This interview features Lauren Myrick, Founder and CEO Found. Myrick has raised over $75.2M from leading VCs including Sequoia Capital, Founders Fund, and Lightspeed Venture Partners to build a higher banking system for freelancers and independent employees.
Image Source: Courtesy of Found
Where did the idea for Found come from?
I’ve seen the frustrations of small business owners firsthand in my personal and skilled life. Personally, my sister is a yoga studio owner and self-employed fitness instructor, and I’ve seen her struggle to navigate traditional financial and business management tools. Professionally, when I used to be GM of Payroll at Square, I saw how complicated, painful, and stressful taxes may be for small business owners.
Both of those perspectives inspired me to proceed to explore the financial management challenges and tools that self-employed business owners face. Connor Dunn, my co-founder, and I started talking to relations, friends, and other self-employed business owners to grasp their challenges. Many people don’t realize that managing funds as a self-employed person is very different than managing them as a W-2 worker. There are different tax requirements and forms, and you have to work out how much you owe in taxes. We also noticed a common thread that folks start their very own businesses because they need freedom, flexibility, and creative control—to not grow to be their very own accountants.
Through these conversations and additional research, we realized two vital things. First, we could provide tremendous value to those self-employed individuals by giving them a set of tools to administer their funds—something we felt we were uniquely equipped to do given our experience at Square. Second, the self-employed population in America is large and growing: About 60 million Americans are self-employed todayand self-employment will soon surpass traditional employment to grow to be the majority of the American workforce. It wasn’t long after those conversations that we began Found.
Why is filing taxes one of the most difficult financial tasks for freelancers?
Unlike W-2 employees, business owners and freelancers don’t have income taxes proactively withheld from their paychecks — and are expected to calculate and report their very own expected taxes throughout the yr. They also often act as their very own “finance department,” an area in which most have little or no expertise. This typically involves separating business and personal funds, accurately calculating and proactively saving the correct quantity for taxes, and tracking financial deadlines, expenses, and fines.
In addition, tax laws are consistently changing and complicated by each state and federal policies. These laws are also starting to control how we bill, pay, and track payments across the apps and platforms all of us interact with. For example, thousands and thousands of freelancers, temps, solopreneurs, and gig employees got a big sigh of relief in December 2022 when the IRS delayed a latest tax reporting requirement for third-party payment platforms like Venmo, Cash App, and PayPal, but that was only a temporary fix.
Keeping your funds in order while maintaining with changing regulations is a lot to handle, and the tools available to self-employed people are inclined to be expensive and inconsistent. For this reason, and the ever-present risk of falling behind on taxes at the end of the yr, we frequently hear that filing taxes is one of the most stressful parts of being self-employed.
How does this yr’s Found collaboration with Column Tax address this issue?
Found directly helps self-employed professionals save and pay quarterly taxes. Found can routinely estimate and put aside money for taxes for our users based on their income. We may help our users easily categorize expenses and provide guidance on what can and can’t be deducted as write-offs.
Partnership found with Column tax to take these advantages a step further and provide tax filing services to its users, especially those filing Schedule C taxes. Column’s technology is integrated with Found’s suite of economic tools for independent employees. With Column Tax, Found Plus subscribers can access free tax filing services with an annual subscription.
Filing returns through Column Tax is already about 1.5 to 2 times faster than standard do-it-yourself tax return software providers, and could also be even faster for some filers, equivalent to independent employees who often have more complex tax returns. Because Column Tax can pull data directly from Found accounts, this partnership could help Found users save a lot of time when entering financial data during the filing process. The IRS has estimated that self-employed individuals spend 24 hours on taxes per yr! And pay $560.
Do you have any helpful suggestions for self-employed people and those with extra income who need to file their tax return without any hassle?
First, it’s critical to maintain your income sources in order. Keep track of Forms 1099-NEC from clients and Forms 1099-K from payment processors like PayPal to avoid last-minute scrambles. Second, make sure you retain your small business and personal funds separate, ideally by keeping separate bank accounts, which is able to help simplify year-end reporting. You also need to keep close track of all of your business-related expenses, as these may be deductible expenses and significantly reduce your taxable income. This can include expenses for equipment, supplies, home office costs, phone bills, and any other supplies that you must run your small business.
Finally, it’s crucial to grasp your responsibility to pay self-employment taxes in addition to your regular income tax. To make sure you have enough money to cover your tax bill, including estimated tax payments, allocate 20% to 30% of your self-employment income to a separate savings account put aside just for taxes. If you expect to owe $1,000 or more in federal taxes for the yr, make quarterly estimated tax payments to avoid underpayment penalties. Budgeting properly and making your tax payments on time can protect you from potential financial problems later on.
What are the most typical mistakes people make when filing their tax returns, especially in the context of retirement?
When we surveyed Found customers last yr, we discovered that only 22% of self-employed people know how one can maximize potential deductions and write-offs, meaning they miss out on a probability to lower their taxable income — and due to this fact their tax bill. Some tax deductions, like buying a latest laptop for work or paying for an accountant, are more obvious, but there are so many others.
For example, saving for retirement is something that anyone—whether you’re a traditional W-2 worker or a full-time freelancer—can do for their future. And if you’re self-employed, you’ll be able to probably deduct contributions to several forms of retirement plans, equivalent to traditional IRAs, SEP IRAs, and Solo 401(k)s. Some of those retirement accounts can lower your taxable income by deferring your tax bill until you withdraw the money in retirement. Not being aware of those advantages can result in missed tax-saving opportunities.