As we start looking at the end of the year, many of us look back on the prior year, and ahead towards next year’s tax season.
Tax season can be daunting, especially for nomads and content creators who may not know what’s deductible and what’s not. This episode features Penny Rose from Fe Fi Fo Fum CPA, an expert CPA who specializes in guiding nomads and content creators through the intricate maze of tax deductions.
- Demystifying Deductions: Get clarity on what you can and can’t write off on your taxes as a traveler or content creator.
- The Pros & Cons of Write-Offs: Penny elaborates on why certain deductions are beneficial, while others might not be in your best interest.
- Myth Busting: We address popular myths surrounding business write-offs, offering a reality check to new creators.
- Steering Clear of Tax Pitfalls: Tips and insights to avoid common mistakes that could potentially land creators in hot water.
Whether you’re a seasoned content creator, a traveling newbie, or simply seeking insights on tax deductions as a nomad, Penny’s expert advice is a must-listen. Equip yourself with knowledge and avoid common tax pitfalls.
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Tax season can be daunting, especially for nomads and content creators who may not know what is and what is not deductible and why, and we're going to cover all that and so much more. We're getting you ready for tax season. That's all coming up on this episode of the RVDreaming podcast. Welcome to the RV Dreaming Podcast. This podcast is for today's and tomorrow's nomads who thrive on adventure, embrace an unconventional lifestyle, and seek life beyond the ordinary. We dive into stories, tactics, and inspiration that fuel the open road. Hey there, my name is Stuart from StuartDoingStuff on Instagram. I've been a full time nomad for three years now, half of which was in a 40 foot Super C RV, and now I'm in a Sprinter van, a 24 foot Sprinter van. I went from big to small, I know it all. And I travel with my two cats, Camden and Izzy. I'm that, sorry, that was cheesy. Follow me on Instagram for more stories and videos, but I gotta, I gotta put on my, my serious face right now. Is this serious enough? Nobody likes April 15th, and if you don't know that date that's not etched in your mind, then you don't have, obviously, any pain points like I've had in my past. But, taxes are something that everybody... Is going to experience what is it? They say death and taxes are the two things that you just absolutely can't avoid Well our next guest here on rv dreaming is going to try and take away a little bit of that sting the best that she Possibly can she is a cpa for content creators and is also On the road. So ladies and gentlemen, welcome to the program. Penny with E5 FauxFemme. Penny Rose, welcome to RV Dreaming. I'm so glad to be here. CPAs for content creators. And I lovePenny Rose from Fe Fi Fo Fum CPA:
that. I have been an accountant for 25 years. I want to be the person behind the scenes, making sure that they're. They're comfortable with their finances so that they can continue to make this amazing content. Let meStuart Doing Stuff:
kind of just scratch and itch real quick on some of these, you know, on some of these things, because I've heard all the rumors. I've owned businesses in sticks and bricks and, you know, and this and that, and I've gone through. Uh, CPAs in different states and different areas. I, it's, it's funny when I meet people who are entrepreneurs and they want to do social media for, for money, you know, as, as part of their living, as part of their, especially their full time living, they're confused sometimes. They think that they can just ride off their, their van, they can ride off their food because they're cooking, you know, in their videos. So it's like, ah, it's a write off or I can write off this or, or I don't have to pay for my gas or I don't have to do this, you know. But they're... There are restrictions as to what you can and can't do. Do you want to maybe hit on just some of the bullet points on maybe some of the most common mistakes that influencers think that they can write off or get away with, where really they really they can't? ThePenny Rose from Fe Fi Fo Fum CPA:
most important thing for anybody that thinks that they're going to be able to write off most of their lifestyle expenses is that you need to have fantastic records in order to do that. However you choose to make, make it electronically, make it paper, whatever it is, you need to keep track of what you did every day. If you are going to a particular location and all you're going to do at that location is film, Then it's likely that you're going to be able to use some of the cost of getting there as an illegitimate business expense. But most of us, when we RV and we're traveling, you're combining business with pleasure. And that makes it more difficult. To figure out what you can expense, what's a legitimate business expense and what's a personal expense and keeping really, really good records is the best place to start with that.Stuart Doing Stuff:
What's the easiest way for people to get started on that? Cause a lot of people don't know what they need to track. WhatPenny Rose from Fe Fi Fo Fum CPA:
you could do it on a calendar application. Um, you can do it on a paper calendar or you can do it in some kind of calendar where you're keeping track of your activities for the day and the locations that you are. In terms of mileage and traveling expenses, what most of my clients use is a software called QuickBooks. If you have, it's The smartphone, it's free with your QuickBooks subscription to get an app on your phone and you can turn on the mileage tracking within that application. And it's tracking your mileage all the time. What I recommend people do is open it up once a week and go through all the things that got tracked and you just swipe personal business, personal business, personal business, and. That's a really easy way to keep track of it, and you can export that information within the QuickBooks desktop, like on your laptop. You can open up the mileage tracking portion, and you can download a spreadsheet, and you can use that spreadsheet as the basis for you tracking where you are and what you do.Stuart Doing Stuff:
That's great for mileage, personal business, but if I say I'm... I'm a, if I say I'm going to do daily vlogging and I'm going to go get, go to the gas station, normally a run from wherever you're at to the gas station wouldn't necessarily be deductible, so to speak, or business mileage. But if I record it, does it become automatically or are there still rules?Penny Rose from Fe Fi Fo Fum CPA:
It does if you have, if you need to go to that gas station in order to record. If you're not able to record in the location where you started and you need to go to the gas station, then it becomes a business trip.Stuart Doing Stuff:
Wow. There's a lot of little loopholes over there,Penny Rose from Fe Fi Fo Fum CPA:
huh? Yeah. And, and what most people are going to do is. In terms of an expense for your business, most people are going to write off mileage. There are two ways to have a business expense for your, your travel expenses in a vehicle, and the easier one to use is mileage. It doesn't, unlikely that it's going to make sense for you to have to keep track of every littleStuart Doing Stuff:
expense. I can take campgrounds, fees. Mileage, a lot of expenses that I would be paying normally and I can deduct it from my business, but there's a good chance that for especially new creators or people getting started, your expenses are going to outweigh the income from your business from like your paid sponsorships or from endorsements or from AdWords or views and clicks and stuff like that. It takes a while for all that to kind of get going. So your expenses are gonna be high. Can I claim a loss? Yes, you can. And, and there's, there's no requirements on that either, huh? So I can totally, I'm going to be facetious here. I don't want anyone thinking that I'm serious with this next comment, but I can show that I make no money at all and I can never pay tax ever again.Penny Rose from Fe Fi Fo Fum CPA:
So the benefit of having a loss is only if you have other income. So having a loss on your tax return only benefits you if you have another source of income. So if you, if you have a If you're a freelancer, aside from content creation, and you have 50, 000 of income from freelancing, that is something that you would normally pay tax on. If you have a, if you have 25, 000 worth of expenses for your other business, which is content creation, those two things are going to offset each other. But if all you have, if you're independently wealthy, And you have no other money coming in, a 25, 000 loss doesn't do you any good because it's not offsetting anything.Stuart Doing Stuff:
Yeah, it's only going to offset your income made from other, from other areas. That's, it's an important kind of a thing. You can write it off, but the whole point and sooner or later, you can't do it forever. Sooner or later, someone's going to come knocking or calling, right? And say, Hey, you have this business here for four years. It's not making any money.Penny Rose from Fe Fi Fo Fum CPA:
Well, actually the number is five years. Oh. And so IRS, you don't have to have a profit, but for two out of five years, you have to demonstrate that you were trying to make a profit, you were trying to run a business, you were doing things that could have made you money, and that, that's theStuart Doing Stuff:
standard. It sounds like it's a pretty loose standard. Because how do you show you're trying? ItPenny Rose from Fe Fi Fo Fum CPA:
comes back down to what I mentioned earlier, keeping track of what you're doing, where you are, and your expenses. I mean, if you can't think of anything right now, but say you, you purchase something and it creates an expense, but the reason you purchased it was because you plan to use it in your business. You're demonstrating That you are trying to make money.Stuart Doing Stuff:
So like this, this fancy new microphone I got here from Best Buy, because I was like, Oh, we're going to launch this podcast and I need a much better microphone than, you know, just a casual conversation over Skype or zoom or something like Skype. Oh my gosh. What decade am I living in? Even though that the podcast doesn't make any money, this becomes. An expense. Look at it. It's right here in the podcast and you can see it. I guess I'm kind of more sensitive to this thing because obviously having other businesses in the past, I know a lot of the things that you're talking about already, but people come up to me and they say, why aren't you doing this? Why aren't you doing that? And I was like, well, because that's illegal. That's flagrantly like. Defraud, that's flagrant fraud what you're doing. Yeah, it'sPenny Rose from Fe Fi Fo Fum CPA:
funny, those people are, are watching too much TikTok.Stuart Doing Stuff:
Oh my gosh, are you talking about those, those fake, here's my fake screenshots of fake revenue and bank balances. And there's, there's someone I follow on TikTok and gosh, I don't remember who it is, but his job is he has this, this jet. I don't know if you've seen it. It's a private, it's like a golf stream. It doesn't work. It doesn't run. It doesn't fly, but he leases out the jet. To creators to create, you know, artificial scenes where they'll roll out the red carpet. They got pilots and, you know, uniforms they've got, you know, photos and special lighting inside the jet for the things. It's all Instagram, Instagram, phony. AndPenny Rose from Fe Fi Fo Fum CPA:
that's amazing though. I love that business model of like, you know, if I had the opportunity to, to buy something like that, I would do the same thing because the content that comes out of it. Is phony, but the business model that that person has with the jet and renting it out is totally illegitimate. I think the biggest thing, and this is the reason I bring up TikTok is just because something is a legitimate tax. Tactic doesn't mean it's worth your effort to go through all the work that it takes to actually apply it. And we're seeing that a lot in the tax industry because people will watch a tic tac and they're like, Oh, you. It's not good enough for you to just be an LLC. You have to be an S corporation, and you have to save your self employment tax, and oh, self employment tax is the worst thing ever. And we're seeing people that are, have Revenue that doesn't make sense for them to choose to be an S corporation, following advice on TikTok and setting it up. And we're, you know, we're having to charge them to unravel their situation. Can we talkStuart Doing Stuff:
about some of the dangers of writing off too much? Because here's. The scenario, right? And correct me if I'm wrong, you're the expert here, but let me kind of nail this down. Um, you have another job and it pays you, we'll use your example earlier, it pays you 50, 000. But you have this content creation company and you took a 25, 000 loss. So now on your tax return, it shows that you made 25, 000 because you took this big loss. Now, granted, you don't have to pay that tax, you know, because, you know, the income tax, because you took a loss. You want to go out and buy a new RV. You, you want to go out and, and buy something that you need a loan for. Now all of a sudden... The tax return only shows that you make 25, 000 a year. No one's going to give you a loan on a 100, 000 van or car or an RV or anything like that. So there's dangers to having too many deductions and not showing enough income. Yeah,Penny Rose from Fe Fi Fo Fum CPA:
that's an excellent example. I'm glad you brought that up. The other thing is if you want to start saving for retirement, I mean, saving for retirement is based on your income. And if you write, if you are only running a business and you try to, you know, reduce your income to the lowest possible amount, you're also reducing your opportunities to invest in your retirement.Stuart Doing Stuff:
So there are a lot of dangers into taking too many deductions, too many write offs. You've got to really kind of identify, and this is where I think a financial planner or someone at a higher level, like you were talking about, like you do, um, comes into play. It's like, well, what's your short term and your long term strategy? You know, because if you're saying that I'm going to want to buy a new rig in two years, You need to start a paper trail that shows that you're a good investment or that you're able to do that. So maybe taking extensive write offs isn't the right time for you rightPenny Rose from Fe Fi Fo Fum CPA:
now. Yeah, that's a really good point. So prior to becoming an accountant, I was a loan officer for, um, be a major bank if I still work there now. And we, Look at two years of tax returns. So you can't just start a business and start have, you know, your content creation, income rolling in, and then go out and get a loan and two years of profit, two years of enough money coming in that's left over in order for you to make payments. I mean, we use, and this is probably antiquated because I've been out of. loan, loan work for a long time, but we use 40%. And so if your paycheck is 100, 000, you're only going to be able to make a total of all the money that you have going out, you know, your mortgage, your car loan, you know, what your student student loans are going to be a big part of that. Your total payments for a year can't be over 40, 000. And so if you are not thinking ahead, exactly as you mentioned earlier, you're just trying to nickel and dime every bit of income out as an expense, there will be consequences. I alwaysStuart Doing Stuff:
