Advice From Industry Experts
August 24, 2024
Navigating taxes in the massage therapy world just got easier. Our recent lunch & learn, "Massage Therapy Taxes & Bookkeeping Made Easy," brought the wisdom of tax expert TK Barlow right to you. Here’s how we’re making tax time less taxing.
This session, tailored for those following U.S. tax guidelines, was not just about learning; it was about transforming tedious tax tasks into a streamlined process. Ready to revisit the highlights and integrate these practices into your business?
Bookkeeping is foundational for massage therapists aiming for tax success. Meticulously tracking all income and expenses is essential. Whether through simple spreadsheets for starters or advancing to software, establishing a regular tracking routine ensures financial clarity and prevents disorganization.
TK recommends setting a regular time to update your books each week or month. Schedule it like any other appointment you keep. Each week, at this time, you review revenue and expenses. This will ensure you stay organized and understand how your business is doing financially.
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It’s essential to make bookkeeping a regular part of your routine. Bookkeeping for massage therapists include a record of every sale you make, as well as every purchase for your business. Creating a log of income and expenses will give a clear picture of the financial health of your business.
Software like Quickbooks or Xero can help you organize all your numbers into profit & loss reports, balance sheets, and more. Couple this with sales reports from ClinicSense, and you’ll never need a spreadsheet again. The software tracks and organizes all the numbers for you.
The reports created with accounting software correspond with the tax forms you must fill out for your business. So, when it’s time to file your taxes, all you have to do is transfer the numbers on your report to the numbers on your Schedule C form - or send your profit & loss report to your tax professional, and they’ll do it for you.
Managing taxes for your massage business might seem daunting, but here's a piece of advice to make it approachable: Your tax situation is a clear reflection of your bookkeeping practices. At its core, your taxes hinge on your income (all the sales you make) and your expenses, which you can deduct to decrease your taxable income. By keeping a meticulous record of these elements, you're not just staying organized; you're strategically lowering your tax bill.
Most massage businesses are structured as a sole-proprietorship or an LLC. With these business structures, earnings from your business are reported on your personal taxes. If your business is an S-corp or partnership, the business will be taxed separately from your personal income.
If you’re not sure what the best structure for your business is, contact an accountant or tax professional. According to TK Barlow, if your business is profiting more than $60k annually, it’s time to talk to a professional about the benefits of becoming an S-Corp.
Sole-proprietors and LLCs must file their taxes by April 15. S-corps and partnerships must file taxes by March 15. If your tax bill was more than $1,000 last year, you may be required to make estimated tax payments on a quarterly basis.
Tax deductions and credits are like financial bonuses from the tax system. Deductions lower your taxable income by accounting for certain expenses, effectively reducing the amount of income that's subject to tax. Credits, on the other hand, are dollar-for-dollar reductions in your actual tax bill, giving you a direct discount. Both serve as valuable tools to optimize your tax outcomes, making them essential elements in your tax planning arsenal.
As a massage therapist, you're entitled to deduct expenses that are both ordinary and necessary for your business. Tax deductions for massage therapists include the cost of supplies, subscriptions, advertising, rent, and utilities. These deductions are practical ways to manage your finances more efficiently, directly impacting your bottom line.
Yes, expenses related to continuing education and professional memberships for massage therapists are deductible. These investments in your professional development and networking are recognized as necessary for maintaining or improving your skills, thus eligible for tax deductions.
For tax purposes, differentiate business expenses from personal by considering if the expense is necessary and directly related to your business operations. Business deductions can't be lavish or extravagant; they must be justifiable and essential. Keep personal and business finances separate to ensure clarity in your massage therapy tax deductions.
Yes, there are tax advantages and deductions for making big purchases like equipment, notably through depreciation. If you spend more than $2,500 on an item, you have the option to depreciate it, meaning you can spread out the deduction over several years or take it all in one year. However, be aware of certain restrictions, particularly with depreciating vehicles and their maintenance and repairs.
Tax planning is essential for financial efficiency and long-term success in any business. It's not just about adhering to regulations; it's about understanding how different tax implications affect your business's bottom line. Through careful planning, you can ensure that you're making the most of every deduction and incentive available, ultimately safeguarding your profits and supporting the sustainability and growth of your business.
Tax planning is the strategic analysis and arrangement of your financial situation to minimize tax liability within legal bounds. It involves making informed decisions on income, investments, and expenses to ensure tax efficiency, ultimately saving money and supporting your financial goals.
Any strategizing that happens before December 31 is considered tax planning. Tax planning is a good business practice. If you’re strategizing ways to lower your tax bill after the year's over that’s tax evasion, which is a crime. So, start planning ways to minimize tax liability before December 31.
TK recommends scheduling a tax planning meeting for your business in June or July. This mid-year review provides a clear snapshot of your business's growth and leaves ample time to devise and implement an effective tax strategy, ensuring financial health and compliance.
Self-employed massage therapists can incorporate retirement planning options like SEP IRAs, Solo 401(k)s, and SIMPLE IRAs into their tax strategy as part of a comprehensive self-employed benefits package. These options not only enhance retirement savings but also offer tax advantages, aligning with effective financial planning.
When expanding your practice or hiring additional staff, it’s important to understand payroll obligations. For W-2 employees, you'll need to withhold taxes, unlike with 1099 contractors, where withholding isn't required. Strategically navigating these differences is key to managing your tax responsibilities efficiently.
Heading into tax season, the effort you've put into keeping your bookkeeping in order truly pays off. With diligent financial tracking, the process of preparing your taxes can be straightforward and manageable. With consistent record-keeping throughout the year, you can transform tax time from a source of stress into just another step in managing a successful practice.
Filing your taxes is simple when you have the right information organized for your accountant or tax professional. Here’s a list of information they’ll need from you:
The biggest mistake business owners make is not staying on top of their bookkeeping. If your bookkeeping goes by the wayside, it’s going to be challenging to tackle your taxes. Use software like ClinicSense to track all your sales effortlessly and use accounting software to make bookkeeping fast and efficient.
TK says you can do your taxes yourself, but there’s a lot to learn. Finding the right resources and getting advice from a professional early on can save you a lot down the road. You can learn more about TK, and how she supports wellness providers at www.TKBarlow.com
For 14 days
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