Introduction

As a handyman or home repair professional, you juggle numerous roles — from skilled tradesperson to savvy business owner. Your financial landscape, however, can be as complex as a tricky home repair job. Navigating this terrain calls for more than just a good wrench; it requires smart financial strategies. That’s where Jason Arsenault CPA, LLC, based in Gallup, New Mexico, steps in. With specialized expertise in assisting small businesses, we’re here to turn your financial challenges into opportunities for growth and stability.

In this comprehensive guide, we’ll delve into the unique financial aspects of your industry. From setting up your business structure for maximum protection and tax advantages to mastering the art of budgeting with irregular income, we’ve got you covered. But that’s not all — we’ll also explore how strategic record-keeping, savvy marketing, and expert tax handling can transform the way you view and manage your finances.

So, let’s get started. Together, we’ll hammer out the financial details, so you can focus on building success, one project at a time.

 

Case Study: John’s Handyman Services – A Transformation Story

Background

John Yazzie ran a small handyman business in Gallup, New Mexico, operating under his own name. He relied primarily on cash and personal checks for payment, cashing them at local check-cashing services. His business was modest but steady, and he didn’t see the need for formal accounting services. This approach, however, limited his growth potential and left him vulnerable in several ways.

Challenges

1. Lack of Financial Records: John didn’t keep formal records of his income and expenses, making it impossible to gauge his business’s actual profitability.
2. Tax Liabilities and Missed Credits: Operating informally meant John wasn’t reporting his full income, leading to potential legal issues. He also missed out on tax credits and deductions that could have reduced his tax burden.
3. No Business Credit: Without documented business income, John struggled to qualify for loans or credit lines, hampering his ability to invest in better equipment or expand his services.
4. Personal Liability Risks: Operating under his own name exposed John’s personal assets to business-related risks.

The Transformation

John decided to partner with Jason Arsenault CPA, LLC, to professionalize and grow his business. Here’s how the transformation unfolded:

1. Forming an LLC: Jason Arsenault CPA, LLC helped John set up an LLC, separating his personal and business finances and limiting personal liability.
2. Opening a Business Bank Account: John opened a business bank account, depositing all business earnings here and paying himself a regular salary.
3. Implementing Bookkeeping Practices: With guidance from Jason Arsenault CPA, LLC, John began meticulous record-keeping, tracking all income and expenses.
4. Addressing Tax Obligations and Opportunities: John filed his taxes accurately, reporting all income. This not only kept him compliant but also allowed him to take advantage of various tax deductions and credits.
5. Building Credit and Growth Opportunities: With documented income and improved creditworthiness, John was able to secure a loan to purchase new equipment. This investment expanded his service offerings and increased his income.
6. Regular Financial Review and Planning: Regular meetings with Jason Arsenault CPA, LLC ensured John stayed on track with his financial goals and adapted to new opportunities and challenges.

Results

1. Increased Revenue: With better equipment and expanded services, John’s revenue increased by 40% within the first year.
2. Tax Savings: By claiming legitimate business expenses and credits, John reduced his tax liability significantly.
3. Improved Credit Score: John’s improved financial practices and documented income helped build his business credit score, opening up further opportunities for growth.
4. Peace of Mind: With professional financial management, John gained confidence in his business decisions and peace of mind regarding compliance and financial stability.

Conclusion

John’s journey from a cash-based, informal operation to a professionally managed and growing business highlights the transformative power of sound financial practices and professional accounting support. By partnering with Jason Arsenault CPA, LLC, John not only secured his current business operations but also paved the way for future growth and success.

 

 

Understanding the Handyman Business Landscape

Common Financial Challenges Faced by Handymen

As a handyman or home repair expert, you’re adept at fixing leaks and patching walls, but your financial landscape might present a different set of challenges:

1. Irregular Income: Unlike a regular 9-to-5 job, your income may ebb and flow with the seasons and market demand. This irregularity can make budgeting and financial planning more complex.
2. Expense Tracking: With various projects on the go, keeping track of expenses for materials, travel, and tools can be overwhelming, yet it’s crucial for understanding your profitability and for tax purposes.
3. Tax Complexity: Navigating the intricacies of self-employment taxes, deductions, and potentially the New Mexico gross receipts tax can be daunting, especially if your focus is more on craftsmanship than on ledgers and tax codes.
4. Retirement Planning: Without the cushion of an employer-sponsored retirement plan, you need to proactively plan for your financial future.
5. Cash Flow Management: Managing the inflow and outflow of cash, particularly during off-peak seasons, is vital to keeping your business afloat and thriving.

