Most massage therapists work for themselves, even if it’s just part time, which has implications for tax season and filing your return. The complexity of your tax return will depend on many things, including how you’ve structured your business: as a sole proprietor, an LLC, or a corporation. In any case, you’ll want to consult with an accountant – it max be an expense of a few hundred dollars, but a good accountant will pay for themselves by minimizing your income tax (not to mention the potential headaches from mistakes and mountains of paperwork).
You can be prepared for your meeting with an accountant by considering our 3 tips for tax season:
1. Keep All Of Your Receipts
This is something you should be doing all year long. Keeping a record of all the receipts for the purchases you make for your business will allow your accountant to help you figure out which items qualify as deductions.
The advantage of deductions (or write-offs) is that they reduce your overall income for tax purposes. For example, if you made $50,000 but report $5,000 in business expenses, you will be taxed on only $45,000 in income. In some cases, you may even drop to a lower tax bracket and therefore the percent of tax you pay is reduced as well.
Keep in mind that some deductions may be deducted at the full amount, while other deductions are partial or predetermined amounts. This is where the advice of an accountant can really be handy. Otherwise, you’ll want to reference government resources.
Below are a few categories of deductible expenses you’ll want to consider:
2. Factor In Your Home Expenses
Working from home is common for many massage therapists, especially those that are working for themselves part-time. Using your home to do business brings about another set of deductions. The first step is determining if your home does qualify as a ‘home office’. The criteria that you must meet varies by location, so it’s a good idea to check with your accountant or government agency on this. If your home does qualify as a place of business then you can look forward to some of these additional deductions:
Those that work out of their home may also work out of their clients’ homes. In which case, additional expenses may be eligible as deductions, such as fuel and car maintenance.
3. Learn About Sales Tax
In many places massage therapists need to collect and remit sales tax. The amounts and rules can vary widely between the different states and provinces. To avoid costly mistakes, make sure you fully understand the rules around collecting, remitting and keeping records of sales tax. You can do this by speaking with your accountant or reaching out to your local government agency. Some things you will need to be clear on are:
Keeping clear records all year and being educated and informed when it comes to the tax laws where you live makes tax time less scary. These tips should have the wheels in your head turning, helping you to see which areas you need your focus in addition to where you need more education.