Read my honest Collective S Corp review. I use this back-office tax platform to manage the accounting, bookkeeping, and taxes for my freelance business.
Disclosure: This site participates in affiliate programs. So you know, Copy Martin, LLC may earn some recompense from the companies mentioned in this here Collective S Corp review. Thought you should know that before reading!
Back in 2021, I was paying $5,000 every quarter toward estimated taxes. It was my first year as a full-time freelance writer and there was no guarantee I would hit my revenue goals each month. So I was paying based on what I reasonably thought I’d clear that year. At the end of the year, it looked like I’d hit my target revenue mark. I’d made all of my estimated tax payments to the IRS on time, too—$20,000 in total. Home free, right?
Sure, until I found out I still owed thousands on my 2021 tax return.
What My Business Looked Like Before Switching to Collective
Turns out, I wasn’t paying the right amount toward estimated taxes. Come to think of it, that’s not all I was doing wrong. Which isn’t surprising. I’m a writer, not a tax expert. Numbers elude me. I got a C in high school geometry before nearly failing algebra trig. Since I took my first freelance writing assignment back in 2010, it has been a whole lot of try, fail, refine, especially when it comes to accounting and taxes.
Started as a Sole Proprietorship
In 2018, I finally established my sole proprietorship in San Diego. Until 2020, that sole proprietorship was a side hustle—I took on various content writing and copywriting assignments on a freelance basis. Ultimately, my goal was to build this business up to a point where I could leave my corporate job, which I did in September 2020.
Hired Accountant to Handle Personal and Business Taxes Each Year
In terms of the numbers—i.e., revenue tracking, expenses, accounting, bookkeeping—I’m not going to lie: I didn’t know what the hell I was doing. I was wise enough to create separate accounts for my business and personal finances. I didn’t have many expenses to track, aside from a few subscriptions I needed to run my business (Upwork and Freshbooks, to name a few).
I did hire an accountant to handle my taxes every year (Golden Hill Tax Solutions). No complaints there. In fact, each sit-down with Ed was like a crash course in personal and business accounting.
Did My Best to Handle Taxes and Expenses On My Own
My process for paying myself and tracking businesses finances was informal, to say the least. Frankly, I spent a lot more time working and generating revenue than I did sorting my books out. Here’s the step-by-step process to give you an idea of how I did it before subscribing to Collective:
- Invoice clients through Freshbooks or Upwork
- Keep business revenue in a separate checking account
- Cut checks (owner’s draw) to transfer funds from business to personal checking
- Set aside money each month for estimated taxes
- Make quarterly estimated payments
- Dump all of my forms, receipts, and other material on Ed’s desk come tax time
- Hope I did it right
If it sounds messy, that’s because it was. For the first year, this system worked just fine—the IRS actually cut me a check after it was all said and done. Except that I was still working full time and freelance only accounted for 30-40% of my total annual income. Things would change when I went full-time and hit my first six-figure year.
Why I Decided to Let Collective Accounting Review My Business
Toward the end of 2021, I started looking into new options for accounting and bookkeeping. I came across the notion of switching to an S Corp—something I knew nothing about—with the potential to save me money on taxes each year. Then I discovered Collective, “the first online back-office platform designed for self-employed people.” Their program looked good, so I decided to schedule a call and have Collective accounting review my business.
How Does a Collective Tax Review Work?
After I filled out the form, a rep from Collective scheduled a Zoom call to see if my business qualified for their program. On that call and thereafter, I learned a few things about Collective that sealed the deal for me:
- An all-in-one platform for S Corp formation, accounting, taxes, bookkeeping, and compliance
- It’s for solopreneurs who make $80,000 or more each year
- Average member saves $9,000 in taxes annually
- Anytime access to the team if I have question or concerns
- Includes annual tax filings for my family and business
- Includes QuickBooks and Gusto for payroll
- Serves my state, California, along with: Arizona; Florida; Georgia; Massachusetts; Pennsylvania; Texas; Virginia; Utah; and Washington
How Much Does a Collective Membership Cost?
Currently, I pay $262/month for my Collective membership. According to the Collective pricing page, that monthly fee has increased to $269/month, or $2,748/year.
