very first day that I watched our contracts just start falling away. You know, the phone calls started rolling in the emails and it was just, uh, it was a month of cancellations, but I forgotten how close it was to tax return day. What a cluster that time was.
Debi Malone, CP…: 10:22 It was very stressful.
Linsey Lindberg…: 10:24 And, and here we are trying to turn in our tax return from 2019, which from every business owner I’ve talked to was a fantastic year.
Debi Malone, CP…: 10:34 It was horrible in that way. Yes, because everybody owed taxes and didn’t have the money to pay it. Cause a COVID, you know, thinking it was going to continue that the, the good times are going to continue. The economy was doing great businesses, your business. I had never seen such a great year. It was carrying over. You paid for that trip, took all your employees to Mexico to celebrate and then boom. And that’s how it happened. So that, that moral about saving for a rainy day. It’s really important to do that. I think everybody realizes that now it’s probably going to do more of that because who would have ever thought a pandemic? I mean, it affected my physician clients, the restaurant client. It didn’t matter. I have a client that does wholesale out of the country. Everything was shutting down. So businesses stopped and it’s just, it was dark. But the, I will say the government helping with those loans was incredible. So like you said, if you didn’t have good records, if you didn’t prove your income, your expenses, it would be really hard to qualify. So having good records and good tax forms and payroll records, and it’s important, it’s so important.
Host Linsey Lin…: 11:53 When we come back from break, we’ll get into the meat of this episode and find out more about what having your financial house in order looks like from your accountant’s perspective.
TXMI Commercial…: 12:04 Support for this program comes from Texas Mutual Insurance Company, a safety focus workers’ comp provider, supplying information and resources that can help Texas employers stop accidents before they happen more at texasmutual.com. And now back to our show.
Linsey Lindberg…: 12:22 For all of the businesses out there who have great CPAs and they don’t even think about it. You know, when you have a fantastic CPA and they just take care of it and make it all look magical and effortless, you’ve got your stuff together. You’ve got a great partnership. Great. But I think that we are kind of speaking to the people who had to learn that lesson the hard way. So a little bit, I want to talk about, you know, what are some of those really basic things that the goal of this podcast is to help people make it to the other side. So if you are a small business who is still struggling, what are some pieces of advice that they should know or things that they should get in alignment with their companies that maybe, you know, if you don’t have a CPA, you can still be in compliance with the law and be doing stuff really sloppily, but that doesn’t help you out when bad stuff happens. It’s kind of the same thing as savings. You don’t have to save nobody’s, they’re forcing you to save, but when bad stuff happens, that’s when you go, oh, I should save something. Or, oh, I should’ve, I should’ve made my, my corporation labeled the correct way and been paying taxes into the programs in the correct way. Oh, I was going to ask you could, because we had already talked about, um, how we switched me from being a regular LLC C Corp to an S Corp.
Debi Malone, CP…: 13:53 Well, you were an LLC single member, which means almost being the same as sole proprietor. And we decided to file you as an S-corporation and put you on as an employee of a corporation filing as an S corporation. Right.
Linsey Lindberg…: 14:08 Great. So do you remember the day you talked to me through it? I said, okay. Okay. Okay. And the day that you sent me over the paperwork and it showed me how much that it was, you know, cost and taxes and all of the things that were going to come out of it. And I came to your office, I don’t even think I made an appointment and I sat down. It was like, I was sitting down at my therapist couch and I said, I can’t afford this. We have to stop this right now. We have to stop this ADP thing. I cannot afford this. And, and you looked at me and you were so busy with other things. You looked at me and you said, Linsey, you can’t afford not to do this.
Debi Malone, CP…: 14:48 You don’t remember, but I probably did if you interrupted and walked in, I probably did. I’m very direct when I, when I need to be. And sometimes I have to be told, can you soften your delivery?
Linsey Lindberg…: 15:01 Well, it’s one of those moments that that’s, that is when I knew that you were ride or die, that you were not like you were looking out for me.
