This is Bill with Notary Coach and the sign and thrive training course and community. Today we get to talk about a super exciting topic - accounting and tax efficiency. I know it gets kind of a bad rap sometimes but your tax efficiency in your business can really make or break this or any business.
I think one of the biggest challenges that we have as mobile notaries and loan signing agents is finding people who are willing or able to talk about what the tax situation looks like for notaries. There are some good reasons for that as there's a lot of different variables that come into play. So, before we get into it let me give you the standard disclaimer. I am NOT a tax professional and not a lawyer - I'm not an accountant - I'm not a CPA. I'm just going to show you some guidelines and give you some resources and then I encourage you as part of your team to really find a tax advisor that understands the notary business or service-based business. I’m also going to give you a link to the IRS code that all of your tax advisers should absolutely have as well.
So, let's take a 30,000-foot view here.
As a mobile notary and loan signing agent - this is a legit business and part of that is a big perk! One of the big reasons that a lot of people like to be self-employed or have an LLC or even a C corporation is the tax benefits. One of the perks is that you get your money before you have to pay taxes on it. As an employee, you don't get your money until the taxes are paid. It's the exact opposite when you're self-employed - we get that money and then we get to decide and determine what the expenses are based on the guidelines, and then we pay our taxes based on that. That's a huge advantage to being self-employed! I encourage you to really optimize that and become a really good tax efficient business.
But what does that look like? First there's basically two main ways or tips. I'm going to give those to you right now so you can start improving your tax efficiency and perhaps lowering your tax responsibilities. That said, not every situation is going to demand lower taxation - sometimes there's a trade-off. For example, if you ever decide that you're going buy a home or even buy a car - if you write off all of your income - it can make that a challenge to say the least. So, this doesn't apply to everybody and all situations. Just because we have some tax advantages doesn't necessarily mean that we're going to use them. That's why I still highly encourage you to find a tax advisor that knows your specific situation.
Let's dive in - so first thing you want to do to start tracking all of your expenses - even the stuff that you wouldn't necessarily think in your head ‘oh that's definitely a tax deduction’ as a mobile notary or loan signing agent, we have some that are very obvious. We have paper, pens, fuel - maybe we can write off the mileage on our car – perhaps we can write off the depreciation on the vehicle, the rubber stamps, the notary journal, maybe some clothing. Then we can get a little more creative - there's sections of your home if you use it as a home office that might be able to be tax deductible as well. You want to start tracking all of that right away.
That's really a huge point. The time for tax planning is not April 14th - it's right now - right this minute -start being a better bookkeeper - a better accountant! If you can't do it yourself, there is software out there. In fact - part of what's sparking this conversation are these amazing trainings that I did with Sue Hope over at Notary Assist and Steve Bjorkman (pronounce the 'j') over at Notary Gadget
I've got some amazing feedback from you guys and I know that there's some of these questions out there.
We're very blessed to have software out there that is custom built and designed just for the notary business. That's a great start! In addition, you can get some additional advice as well - but start tracking all of your expenses! Save your receipts. Get a business account or a business credit card or something that makes tracking those expenses easier.
The second one is the huge one. This is a relatively unknown or hidden gem within the IRS publications. it is IRS Publication 334 and it specifically speaks to notaries, and to other industries as well. There's a section right in there that talks specifically about notaries and it says that fees that you receive as a notary public for services you perform as a notary public are reported on Schedule C or C-EZ.
These payments are not subject to the self-employment tax. If you're not familiar with what self-employment tax is - this is huge! It's basically what a single person - self-employed or independent contractor - has to pay because they're not paying - mostly into Medicare. That's just one of the taxes that they put on.
But as a notary public, the fee that you charge for the actual notary services might be exempt for you. If you're out there hustling and you're really growing the business - that could be upwards of thousands of dollars sometimes tens of thousands of dollars. In fact - it's sparked an amendment on my own tax return. I'm working with my tax guy to go back and to look at those items two just to make sure I'm totally efficient in my taxes.
What that really looks like on a practical level is if you're doing general notary work, that kind of makes sense. If you're in a state where - let's say your maximum fee is $10 and you go out and you charge somebody $50 because there's mileage involved, and all that good stuff – and 10 or 20 or however many notarizations we're involved - that might be tax exempt.
But where it really comes into play is on the loan signing side. Let's say you do have a maximum state notary fee of $10 but you do a loan signing for a hundred bucks as there are 12 notarizations in that loan signing. So, 12 documents that actually had to be notarized - $10 times 12 is $120 and you're only getting paid $100. There's a very good chance that all of that income might be tax exempt from the self-employment tax. So, in the case if there were only five notarizations, then $50 of that hundred might be exempt from the self-employment tax.
You want to make sure that you get the right tax advice for your particular situation. Even my CPA was not aware of IRS Publication 334 – so I put a link down below so you can actually reference that.
Do your own research - do your own due diligence - but implementing the tracking of all your expenses and then also knowing about publication 334 will help you continue to track those.
What's cool is both of these software programs that we learned about - Notary Assist and Notary Gadget - both have a built in mechanism for tracking the number of notarizations in each of your loan signing appointments. I put a link down there as well so if you ever want to check in on those individual trainings, it puts both in one place so you can take a look and get more familiar with that.
Thanks a lot! I hope everything is going great! Happy Tax Efficiency!
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