Alright – so today we’ve got the honor of introducing you to Jonathan Maki. We think you’ll enjoy our conversation, we’ve shared it below.
Jonathan, thanks for taking the time to share your stories with us today Let’s kick things off with talking about how you serve the underserved, because in our view this is one of the most important things the small business community does for society – by serving those who the giant corporations ignore, small business helps create a more inclusive and just world for all of us.
We are a mom and pop shop that helps other family-business owners optimize their accounting, finance, and tax situations while being defensible in front of the IRS. Our clients are small business owners and solopreneurs around the country.
In 2019 Small Business Administration (SBA) report said small businesses contribute 44 % of U.S. Gross Domestic Product (GDP) and account for 48 % of all American jobs. In spite of being the “backbone of the economy,” we are not served well in multiple arenas.
It is often more difficult for us to qualify for a home loan or a business loan because we don’t have a guaranteed salary and less predictable income. As such, we are viewed as riskier for banks than big businesses.
The tax rate for self-employed is the highest in the country. We pay 15.3% to self-employment tax. This is in addition to income tax.
IRS audit rates, according to the 2017 IRS Data Book, for sole-proprietorships were nearly five times that of small corporations (S Corporations)
The cost of healthcare for sole-proprietors is expensive because we are not part of a greater pool of people.
Through working with our clients, we learned that people don’t know about these challenges before starting a business. As a result, many small business owners learn about them the hard way. They find themselves in trouble with the IRS or feel like their finances are a mess. In these situations, we can’t (always) blame them. Taxes and accounting are complicated. The IRS doesn’t tell you how to be compliant with them but sure will send you a scary letter when they find out something is off!
We help our clients get out of challenging tax situations or help them get set up right from the beginning. That way they can avoid most (if not all) of these problems down the road. Knowing what to do from the very start helps them navigate these challenges much better.
In reality, not everyone can hire a professional to set up your business when they are just starting. We met people who can’t afford to hire an accountant when just starting. We saw that there is a lack of resources to educate people just starting up.
To address this we wrote a book and developed an online course. The book is called “Audit Armor – Protect Your Growing Business from the IRS”. It is a quick read or listen (55 min on audible.com) written in an everyday language. This book is filled with tips and nuggets we learned over the past 14 years of working in the tax industry with small business owners. Our hope is that every small business owner reads this book and that it helps them reduce the fear around tax and IRS audits.
Our online course on Thinkific is called “Will My Business Make Enough to Support My Family?” This course is meant to help people who are starting a new business to create a condensed business plan and to project expected profits for the first year, and then to decide if it makes sense to move forward. It can also help people who already started a business too. At the end of the course, you should have pretty specific numbers around your projected income and expenses.
As always, we appreciate you sharing your insights and we’ve got a few more questions for you, but before we get to all of that can you take a minute to introduce yourself and give our readers some of your back background and context?
I grew up in a military family and moved a lot. Every time we moved to a new place, I liked going to the local mom and pop shops because they made me feel welcomed. They provided me comfort in a new town and I felt that they are the ones that added character to the town. So when I started a tax business 14 years ago, I wanted to work with them and jumped right in. Now, we are a mom and pop shop that helps other mom and pop shops. My wife and I ran our business together and it supports our family of four.
Almost all our clients are service-based mom and pop shops like ourselves. For all our clients, their business is the main source of income that they support their family with. We also work with rental property owners who have a W2 job because rental properties are businesses too. Our clients also have one decision maker in the business that is the owner or the owner and the spouse if a married couple owns the business. The reason why working with businesses with one decision maker is important to us is that it helps us help our clients achieve their goals more effectively. When there are two decision makers from two separate households, one partner may want to maximize the tax savings in the year the other partner plans to purchase a house and needs to show higher income on your tax return.
We started MFI Works (formerly known as Maki Financial Inc) in 2008 providing tax and accounting services for service based small business owners. Soon we realized many of us have similar challenges that we didn’t have when we were employees. As mentioned earlier, self-employed folks have the highest tax rate and face challenges in getting loans. We saw people’s financial struggles that caused them serious issues to their mental and physical health, relationships, and marriages. We get these problems because we experience the same set of problems as small business owners ourselves.