Debi Malone, CP…: 15:09 You’re not the only one that’s done that. When I say you got to set up and have people don’t like to keep money in their account, what do you mean? I have to keep money in there to pay my payroll taxes? Well, the huge thing I believe in, if you’re going to do payroll, you’re going to pay the taxes that take, you’re not going to hold off for 30 days when it’s due, because you’ll use the money and people have gotten so much trouble. So the thing you have to remember, Linsey is you keep control of that amount. So if you told me, well, I want to get paid, you know, 2000 a month. Yeah. Well the social security tax on that and the Medicare tax equals so much, it’s going to be taken out. Plus the income tax. Maybe that wasn’t the right number, but it was a start. So we could have lowered that at any time. And I think now you realize it wasn’t set in stone, that it had to be that amount. So it just allows you to be more creative and accounting is creative and tax is creative because it’s all there for you to use people don’t read, they don’t read the instructions. They don’t like to read the lines, but it’s, uh, it’s all there for you. I didn’t create this. The government did. And it’s a beautiful program and it works if you follow it, which is why we’re in business. And always, I think we’ll be, everybody’s always asked me the question, oh, new president, new tax law. You’re not going to have a job. And I just laugh because the, the idea of simplifying, like I said, I’ve been doing this for 37 years. I’m still waiting for that simplification. It hasn’t happened. So I think I’ll always have a job, which is why I’m going to keep working because the brain activity, I see all these people aging and getting dementia. Well, I’m not stopping because of that.
Linsey Lindberg…: 16:51 You’ve had quite a couple of years because when Trump came into office, it was the biggest tax overhaul that we’ve seen in. What did they say? A decade,
Debi Malone, CP…: 17:01 Two decades now, because it had been an a, since Clinton was in it, it pretty much been the same. So
Linsey Lindberg…: 17:07 You had that to deal with. And I’m, if I remember right, it came through in December, January, sometime like that. And then taxes came around relatively quickly. So
Debi Malone, CP…: 17:17 Yeah, it was in 18 and 19 where new years and taxes with Trump.
Linsey Lindberg…: 17:22 And you’re still getting everybody up to speed in that kind of capacity. And then we’ve got COVID and now you’ve got all the PPP and now you’ve got,
Debi Malone, CP…: 17:34 They’re not, they haven’t even said how they’re going to handle that. And now today they’re saying that, you know, the PPP money was used for payroll. Well then a normal tax return, payrolls and expense. Right. And if in my simple mind, cause I keep it simple. Well, if you got this money, how can you take the deduction? Because it wasn’t your money, but they’re saying you’re going to still be able to take the deduction. So they don’t know. And I just keep warning. All my clients, be prepared to get some statement either in the form of a 199 with the amount of the PPP money that was forgiven. Because I don’t see how you’re going to be able to double dip, take the deduction, even though you didn’t pay for it. I think it’s great if they allow that, but they haven’t said think about it.
Linsey Lindberg…: 18:26 That’s a really good point. Someone else mentioned to me that some of like the EIDL loan is going to be taxable money.
Debi Malone, CP…: 18:35 It’s a different, that was, that was through the SBA also, right? Correct. Yeah. But that was alone. The PPP was alone. That was forgiven. And if you have a cancellation of debt, it’s normally reported to you as income. So I’m waiting to see, are they going to report that as income to everyone that was received it and was forgiven? They haven’t said.
Linsey Lindberg…: 18:59 So, but what you’re saying on a few different accounts is maybe they’re small business owners out there who think, how could they, you know, I’m I’m, I am so in the hole for this year, like we are definitely bleeding money.
Debi Malone, CP…: 19:15 They’re going to have losses anyway. Even if they have to report it as income they’re there, they’ve spent more than the PPP loan money. They’ve spent all their resources. So they’re going to have negative years that will allow them not to have taxes. And the cool thing about that is you get to carry over the loss to 2021. Hopefully things turn around and there’ll be able to be profitable. Again, they’ll have these losses to carry over.
Linsey Lindberg…: 19:38 So we were just talking about how it might be that on some of this money that you got from the government, you might still have to pay taxes on it, or it might still be taxable.
