There is one thing you can do, selling hair extensions that can definitely get you locked up. That is not paying your taxes. Today, we’re talking about making sure the man gets his cut so that you can continue living freely and enjoying the dream life that you are building. Let’s get into it. Give it up for the one and only, Charlo sticking iffy Greene, it’s money Monday! I am here for you, whatever you need, we literally got it. So we’ve talked about registering your business. We talked about protecting your business. We are laying the groundwork for your brand, but all of that can come crashing down in a fiery end if you do not make sure the tax man is paid. That is the one thing you cannot mess up. Don’t do it. So what are the things that you need to keep in mind? Like I said, not really into giving you guys advice on these really, really important matters that I haven’t mastered myself.
So I call in the experts that have all that, that had been working and doing this sort of thing every single day. So we are going to have our tax expert chime in and just a second, but before we do that, I want to remind you the big thing. Every single person selling hair extensions online and not just selling hair extensions, every single online retailer needs to understand is that we are in a whole new tax era now because the fact that Amazon is growing so rapidly and it’s so hard to compete when this company doesn’t have to charge this extra five to 10% in taxes. All of these different states lobbied and all of them now have these different tax laws for online businesses. These laws used to state that you needed to make maybe a quarter million dollars in a year in order for you to be taxed by them without having a physical presence in that state.
These new laws are totally different and they vary state by state as far as the threshold for sales in a state that are, that need to be taxed after you hit this, this breaking point, if that makes sense to you guys. Once you make this number of sales, everything else beyond there needs to be taxed. So with that in effect, um, or with the new laws in effect, there are places that have limits as low as $600. There are places I think that have limits as low as $50. There are places that have thousands of dollars as the threshold. You as a small business owner that is working to get these packs out, I doubt you have the time to monitor every single where every single dollar is going. Um, whether or not you are hitting the threshold that may or may not have changed since the last time you looked at it.
The attorney that we spoke with, um, she actually suggested a tax calculating app thing that you can install on your website. And so that’s something that we’ve been utilizing. Um, that’s called Avalara tax. And so that thing job is basically to monitor every single change in tax laws to see where every single order is coming from and then to apply the appropriate taxes for you and then to report that to whoever it is that you are using to collect all of your records and pay your taxes. That’s a lot of work to do. If you’re selling online and you have no idea that there are resources to monitor it, but what would it be even worse is if you make $100,000 in sales this year and you think that you’re walking away with your $50,000 or $60,000 in profit, but then you get a bill from every single state that you’ve earned money from demanding the five to 10% in sales tax that you should have been taxing or charging your customers.
I know that most people have not implemented or taken note of these new tax laws. Here is the expert on when exactly you need to be worrying about all of this stuff in summations. She says you need to start worrying about it like, like now. I told you that this is the start of the week as the owner of the business, your job is to run the business, but your job is to also do all of this stuff that no one else ever sees. That includes you constantly filling out really boring paperwork. You’re going to government websites and making sure that they understand what it is that you’re doing and what you’re building and that they know that they’re getting there. Like this is another one of those things that you just have to do and it takes time and it takes energy, but you have to make sure the tax man is paid. So for more on that, here’s our expert. What are mistakes that small business owners make, especially in the beauty space that might lead to trouble? Let’s start there.
There is an internal, just a red flag against, uhm, cash intensive businesses, right? So just, you could think of it and it’s just odd, just their perspective, right? Most, uhm, establishment and the beauty and wellness industry just didn’t distinct cash, cash intensive. And when you have so much cash who are all around you, uhm, it’s really easy not to track it, right? So if it doesn’t hit like a bank or something like that, then there’s no way to track it. So then the IRS has the, you know, do a lot more work on their and try to figure out what income was actually made versus what was reported. It could happen maliciously, right? It can be the intent of the business owner to say, okay, I’m not reporting as money. He going to just get in cash. Or it could just be interfered they didn’t need to do that. Or maybe they just don’t have certain accounting controls in place to track every single penny like the IRS would expect it to. So the first one guys you small business owners make is just their record keeping their accounting systems, the tracking of all the income and expenses for their business.
So when it comes to you just getting started out, what are the types of things that you need to track and hold on to?