We help our fellow small business owners navigate these challenges and achieve their goals such as home buying or growing their businesses. The tax savings we create for our clients allow them to contribute more to their retirement or to reinvest in their business. We help them optimizing their tax situation while being audit proof. While nobody wants to overpay in taxes, you don’t want to trigger an IRS audit either.
We also help small business owners purchase their first home and investment properties. We solve problems around home buying by strategizing ahead of time. Recently, we had multiple clients who bought a house said to us “Wow, I didn’t think we could buy a house this quickly. This wouldn’t have happened without working with you”. This is a kind of moment that makes us proud and gives us energy to keep serving our clients. We love seeing our work impact other people’s lives positively.
With my mortgage originator license in addition to a tax license and an MBA, we can create a robust plan for real estate purchases for our clients.
Over the past decade, we worked hard to build a strong network with quality professionals who are equipped to solve tax problems for our clients. Now it is paying off because we are more and more becoming a one-stop shop for small business owners for their tax and business needs. For example, our firm does not represent IRS audits but we can connect you to an IRS audit specialist if necessary. If you want to purchase a business, we can connect you with an expert in that area. In these cases, we act as a quarter back to handle the your needs to the quality professionals who do a great job!
We want small business owners not feel like underdogs. We want them to navigate their tax and finance situations well, to have a peace of mind around their tax matters, to enjoy their business, and to thrive. These life components are priceless. And us small business owners deserve them too!
In 2020, we started a new brand called Audit Armor to help people who are just starting a new business. As you may know, many people started a business during the pandemic. We want them to be successful! The purpose of Audit Armor is to provide information and tools that help people to avoid typical pitfalls that small business owners encounter. We have a book, an online course, and Tiktok account that provide useful information for small business owners.
Oh, what sets us apart from other tax firms? Last but not least, I wrote a song dedicated to small business owners! My first major was Classical Guitar and Music Performance. Although I became a tax guy, I still love writing songs and playing music. The song is called “You are my champion” and is for you who wake up every morning to serve the community despite all the setbacks you face.
Has your business ever had a near-death moment? Would you mind sharing the story?
The first two years or so I barely scraped by paying the bills. It haunted me whenever the 1st of the month rolled around. Many times I was unsure about where the new business would come from. But it came, somehow.
Because of this early experience I like to tell people how many months I’ve been in business. The years don’t matter nearly as much as surviving month-to-month, and then setting actionable targets each month.
The anxiety of those first few years has dampened quite a bit as I’ve learned to cope with it. But each time we want to grow, and take on helpers to do so, those old worries crop up. Talking them out with trusted folks is what I’ve learned to do. Turns out they have the same concerns too!
What’s been the best source of new clients for you?
Until quite recently, all our prospects came through referrals from our existing clients. For us, happy clients are the best source of more clients! Having said that, we opened a TikTok account in December 2021. It’s been working as a good advertising platform for us.
Contact Info:
- Website: https://auditarmor.com/
- Instagram: https://www.instagram.com/audit_armor/
- Other: Tiktok: https://www.tiktok.com/@auditarmor Online course; https://auditarmor.thinkific.com/order?ct=09a83cbb-68aa-495b-95b2-537f90bfb48a Audit Armor Audio Book: https://www.audible.com/pd/Audit-Armor-Basic-Training-Manual-Protect-Your-Growing-Business-from-the-IRS-Audiobook/B09L9QSN63?qid=1639697224&sr=1-1&ref=a_search_c3_lProduct_1_1&pf_rd_p=83218cca-c308-412f-bfcf-90198b687a2f&pf_rd_r=ABWEQ9VG0CM7ZSVB3B8E You are My Champion – Motivational Song: https://open.spotify.com/album/4BDxrlsHjZAykxf64dseZx eBook: https://www.amazon.com/Audit-Armor-Basic-Training-Manual-ebook/dp/B093Y6XG55/ref=sr_1_6?dchild=1&keywords=audit+armor+book&qid=1634063231&sr=8-6