Debi Malone, CP…: 19:48 I think it’s going to be a wash. Remember how I’ve always told you a dollar in a dollar out well it’s zeros. So let’s say you had a $20,000 PPP loan and you use the $20,000 for payroll as an expense. So income of 20, a subtraction of 20, it has a zero effect on you. But what they’re doing right now is saying you don’t report the PPP loan is income and the forgiveness, and you still get a $20,000 deduction, which would be great. And I think that’ll help people even more. So I see big refunds.
Host Linsey Lin…: 20:24 In this next section, Debbie and I get into a conversation about being willing to take calculated risks and some additional programs through the SBA that you’ll need your accountants help to benefit from like the SBA 7(a) program for small businesses, looking for support to buy commercial property, to use as their HQ. Like I did this year.
Linsey Lindberg…: 20:43 I am trying to buy a building. Thank goodness,
Debi Malone, CP…: 20:49 I love that. I love that.
Linsey Lindberg…: 20:50 So, okay. Let’s, let’s divert their and SBA 7(a) loan is for a company buying a property, but the government has all of these different branches of loans where they guarantee they will back half of your mortgage, right? Because they want you to become a property owner. It’s good for your city that you live in. It’s good for you. It’s good for the family that you want to raise. It’s good for everything,
Debi Malone, CP…: 21:18 But there is a risk and people need to realize, but I think if you want to become part of the small business community, take the risk. A lot of people are so scared of that because when I first opened my office was as big as a closet. I had two chairs and a small desk. Cause I didn’t want a lot of rent in my first space. Cause I didn’t know if I was going to have any clients, but I don’t look back. It was the best decision I ever made to go out on my own. And if you have a viable product, whether it be retail or, you know, medical, or like me accounting or lawyers, or do it, I mean it is feast or famine. Like we’ve experienced for small businesses a year with COVID you were feasting last year and you were famine this year, but the freedom it gives you and the pride you feel knowing I did this, it’s immeasurable, I love it. I love that feeling that, oh my God, I’ve been on my own so long. You know, it’s just it’s I can’t explain how that it may not be a financial, it is financially secure, but it’s also just a prideful feeling that I did it.
Linsey Lindberg…: 22:36 The thing that finally made it click to me and I have to say I’m probably so much further behind a lot of people probably who are small business owners because no, you’re not. I grew up with a family where no one was a small business owner. I was the first person in my family to graduate from college. So I wasn’t around it. I didn’t ever see adults making moves like this. So it was very scary to me. Um, but when somebody finally explained it to me that, you know, if you’re paying rent, sure. There are things that you don’t have to worry about. Like, you know, somebody is going to come fix the air conditioner if it breaks and there’s there’s conveniences, for sure. However, if you put the money down and are paying a mortgage and then the market continues to go up and you can sell it, then at the end of the day, the goal is, is that you went that entire amount of time that you were there. And because you made that money back, you basically housed your business rent-free.
Debi Malone, CP…: 23:41 And guess what? There’s another huge tax break about that. If you decide, I want to cash out and, and recover the money I put in plus the gain, because the market’s gone up by another property, it’s called a like-kind exchange. And you defer that profit to another building, maybe bigger. This is why I love my job. There’s always ways to defer. There’s no way to avoid taxes, but there are smart ways to pay less or defer them.
Linsey Lindberg…: 24:10 You are so good at advising stuff that will help, especially as a female, small business owner, who is still a single lady and you know, you only have yourself to look out for it. And you’ve had some great advice and things like, like invest in real estate, make sure that you have hard assets, make sure that you’re putting money aside. You have you’ve continuously told me to go ahead and do an IRA and I have not done it yet. No! So tell me and everybody else for the hundredth time, why is it important as a small business owner to go ahead and establish an IRA for yourself?