say it's good to start with the end in mind. You know, you just really have to kind of know all that and you need a good financial advisor, especially if you've never done this before. If you've never been self employed and you're not sure how your, you know, your self employment income combines with your W2 income, which affects this, which affects that and your goals here and your. thing there, you know, it all comes together. Having a long term strategy isPenny Rose from Fe Fi Fo Fum CPA:
helpful. I work a lot in tax strategies, which is very popular in personal finance. And what we look at is we'll make an estimation, a conservative estimation of how much money we can save somebody based on looking at their two years of Prior tax returns, and we'll set our our fee that they're going to pay us and show them. Hey, you know, this is going to make sense because we are, you're going to save X amount of money, and we're going to charge you this amount of money to be able to implement that for you, because, you know, as I mentioned earlier about keeping really good records. One of the things that you have to do for tax strategies is to keep Keep really good records and if you, if you have a CPA helping you, they're going to help you keep track of those records and make those records for you. And that's part of what you're paying for. You know,Stuart Doing Stuff:
Penny, you've been doing this for quite a while. I'm curious. Do you have anything that you've come across where you just go? Oh, my gosh. I can't believe that you're tryingPenny Rose from Fe Fi Fo Fum CPA:
to get away with this. I went to a personal finance meetup and I met somebody who's a virtual bookkeeper and it, and it really changed my life. I also met up with a husband and wife who were in trouble with IRS and I met with them and asked them to provide two years of tax returns. And I, I went through their information and I ended up not. Choosing to work with them. I didn't bring them on board. So we can't, so I can't say I fired them, but I said, I'm not a good fit for you. And that's mostly because in the situation they were in as the CPA, I would be representing them in front of IRS. And that's a higher standard than just helping somebody with a tax plan or, or a strategy. And I was not able to reconcile their belief that they should screw the government every way they possibly can. And I ultimately said, you know, you'll, you'll need to find somebody else. But what I saw in their tax return was shocking. And we talked about something similar with that. You do when you initially said, Hey, I, you know, can I just create a lot of permanent loss and I'm never paying tax on it. And what they had done was they moved out of their house, moved into another house. And during COVID. They said they were landlords for the old house that they no longer lived in, and they created 30, 000 worth of expenses, and they never actually tried to rent the property. And I think that's one of the. craziest things that I've seen that I can actually talk about. So they, I'm not sure who did their taxes. They probably did their own taxes. So they created, you know, the form that you fill out for rental property. And it, all I had was expenses on it. It didn't even have a dime. And I said, you know, how many one of the questions that's on that form is how many days of the year was the property available for rental. And they said, you know, 365 and I said, Well, did you do you have any records that you tried to. Did you list it for rent? Did you, did you do any of these things that IRS is going to ask you that indicate that you're trying? And they said, no, because it was COVID.Stuart Doing Stuff:
For people who have questions and they want to find you, they want to follow you, they say. I've been looking for a CPA that specializes in content created because I'm making some money. I'm doing some things. I just need a guidance and my CPA doesn't know anything about my lifestyle. How can people find you? How can people reach outPenny Rose from Fe Fi Fo Fum CPA:
to you? The best way to contact me is on Instagram and I'm at fee5fo from personal CFO. And hit me up in the DM if you have a. So if you have a specific question that you've been struggling with, I love to get into the details with people and meet other RVers as well. RV content creators are, are really my jam and the DMs are the, in Instagram are the best way to get in touch withStuart Doing Stuff:
me. Okay. Then we will link that Instagram account to the show note. Thank you for joining us on RV dreaming. You have anything else before we, before we sign off?Penny Rose from Fe Fi Fo Fum CPA:
So anybody that is just new starting a business, I have a financial setup guide. So if you want to pick that up, if you just DM me and say, Hey, I heard you on this podcast and I'd love that PDF, go ahead and do it and I'll, I'llStuart Doing Stuff:
hook you up. All right. Thanks, Penny from Fee Fi Fo Fum CPA. Man, I learned a lot in this episode, and I hope you did too. That's it for today. Enjoy your travels. Make them safe, make them fun, and make them memorable. We'll see you later. Thanks for listening to the RV Dreaming Podcast. See the action on Instagram. StuartDoingStuff. Hear about it on the podcast. Be sure to subscribe. We'll see you in the next episode.