So I would say, and I know this is going to be not what you guys want to hear, but every, everything when it comes to accounting and tax, there is a presumption that you will be tracking everything. Now we, we get it, you know, things happen and things get lost. And so while in general there’s a rule that everything needs to be on temporary initially kept. So let’s say you go and you buy inventory for you to keep that invoice. Uhm, it would be nice if you made a note on the invoice or maybe created an internal memo as to what it was for, who the vendor was, um, and all of that, how it relates to your business and you know, electronically keep that I would never advise to, to keep paper at all. It just does it, it is just not feasible in today’s world and it’s just too much pressure to keep track of the business anyway, but snap a picture of it.
But I will say track everything. And there are lots of apps for you to keep track of this stuff now. So I’m just going to assume that we’re all are very tech savvy. You’re buying stuff and you’re using your credit card or a debit card or whatever online and they’re emailing you back invoices. Go ahead and move that email with that invoice right over to that receipt. Bolder, um, to keep track of that. Or if you’re, you know, you’re out and about on town and you’re buying supplies and stuff, you know there are apps, like QuickBooks has an app and I know there’s zero and say show their accounting. Really, really low cost accounting system where you could just take off your phones and have a picture that it would make a note of what it was for and it done.
I think something I like to make sure I do when I’m putting out content is give the people that are watching a really contextual view of the topics. So, can we understand like worst case scenario, my understanding is you get audited, they find something that doesn’t work and you end up going in prison like DMX, like that’s worst case. Like am, am I on the right? Like prison is what you end up with worst case scenario, if you are not doing what you need to do with tracking and paying your taxes.
I would say, I would say for arrant audit it’s really built on intent. Like so that just remember that [inaudible] audit is conducted by like a person of real human that understand that it can be tough tracking like every single penny. Like we get that and then sometimes maybe you kept track of it but it wasn’t done contemporaneous. I’ve seen situations where I’ve started an audit, they didn’t have, you know, support for something. So they had two actions. Number one they can go and they could you know, guesstimate, you know, based on the one really, really good like information of you know, what they’re doing now we’ve always done the same thing. So I’m sure I can estimate how I did it. You know, from a year or two ago. It’s called the Cohan rule and you can’t, you can’t guesstimate, I think guesstimate because I mean obviously it’s not going to be, you know, very specific and truths effect cause you’re doing it after the fact, but yet you can guesstimate,
Um, based on today’s knowledge what you would have done a year or two ago when it actually happened. People that go to jail, um, are people that like, it was their malicious intent to hide money or file false tax returns from the government, right? They intended to evade tax. You don’t go to jail for uhm, being big sloppy with your business, right? Or just not knowing accounting. You may have to pay, obviously you got to pay back the money you own. You’re going to pay back interest, but you can even explain your way out of a penalty.
And that conversation was so freaking juicy. If you are left wanting more than, go ahead and click the link. We go super in depth and we have her contact information. Um, I just think she’s super, super dope. So your homework for two days master class is I’d like you to get in the common section and like our experts said, you need to make sure that you are keeping your receipts. If they’re digital, then you need to make sure you have a digital copy of their physical receipts. You need to make sure that you have a copy of those receipts. What are you going to be doing to keep track of your expenses? How are you planning on holding onto these receipts? Do you? For us, we try and keep everything. We try and make sure everything is siphon through the same exact channels. We have our PayPal, we have our stripe, and we have our bank account.
There is no cash purchase happening. Every single dollar in every single dollar out is found in one of those platforms. She says that is perfectly fine. That’s more than enough for them to be able to look into and track all of the expenses that we’re making and that we’re claiming. So that being said, what are you going to use to keep track of your expenses so you don’t end up in tax jail, don’t want to go there. Don’t want to do that. So let me know. All of you have an incredible weekend, but hold on, hold on. Hello, Chrissy Mac and Janiel pain. You two are winners of our 13 texture sample pack giveaways. You got to actually see me saying this here. Go ahead and email me email@example.com to claim your prize. Thank you guys so much for tuning in, taking note and taking action. It is clear that you guys take your future seriously. You take this opportunity to rebuild your life into what it should have been in the first place. Seriously. And I appreciate that. So I’d like to reward you by giving you a little sun. So looking forward to seeing you in my inbox. Everyone else have a wonderful weekend.