The Importance of Separating Personal and Business Finances

A common pitfall for many handymen and small business owners is the blurring of personal and business finances. Here’s why keeping them separate is crucial:

1. Clarity in Bookkeeping: Separating these accounts simplifies record-keeping, making it easier to track business expenses and income. This clarity is not only beneficial for day-to-day management but also essential during tax season.
2. Professionalism and Credibility: Having a dedicated business account enhances your professionalism. It shows clients and financial institutions that you are serious about your business.
3. Legal and Tax Protection: In the unfortunate event of legal issues, having separate finances can help protect your personal assets. Additionally, clear separation aids in identifying deductible expenses, potentially lowering your tax liability.
4. Easier Tax Preparation and Planning: With distinct separation, tax preparation becomes more straightforward, helping to avoid errors and missed deductions. It also makes financial planning more effective, giving you a clearer picture of your business’s health.
5. Improved Credit Opportunities: A separate business account and credit history can open doors to better financing options, like business loans or lines of credit, crucial for scaling your business.

In essence, treating your business finances with the same care and attention as you would a complex repair job is key to your long-term success. The right financial tools, knowledge, and support can help you navigate these challenges effectively.

Setting Up for Success: The LLC Advantage

As a handyman or home repair professional, one of the smartest moves you can make for your business is setting up a Limited Liability Company (LLC). Let’s explore how this step can benefit you:

Benefits of Forming an LLC

1. Limited Liability Protection: The primary advantage of an LLC is in its name — limited liability. This means your personal assets (like your home and savings) are protected in case your business faces legal issues. It’s a shield between your personal life and business risks.
2. Tax Flexibility: LLCs offer flexibility in how you’re taxed. You can choose to be taxed as a sole proprietor, partnership, or even as an S-corporation, potentially leading to significant tax savings.
3. Credibility with Customers and Vendors: Operating as an LLC can enhance your professional image, building trust with clients and suppliers. It shows that you’re serious about your business and its long-term prospects.
4. Easier to Obtain Financing: As an LLC, you might find it easier to obtain business loans and lines of credit. Financial institutions often view LLCs as more credible and stable than sole proprietorships.

Obtaining an EIN and the S-Corp Option

Once your LLC is established, obtaining an Employer Identification Number (EIN) from the IRS is a crucial step. Even if you don’t have employees, an EIN is beneficial because:

1. Enhances Privacy: Using an EIN instead of your Social Security Number for business transactions can help protect your personal information.
2. Required for Certain Transactions: An EIN is necessary for opening a business bank account, applying for business permits, and handling payroll (if you decide to hire employees).

Furthermore, electing to be taxed as an S-corporation, a choice available to LLCs, can offer additional tax advantages. This structure can potentially reduce your self-employment tax liability, as you’ll pay yourself a reasonable salary and take the remainder of profits as distributions, which are not subject to self-employment taxes.

Navigating Irregular Income

One of the most challenging aspects of running a handyman or home repair business is managing the irregularity of income. Here’s how you can navigate these waters effectively:

Budgeting with Fluctuating Income

1. Understand Your Baseline: First, determine your monthly baseline — the minimum amount you need to cover essential expenses like rent, utilities, and groceries. This knowledge is crucial for financial stability.
2. Create a Buffer: On months when you earn more than your baseline, set aside the extra funds in a savings account. This buffer will be invaluable during leaner periods.
3. Adopt a Conservative Spending Approach: During high-income months, resist the temptation to overspend. Maintain a conservative spending approach to ensure you’re covered during slower periods.
4. Use a Separate Business Account: As emphasized earlier, separate your personal and business finances. Pay yourself a regular ‘salary’ from your business account to your personal account, stabilizing your personal income.

The Importance of Regular Draws

Instead of random distributions, set up a regular draw schedule (weekly, biweekly, or monthly). This system mirrors a regular paycheck and helps in several ways:

1. Predictability: Regular draws make personal budgeting easier, as you know exactly how much you’ll receive and when.
2. Disciplined Savings: It encourages you to save in your business account during more profitable times, ensuring funds are available for your draws during slower periods.
3. Smoother Cash Flow Management: This approach helps in smoothing out the peaks and valleys of cash flow, providing a more stable financial picture.