Honestly, the monthly fee did raise an eyebrow for me, at first. At the time, I wasn’t exactly chomping at the bit to pay hundreds of dollars a month for accounting and bookkeeping. However, the fee was tax deductible. If my math was correct, this fee would pay for itself within the first year.
Advantages of an S Corp vs. Sole Proprietorship
|When you file as a single-member LLC and S Corp tax election||When you file as a sole proprietorship|
|No self-employment tax on business profits||Pay the entire 15.3% self employment tax yourself|
|Pay less in taxes on taxable personal income||Profits or losses from the business “pass-through” to your personal tax return|
|Legal separation (S-Corp is liable)||Pay significantly more on taxable personal income|
|More options for retirement savings, health insurance, and reimbursements for expenses||Unlimited liability for business debts|
What I Like About My Collective Membership
Here’s what really stands out to me about my Collective membership, so far:
Self-Service Onboarding and Education
Customer service is important to me. Collective has a terrific onboarding and education process. Check out the company’s blog and help center to see what’s what—it’s a crash course in taxes and bookkeeping for freelancers.
LLC and S Corp Formation
If I were to go this route myself, I’d have trouble figuring it out. The Collective team handled nearly every aspect of forming my LLC and S Corp tax election, from filing licenses to ensuring compliance.
Accurate Estimated Tax Payments
My 2021 Q1 estimated payment as a sole proprietor was $5,000. In 2022, my Q1 estimated payment was $750, a $4250 difference. Assuming the trend holds, I’ll save around $10,000 on my 2022 estimated taxes. What’s more, the team reminds me to pay estimated taxes each quarter, including a recommended amount based on real-time accounting and bookkeeping for that quarter.
When I have a question about nearly anything—e.g., can I expense the damages to the Ferrari I crashed on a test drive?—I just send an email and a CPA responds within 24 hours. Honestly, the asynchronous nature of communications works for me and my daily schedule.
Expenses and Reimbursements
Each month, I fill out a monthly expenses reimbursement worksheet, then cut a check into a personal account based on that worksheet. All in all, my expense tracking has been much more efficient and accurate. And for the first time in my freelance writing career, I’m reimbursing myself for expenses the right way.
Two Potential Drawbacks of Collective
As with any service, not everyone has the same experience as I’ve had with Collective. I was poking around some online forums and saw some users point out three things that I’ve experienced myself.
It’s my first year as a member and the Collective team filed an extension for my 2021 tax return. As part of that process, I had to pay my estimated taxes up front. It was sudden and the amount was significant (in the thousands). Since then, the team has been rather quiet about the status of my return. It’s something I’ll definitely keep an eye on.
Communication is done entirely by email. When I’ve had questions, I write an email to a generic address. Later, I’ll receive a response from somebody working on my account. So far, the same CPA has responded to all of my queries, with a separate contact for issues related to my tax return. For me, the asynchronous communication works just fine, though I can understand why others might not like this.
Running payroll and taking distributions has been an adjustment. Whereas I could cut owner’s draws any time for any amount as a sole proprietor, I now run payroll twice a month based on my “reasonable salary.” I can take separate distributions, but have to be careful to avoid being penalized. As to the actual threshold for how much distribution I can take, the answers have been rather vague.
Hesitant About a Collective S Corp Review? Try it Free First
Overall, I’m pleased. So far. Once I’m through a full year with Collective, including next year’s tax return, I’ll come back and update this blog post with my experiences. But I do get it. When I was still working in-house while juggling the side hustle, forming an LLC with S Corp tax election way over my head. And I did need help with almost every aspect of the process.
If you struggle with estimated taxes for your business of one, an S Corp could work for you. As a general rule, if your solopreneurship generates more than $80,000 in revenue annually, there’s a good chance you’ll save some money going this route. The good news is you can use my promo code COPYMARTIN to get a free one-month trial of Collective.
Take it for a spin and see if this Collective tax review matches your experience. Speaking of your experiences, I’d love to hear from people who’ve used Collective. Love it? Hate it? Please feel free to share your own experiences with Collective in the comments section below.