Debi Malone, CP…: 24:48 Well, I think the younger you are, the more important it is because you get disciplined right away. That that is not yours until later. I wish someone had told me that when I got out of college at 22 and worked to work for a firm, do the 401k. Unfortunately, the firm I was with didn’t have one because I worked there for 10 years and I walked away with nothing. If kids today out of college would start immediately, they will have a nice savings and just pretend it’s not there. So as a self-employed or small business owners, you have your payroll that I insist you get yourself on, because that allows you also to do a small, simple IRA or a simple, a retirement account. And you can do about 20% of whatever your gross wages are and it’s deductible by the company. Yes, it’s cash. But I look at it as moving it from basket a to basket beats. Still there, you just can’t touch it until you’re 59 and a half. I am 59 and a half. Look how fast it goes. So do it and just be disciplined. Like everything else I need to, I don’t care if it’s $50 a month, think about it. How, how much do you spend going out to eat a lot? So having an automatic withdrawal from your business account to your SEP, to your IRA and it’ll just happen. I think it’s so important.
Linsey Lindberg…: 26:12 It’s something you can do at the end of the year, too, because it, with the SEP, it will accept the 20% of your income up to that. And you could take what is left. And instead of using it as income, that’s going to be taxable. You can put it into your SEP, all in one chunk.
Debi Malone, CP…: 26:30 Yeah. By the due date of your tax return or six months later with an extension. So like in your case, the type of corporation you are, the S-corp is now due March 15th. So you have until March 15th to fund it, it’s not December 31st. So say your business picks up again, things get better and everybody gets vaccinated and you have this cash from gigs coming in. Guess what that money coming in can be used for 2000 twenties deduction because you have until March 15th or with an extension till September 15th to fund it and still use it as a deduction for the previous year. So it’s just a, win-win. Think about it.
Host Linsey Lin…: 27:07 Thank you for joining us on this episode of Emerging Texas Strong. Let’s take a second and review a few things that your accountant wants you to know. #1) Bookkeeping and record keeping for your small business is one of the most important parts of running a company. Do not wait until the end of the year to get your financial house in order. #2) Consult your accountant and make sure that you’re set up with the IRS as the correct entity structure. That makes the most sense for you and your business. Should you be a single member LLC, or is it time to register as a different kind of corporation? #3) Being current in all of your taxes and record keeping can be the difference between getting aid in the event of an emergency and not getting aid. #4) While you’re at it, make sure you established an IRA or SEP retirement account. You’ll need the money upon retirement and you can use it as a deduction on your current year’s taxes. And, #5) Having a good accountant is like having a good friend who knows everything about you, takes joy in watching your success, and we’ll be there to hold your hand through the failures. If you’ve enjoyed this podcast or found it useful, please share an episode with a friend. We want to grow Emerging Texas Strong as a free resource for business owners. So send it to someone who could use these lessons to be happier and healthier business owners. Join us next time for Episode 9: What Your Accountant Wants You To Know Part 2 where we’ll finish this fabulous conversation with Debi Malone, CPA, PC podcast, production interviews, edits, sound design, and office snacks for the Emerging Texas Strong Podcast are done by Linsey Lindberg. Bios and business information for all guests featured in season two can be found on EmergingTexasstrong.com. Find out how you can work with them and support Texas small business to share the hope, the journey, the struggles, and the advice. Be sure to follow like rate and subscribe to Emerging Texas Strong on the web so that each episode shows up directly in your podcast feed. And if you’re enjoying the show and want to show some love, leave a five-star review, it’ll help more people find us. Follow us on Facebook and LinkedIn @emergingtexasstrong or Twitter @Texasstrongpod, where I’ll be posting ways to connect with our guests and gems from episode eight mentioned in today’s show. And if you’d like to be interviewed, please reach out contact@emergingtexasstrong.com. Emerging Texas Strong is a production of Earnest Media. If you are interested in sponsoring a heartful podcast, focused on the journey of Texas small business owners for a focus market audience, we would love that. Email me contact@emergingtexasstrong.com. And remember, you’ve got a friend somewhere in Texas, who’s rooting for you. I’m your host, Linsey Lindberg. Join us next time. For more stories of Texas small business on Emerging Texas Strong.
Debi Malone, CP…: 30:28 You have to persevere. I mean, there’s a will. There’s a way you can do it. Just, just don’t give up.
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