Tools and Strategies for Effective Financial Management

Consider using budgeting tools and software to track your income and expenses. These can provide valuable insights into your financial trends, helping you plan more effectively. Additionally, partnering with a knowledgeable CPA, like Jason Arsenault CPA, LLC, can provide tailored advice and strategies to manage your unique financial situation, turning the challenge of irregular income into a manageable aspect of your thriving business.

Tax Deductions and Savings

For handymen and home repair professionals, understanding and maximizing tax deductions can significantly impact your financial health. Let’s explore some key areas where you can save:

Common Tax Deductions for Handymen

1. Business Expenses: This includes materials, tools, and equipment necessary for your work. Keeping meticulous records of these purchases is crucial for tax time.
2. Vehicle Expenses: If you use a vehicle for your business, you can deduct expenses like gas, maintenance, and insurance. There are two methods: the standard mileage rate or actual expenses. Choose the one that offers the greater deduction.
3. Home Office Deduction: If you use a part of your home exclusively for business, you may qualify for a home office deduction, which can include a portion of your rent, utilities, and internet costs.
4. Insurance and Licenses: Business insurance premiums and licensing fees are often overlooked deductions.
5. Marketing and Advertising: Expenses for promoting your business, including digital marketing and social media advertising, are deductible.

Strategies for Using Income Effectively

1. Investing in Retirement Accounts: Contributing to a retirement account not only secures your future but can also offer current tax benefits. Depending on the type of account, your contributions may be tax-deductible.
2. 529 Plans for Education: If you have children, contributing to a 529 college savings plan can be a wise move. While it doesn’t offer federal tax deductions, many states provide tax benefits for these contributions.
3. Maximizing Earned Income Credit: Properly recording your income, including cash projects, can increase your eligibility for tax credits like the Earned Income Credit, which can significantly reduce your tax liability.

Partnering with a CPA for Optimized Tax Strategies

Navigating the complexities of tax deductions and savings strategies can be daunting. A CPA, particularly one familiar with the handyman and home repair industry, can provide invaluable guidance. At Jason Arsenault CPA, LLC, we specialize in identifying the most beneficial tax strategies for your business, ensuring you’re not only compliant but also maximizing your financial opportunities.

Effective Record-Keeping and Cash Projects

Managing the financial aspects of cash projects and maintaining accurate records are pivotal for the success and legal compliance of your handyman business. Here’s how to approach it:

Importance of Recording All Income

1. Transparency and Compliance: Accurately recording all income, including cash payments, is essential for tax compliance. It ensures you’re on the right side of tax laws and regulations.
2. Accurate Financial Picture: Proper record-keeping gives you a clear view of your business’s financial health, crucial for making informed decisions.
3. Building Credit and Business Reputation: Documenting all income can assist in establishing a strong business credit history, which is beneficial for loan applications and business growth.

Managing Cash Projects

1. Issue Receipts for Cash Payments: Provide receipts for cash transactions, creating a record for both you and your client.
2. Deposit Cash into Your Business Account: Regularly deposit cash earnings into your business account. This practice not only assists in record-keeping but also demonstrates the scale of your business operations to banks and other institutions.
3. Use Accounting Software: Consider using accounting software to track income and expenses. Many modern tools are designed for ease of use and can significantly streamline the recording process.

Strategic Benefits of Recording Cash Income

Recording cash projects might seem like an extra step, but it can be strategically beneficial:

1. Utilization for Tax Advantages: Recorded income can be used to maximize tax deductions and credits, as mentioned earlier.
2. Retirement Planning and Loan Applications: Accurate income records can be advantageous for retirement planning and when applying for loans, as they provide a verifiable income history.
3. Planning for Future Growth: With complete financial records, planning for business expansion or diversification becomes more manageable and realistic.

Navigating New Mexico Gross Receipts Tax

For handymen and home repair professionals operating in New Mexico, understanding and managing the gross receipts tax (GRT) is crucial. Here’s how you can handle this aspect of your business effectively:

Understanding the Gross Receipts Tax

1. What is the GRT?: The New Mexico Gross Receipts Tax is a tax on the sale of goods or services in the state. As a handyman, most of your services will likely be subject to this tax.
2. Rate Variability: The GRT rate varies depending on your location in New Mexico. It’s essential to be aware of the specific rate applicable to your area of operation.
3. Taxable and Non-taxable Services: While many services are taxable, there are exceptions. Understanding which of your services are taxable under the GRT is crucial for compliance.

