Tax Tips For The Self-Employed Massage Therapist
Tax Tips For The Self-Employed Massage Therapist
We all know tax preparation for massage practitioners can be complex. Here are some tax tips for self-employed massage therapists to make filing simpler. Above all, you may find it easier to file your own taxes or seek a tax professional for assistance.
Licensed massage therapists (LMT’s) are either employed by a company or self-employed contractors and are responsible for withholding. Being self-employed you need to send in quarterly withholding payments for Social Security, Medicare, and income tax on wages received.
Read on to discover ways to make your massage business run better and handle you’re accounting effortlessly. In this article, we will offer some tax tips for the self-employed massage therapist.
Do Self-Employed Massage Therapist Have To File Taxes?
If you are a self-employed LMT and receive payments directly from clients, or an independent contractor and receive an IRS form 1099 at the end of the year, you will need to file yearly and quarterly withholding taxes. In addition, as a self-employed LMT, hopefully you have been submitting estimated taxes quarterly on the IRS 1040-ES form.
At the end of the year you will file taxes on a 1040 or 1040-EZ form, as well as, include Schedule SE form to calculate your net earnings. Also you will need to include a Schedule C Form Profit and Loss worksheet.
Schedule C allows you to list your deductions such as professional dues, advertising, office supplies, etc. If you own a home, rental property, or have investments, you may need to complete additional tax forms to satisfy the IRS and yourself.
In addition, if you file your taxes alone, when in doubt you should seek the advice of a tax professional. Furthermore, to learn more, the American Massage Therapy Association offers a 3 hour credit continuing education course called “Taking Care Of Your Taxes” to take the pain out of filing taxes.
Why Should LMT’s Keep Accurate Records?
Therapists should keep records and all receipts to make sure they are getting the most net income after taxes. Because tax code changes year to year, do not assume that you do not need to report all income or do not need to keep certain receipts.
Let the tax professional or a do it yourself tax program help you decide what deductions can help your tax situation! And remember to keep track and report bonuses, tips and other income.
How To File Your Taxes For Free As A Massage Therapist
First of all, if you qualify you can get your federal tax preparation for free. With the IRS Free File Program for self-employed persons, you can get your taxes prepared on the house! Whether you do your own taxes or hire a tax professional, you want to get the biggest refund or owe the least amount of tax allowed.
Most noteworthy, almost all online and retail location tax preparation companies utilize some form of the IRS Free File Program. Even if they entice you to use their service for little to no cost, they provide professional help and assistance. Likewise, it is always better to file electronically to get a refund direct-deposited into your bank account to avoid delays.
How To Prepare Your Taxes As A LMT By The April 15th Deadline
First of all, when filing taxes, the LMT will have to file Federal and state taxes depending on what state they practice. What a better career than being a self-employed Licensed Massage Therapist in Seattle, Washington and elsewhere around the country that has no personal income tax!
Note: Washington is one of the few States in the U.S. that has no income tax, however, you still must file a Federal Return.
What are other states that have no personal income tax? In addition Alaska, Florida, Nevada, South Dakota, Texas, and Wyoming are states with no personal income tax. As always, get professional advice and use a tax software or company that will help protect you if you ever get audited.
There are many massage schools and instructors that can help you learn massage, as well as, the particulars of running your own massage practice. Every year, rules apply for what is allowable and not for tax deductions. Most important, keep informed when running your practice and enjoy being independent!
Below Are The ways To Get Your Taxes Filed By A Reputable Company
Companies with nationwide retail locations:
H&R Block – H&R Block has been filing taxes for Americans for over 60 years and has thousands of retail locations, as well as, lets you file online. You can also get a reduced rate with H&R Block and file federal taxes for free if eligible and your income is less than the amount the IRS Free File Program specifies.
Jackson Hewitt – Jackson Hewitt is another professional tax preparer that has retail locations across the U.S. Like other tax companies, Jackson Hewitt offers professional accounting and guarantees to provide assistance in case you are audited by the IRS.
Liberty Tax – Their offices are open year round to serve tax filers needs and offer savings on tax preparation. In addition, if you have them prepare your taxes in their store, they offer a guarantee to assist you in case of an IRS audit. They also have an online portal to file your taxes yourself and have a premium fee for those who want need professional advice and assistance.
Online tax software companies:
Credit Karma – With over 60 million members, Credit Karma started as an online credit monitoring service and now offers a free premium tax filing service. They 100% guarantee the accuracy of their calculations along with a free Audit Defense and 100 % guarantee you’ll receive the refund you deserve.
FreeTaxUSA – FreeTaxUSA.com is an IRS-Approved E-File Provider that offers online software for free federal filing and a small fee for preparing state taxes. In addition, they offer Audit Assist, Priority Support, and Amended returns for a nominal fee.
