Tax Preparation for Massage Therapists
Tax preparation for massage therapists is an important task that should be included yearly, as well as, daily in one’s massage business. Massage therapy is practiced all over the world as an art of healing ailments since ancient times. In most states, a licensed massage therapist, whether self-employed or as a full-time or part-time employee, receives income that is required to be taxed. So as per the income tax rules, a massage therapist is liable for filing their tax return yearly after making eligible deductions as per tax code.
Here are some massage therapist tax preparation tips required to file a tax return:
Tax preparation tips for massage therapists
Keeping good records: A massage therapist should spend some time daily and throughout the year to keep his records accurately ready as they are required while filing the year’s tax return. These records can help you in assessing your financial position easily and quickly, as well as, to make certain adjustments as required by law. In order to maintain these records you will have to keep your personal and business expenses separate.
It should also include the details of your credit card and checking account related to your business, with the date and amounts of all transactions. These records will allow you not only to assess your financial standing but also in the case an audit is conducted by the Internal Revenue Service, as well as, the tax department of the state income is received. As an example, the state of Washington’s tax filing procedures is similar to other states requirements which can be found here.
What comes under income and expenditure?
When it comes to income, most massage therapist practice as self-employed sole proprietors or independent contractors and accept income on a cash basis or as a 1099 for tax filing. Self-employed individuals generally must pay a self-employment tax, as well as, an income tax and file a yearly return and pay estimated taxes on a quarterly basis.
Therapists usually figure net profit and loss from their business by subtracting business expenses from business income. You can avoid such complications and further repercussions by keeping your records well maintained on a daily, monthly, quarterly, and yearly basis.
The costs you incur in the daily operation of your business includes utilities, rent, supplies, promotions, advertisements etc., and come under the head of expenses. However you can only claim these expenses on your tax return only if you have relevant documents and intent to support them.
The way you use the things purchased at your business comes under the head of intent. For instance, you have bought a towel, and if you use it for your massage therapy business only, then deduct its full cost on the return. But if you are using it at your home also, then it will be treated as your personal spending and only a relevant amount can be deducted in the tax return.
Other deductible business expenses
Massage therapists claiming deductions for certain business expenses under Schedule C, the IRS requires some additional information about them. Some basic rules in this regard may include:
Travel expenses: The cost of travelling and staying away from the area of your tax home instead of your residence for a day or more can be deducted on your return. But to support your claim you will have to maintain a calendar or datebook and keep receipts recorded.
Entertainment expenses: The IRS does not consider meal expenses as lavish or exaggerated as they are related to your business. But you will have to maintain receipts to support your tax claim for deduction.
Gifts: The IRS does not allow more than $25 to gift per person in a calendar year for deducting on the tax return. But if some incidental expenses like mailing and packaging costs are included, then you can deduct more than $25.
Car expenses: The cost of maintaining and operating a car used for business purposes can be deducted as standard mileage rate or actual expenses. You can also deduct business related portions of the car you have leased for business travelling away from your home.
Tax deductions while working at Home
If you are regularly using a part of your apartment or home exclusively as the main place to meet clients of your business then you are also eligible to claim some deductions on your home-office even if the area is not in a completely separate room in your home. However, to support your claim you will have to organize certain documents like the photo of the space you are using. It is necessary to prove your claim as its audit can be done after several years and you might have moved to some other place by that time.
If you are using a portion of a property for your business then your deductions can include part of the mortgage interest, tax of the property, insurance, utilities, and depreciation along with repair and maintenance, depending upon the percentage of property you are using. You can also deduct the cost of running your business like maintenance of financial records, paying bills, business licensing and fees, educational courses and materials, making appointments, as well as, upgrading your website etc. Furthermore, cell phone and internet access can be deducted as a percentage used in your business. Such deductions will lower the rate of your tax by reducing your taxable profit.
When to call a professional for tax preparation?
If you are comfortable with preparing your own taxes as a massage therapist then that is allowed, otherwise, you should call a tax professional to consult in this regard. You may also have to tackle some additional tax related complications depending upon the county or city you work. You can also incur some other complications in this regard.
When help is needed, you should call an experienced tax professional who handles tax cases of small businesses like massage therapy. Though it can add to your expenses, it will still help in saving lots of time and money required to pay penalties if you have filed a tax return improperly. A professional accountant can also help you in reducing your tax liability. Doing this will make sure you get your fair share of deductions and that you do not overpay the IRS.
Thus, by understanding the implications of tax preparation on various aspects of your massage therapist business and keeping good records. You can easily prepare and file your tax return in time and properly. It will also help you in making your business better by knowing your progress in the previous year.