195 | Bookkeeping in the Fair Tax Era

Hey ambitious bookkeepers!

Okay, I have a confession to make. I've been avoiding the news lately. Sometimes I'm even surprised by the weather (like the snow that appeared after 70-degree days last week). I'm not proud of it, but life gets busy, you know?

But recently, I had this midnight spiral of anxiety. What if I'm missing crucial developments that could impact my industry? What about all the accountants and bookkeepers I help? Could my business be affected?

So I did what any reasonable person would do: I turned on a meditation podcast and went to sleep. Problem for tomorrow-Serena!

A couple days later, I decided to do my research on something I'd been hearing whispers about: the Fair Tax Act. I had a little chat with ChatGPT (don't judge me—it really does speed up research!), and I'm bringing you the fruits of our labor, plus my own two cents.

Listen here or on your favorite podcast player, or watch the video version on YouTube >>

Now let's dive into some highlights!

What Is the Fair Tax Act, Anyway?

If you've been keeping up with tax news (unlike me), you've probably heard about the Fair Tax Act. It's a bill that could:

• Eliminate income tax for businesses and individuals
• Eliminate payroll taxes (no more Social Security or Medicare deductions)
• Eliminate the IRS (which is half gone already with all the layoffs)
• Replace all of this with a 23-30% national sales tax on all goods and services

This would be one of the biggest tax shifts in U.S. history. And as bookkeepers, we need to be ready.

How Would This Change Bookkeeping?

Contrary to my midnight spiraling fears, our work as bookkeepers isn't disappearing—it's evolving. Here's where we'll see shifts:

1. Less Demand for Income Tax Support

If businesses aren't filing income tax returns, there's no need for:

• Estimated tax payments
• Tax deductions tracking
• Year-end tax preparation

We might lose those clients who only show up at year-end solely to get their P&L for tax filing. This could actually be a blessing for some of us, honestly!

2. Increased Need for Sales Tax Compliance

This will be HUGE. Bookkeepers will need to help businesses:

• Set up systems to track federal sales tax (on top of state sales tax)
• Ensure proper collection of the 23-30% national sales tax
• Remit taxes correctly to state authorities

If you haven't specialized in sales tax before and have been avoiding learning it, now is the time to start—while the stakes are lower.

3. Changes to Payroll Services

While payroll tax filings would disappear (no more Social Security, Medicare, or income tax withholding), businesses will still need help with:

• Employee wages
• Benefits administration
• Cash flow management for payroll

This is great news for those of us who don't handle payroll tax filing anyway and use systems like Gusto. But there will probably still be things like unemployment tax or state-level employee filings.

4. Greater Emphasis on Budgeting and Forecasting

With no tax deductions, businesses will need completely new strategies for:

• Managing cash flow
• Reinvesting profits
• Staying profitable with higher consumer prices

How to Future-Proof Your Bookkeeping Business

This isn't about fear—it's about being proactive. The best bookkeepers aren't just number crunchers; we're trusted financial guides. Here's what you can do today:

1. Start Learning Sales Tax Compliance

The national sales tax would be collected just like state sales tax, but on a larger scale. Get familiar with:

• Sales tax software like Avalara, Tax Jar, or native functions in QBO/Xero
• How to file multi-jurisdiction returns
• Taxability rules for various products and services

If you work with service-based businesses that don't currently collect sales tax, start educating them now. And remember, we'll all be dealing with sales tax on our own services too!

2. Shift Toward Budgeting and Forecasting Services

If income tax disappears, business owners will need whole new financial strategies:

• Help clients implement Profit First strategies
• Ensure they're not spending sales tax revenue they've collected
• Offer cash flow planning to navigate a tax-free world

3. Expand Your Advisory Skills

If tax prep is your bread and butter, you'll need to shift. Consider adding:

• Fractional CFO services
• Financial planning
• Profitability consulting

Focus on educating business owners—many will be confused about this shift (I mean, I'm confused too!), and you can be their guide.

Final Thoughts

At the end of the day, bookkeeping is still the backbone of business. Even if the IRS disappears and income taxes go away, businesses will still need financial experts to keep their books clean, manage cash flow, and plan for the future.

So instead of fearing this shift, let's prepare for it. This is our chance to step up and become even more valuable to our clients!

Are you ready to future-proof your bookkeeping business? I'd love to hear your thoughts on how you're preparing for potential tax changes.

Now go be ambitious!

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