Handling the Gross Receipts Tax

1. Accurate Calculation and Collection: Ensure you’re calculating and collecting the correct amount of GRT from your clients. This is where precise record-keeping becomes invaluable.
2. Timely Reporting and Payment: The GRT requires regular reporting and payment to the New Mexico Taxation and Revenue Department. Keeping track of these deadlines is vital to avoid penalties.
3. Taking Advantage of Deductions and Credits: There may be deductions and credits available that can reduce your GRT liability. Being aware of these can save you money.

How Jason Arsenault CPA, LLC Can Assist

Navigating the complexities of the GRT can be overwhelming. As a client of Jason Arsenault CPA, LLC, you don’t have to tackle this alone. We provide comprehensive assistance with:

1. Understanding Your GRT Obligations: We’ll explain the ins and outs of GRT and how it applies to your specific business operations.
2. Accurate Calculation and Reporting: Our team ensures that your GRT calculations are accurate and that your filings are timely, helping you stay compliant.
3. Identifying Tax Savings: We look for opportunities to reduce your tax burden through applicable deductions and credits.
4. Peace of Mind: With our expertise, you can focus on what you do best — running your business — while we take care of the tax details.

Marketing: A Dual Benefit

For handymen and home repair professionals, effective marketing is not just about attracting more customers; it’s also a strategic financial move. Let’s explore how smart marketing can benefit your business in more ways than one.

Marketing for Business Growth

1. Brand Visibility: In today’s digital age, having a strong online presence is crucial. From social media to a professional website, these platforms help increase your visibility and attract new clients.
2. Customer Engagement: Regularly engaging with customers through social media, email newsletters, and other channels builds relationships and encourages repeat business.
3. Targeted Advertising: Digital advertising allows you to target specific demographics, ensuring your marketing efforts reach the right audience.

Marketing Expenses as Tax Deductions

Here’s where the dual benefit comes in: many of your marketing expenses can be deducted from your taxes. This includes:

1. Website Development and Maintenance: The costs involved in creating and maintaining a website for your business.
2. Social Media Advertising: Expenses for ads on platforms like Facebook, Instagram, or LinkedIn.
3. Print and Media Advertising: Traditional advertising costs, such as flyers and local newspaper ads, are also deductible.
4. Branding Materials: Business cards, branded uniforms, and signage are part of marketing and deductible as business expenses.

Partnering with a CPA for Marketing Strategy

At Jason Arsenault CPA, LLC, we understand that marketing is an integral part of your business strategy. We can help you:

1. Identify Deductible Marketing Expenses: We’ll guide you on what marketing costs can be deducted, helping you maximize your tax benefits.
2. Plan Your Marketing Budget: With our financial expertise, we can assist in planning a marketing budget that aligns with your business goals and cash flow.
3. Measure ROI on Marketing Spend: Understanding the return on your marketing investments is crucial. We can help analyze the effectiveness of your marketing strategies.

By combining smart marketing strategies with savvy financial planning, you can make your marketing budget work twice as hard for your business.

Building a Financial Safety Net

For handymen and home repair professionals, building a financial safety net is essential for navigating the uncertainties of business and life. Here’s how to create and maintain this vital buffer.

The Role of Emergency Funds

1. Why You Need an Emergency Fund: It acts as a financial buffer against unexpected expenses like equipment repairs, health emergencies, or slow business periods. An emergency fund can be the difference between weathering a tough time and a financial crisis.
2. How Much to Save: Ideally, your emergency fund should cover 3-6 months of living and business expenses. This amount provides a comfortable cushion for most unforeseen situations.
3. Where to Keep It: Your emergency fund should be easily accessible but not so readily available that you’re tempted to dip into it for non-emergencies. High-yield savings accounts or money market accounts are good options.

Planning for Off-Season and Lean Periods

1. Understand Seasonal Trends: Recognize the ebb and flow of your business. Some months may be busier than others. Planning for these fluctuations is key.
2. Save During Peak Seasons: Allocate a portion of your income during the busy months to support you during slower periods.
3. Diversify Services: Consider offering services that are in demand year-round or during your typical off-season. This can help maintain a steady income flow.

Partnering with a CPA for Financial Stability

At Jason Arsenault CPA, LLC, we understand the unique challenges of your industry and can assist in several ways:

1. Tailored Financial Planning: We offer personalized advice on how to build and maintain your emergency fund, considering your specific financial situation and business needs.
2. Cash Flow Management: We can help you develop strategies for effective cash flow management, ensuring that you have funds available when you need them.
3. Long-Term Financial Health: Beyond immediate concerns, we also focus on your long-term financial health, assisting with retirement planning and investment strategies.

Creating a financial safety net is more than just a precaution; it’s a strategic move towards long-term business resilience and personal peace of mind.

Partnering with a CPA for Success

In the ever-changing and challenging world of running a handyman or home repair business, having a CPA as a financial partner can be a game-changer. Here’s why partnering with Jason Arsenault CPA, LLC, can be one of the best decisions for your business.

Customized Financial Guidance

1. Understanding Your Unique Needs: At Jason Arsenault CPA, LLC, we recognize that each business is unique. We take the time to understand your specific challenges and goals to provide tailored financial advice.
2. Proactive Tax Planning: We don’t just prepare your taxes; we plan them. This means looking for ways to minimize your tax liability throughout the year, not just at tax time.
3. Staying Compliant: Keeping up with tax laws and regulations can be overwhelming. We ensure your business stays compliant, avoiding costly penalties and legal issues.

Business Growth and Strategy

1. Financial Analysis and Advice: We provide more than just bookkeeping. Our services include analyzing your financial data to identify trends, opportunities for cost savings, and strategies for growth.
2. Budgeting and Forecasting: We assist in creating realistic budgets and forecasts, helping you make informed decisions about investments, expansions, and other business moves.
3. Succession Planning: For long-term business owners, we help plan for the future, whether it’s selling your business, passing it on to family members, or simply ensuring a comfortable retirement.

Building a Partnership for the Future

1. Regular Check-Ins and Support: We believe in building relationships. Regular meetings and check-ins ensure we’re always aligned with your goals and can provide timely advice and support.
2. Adapting to Change: As your business grows and evolves, so will your financial needs. We’re here to adapt our services to meet these changing demands.
3. Peace of Mind: Knowing you have a trusted CPA partner allows you to focus on what you do best — running your handyman or home repair business. We take care of the financial complexities, giving you peace of mind.

Partnering with Jason Arsenault CPA, LLC, means more than just having an accountant; it means having a financial ally committed to your success. Together, we can build a stronger, more resilient, and more profitable business.

10 Fun Reasons Handymen Should Hire an Accountant

1. Be the Superhero, Not the Sidekick

Just like every superhero needs a trusty sidekick, every handyman needs a sharp accountant. You tackle the repairs; we handle the numbers!

2. Hammer Down on Taxes

Let’s face it, taxes can be more confusing than assembling furniture without instructions. We’re here to make taxes less taxing!

3. Find Hidden Treasure

Think of us as your financial treasure hunters. We dig deep to find every tax deduction and credit you deserve.

4. Your Financial Toolbox

Just as you wouldn’t use a wrench to hammer a nail, you shouldn’t use guesswork for finances. We’re the right tool for the job!

5. Avoid the Money Pit

Unmanaged finances can be a bottomless pit. We help you build a solid financial foundation, no hard hat required.

6. Navigate the Maze of Paperwork

Paperwork can be a labyrinth. We’re like your financial GPS, guiding you through every twist and turn.

7. Keep the Tax Monster at Bay

Think of us as your tax monster repellent. We keep those scary audits and penalties away.

8. Time = Money

You save time on financial management; we save you money. It’s a win-win!

9. Grow Your Business Tree

With our financial nurturing, watch your business grow from a sapling to a mighty oak.

10. No More Financial DIY

You’re great at DIY in homes, not so much in finance. Let the pros take over!

Ready to Build a Better Financial Future?

At Jason Arsenault CPA, LLC, we understand that running a handyman and home repair business is no small feat. You’re busy fixing, building, and creating – and that’s where your focus should be. But behind every great craftsman is a solid financial plan.

Why Choose Us?

• Personalized Service: We tailor our services to fit your unique business needs.
• Expertise in Your Industry: We know the ins and outs of the handyman business.
• Peace of Mind: With us, your finances are in safe, experienced hands.

Take the Next Step

Contact Jason Arsenault CPA, LLC today and turn those financial puzzles into a clear picture of success. Let’s lay the foundation for your thriving business together!

🔨 Schedule Your Consultation 🔨