TurboTax – This DIY online and offline software is touted as one of the best American tax preparation software packages and has been around since the mid 1980’s. TurboTax was acquired by Intuit-Quickbooks and offers all the guarantees that protect the consumer from tax discrepancies.
Moreover, TurboTax along with their Quickbooks for self-employed IOS/Android app, allows a massage therapist use their phone as an accountant. The app records and tracks every aspect of their business accounting daily, weekly, monthly, quarterly, and yearly and inputs the data automatically into the TurboTax program.
TaxAct – Also a provider of online tax preparation solutions for the small business and self-employed. Founded in 1998, TaxAct offer step-by-step guidance to help tax filers complete their taxes accurately.
When Should The Massage Therapist File Their Taxes?
As a self-employed independent contractor you are responsible for filing taxes yearly and make estimated quarterly payments. The best way to avoid penalties and late fees is to make quarterly payments through the IRS EFTPS system. Consequently, estimated tax is the method used to pay Social Security, Medicare, and income tax on earnings.
According to the IRS for 2019, for income received Jan. 1st through March 31st the estimated tax is due April 15. Incomes made April 1st-May 31st, estimated tax is due June 17th, June 1st-Aug 31st payment is due Sept. 16th. And income received Sept. 1st through Dec. 31, the estimated tax is due Jan. 15th 2020.
Are you still confused? Do you really think that tax filling is complex? If yes, then you may want to hire a professional to file your taxes. There are many ways to file your taxes from retail store locations to online software assisted programs as mentioned previously.
Ways To Prepare For Tax Time As A Licensed Massage Therapist
Here are important ways to prepare for tax time as a licensed massage therapist. Remember, always run your business for profit and be accountable to the IRS.
Either you work as an employee and receive a W9 paycheck, or you work as a freelancer or independent contractor and receive 1099 statements as, well as, cash as a practitioner. Likewise, you want your freedom from working for someone else, however, along with self-employed freedom comes responsibility.
Over the course of your business you should be able to add up all your monies for being an independent contractor for your sessions and massage therapist labor.
As a licensed massage therapist you may have chosen to go into private practice, become an independent contractor, be an employee or do a little of each over the past year. No matter what it is you have chosen, you must deal with paying taxes.
LMT’s Should Keep All Records In A Safe Place
You should start your preparation by keeping all your records accurate and in a safe place. In other words, you will have to spend excessive time to collecting information for filing.
Make sure that you have accurate and complete information such as all receipts for cash, 1099’s, checking, & charges. In addition you also need to keep and organize all expenses for business deductions.
For better accuracy, you should separate your personal and business expense accounts. Use a different credit card for your business and personal checking accounts. Keep all the records including the dates of all transactions.
Make all the processes simple and straightforward to avoid any confusion.
Also, your state tax department and Internal Revenue Service (IRS) will expect you to keep all the financial records and will ask to inspect those records in the event of an audit.
In addition, you need to maintain an inventory of all the products, tools, furniture, and accessories. It is suggested to take photos of expensive items to protect your interest in an unpredictable situation.
How To Track Business Expenses As A LMT
For tax preparation, it is vital to track your expenses correctly for deductions. Document everything and use written evidence, notes, receipts, and an appointment book. You should enter all the required information such as the time and amount of the transaction and the name of the session.
Use a cell phone application to capture transactions. As mentioned earlier, there are IOS/Android tax apps to help you organize and streamline your business.
What Are Considered Deductions For Massage Therapists?
For more on figuring expenses for vehicle, travel, entertainment and gifts refer to IRS Publication 463. The operating cost will include almost all the expenses such as utilities, rent, massage supplies, promotional, postage, and advertising expenses.
Review IRS Publication 334 a Tax Guide for Small Business for more information on ordinary and necessary business expenses. For example, if you buy a towel or massage table for your therapist practice, you should be allowed to deduct the full cost.
List Of Deductions For The Self-Employed Massage Therapist
Furthermore, it is important to realize that business expenses for the licensed massage therapist (LMT) may be deducted only if they are “ordinary and necessary” for massage and bodywork. You can deduct those expenses depending on the documentation and intent. Intent means the purpose and use of buying a product or service.
The following list does not mean that it is necessarily eligible as a business tax deduction. Consult with your accountant, tax advisor, or the IRS on all questions about appropriate deductions.
- office supplies
- massage supplies
- cost of acquiring merchandise
- magazine subscriptions
- fees for consultants
- credit card fees
- bank account fees
- home office expenses
- music for client sessions
- massage table
- massage chair
- hot towel cabinet
- chairs furniture
- massage stones
- local ads & Google Ads
- stone heater
- cabinets for storage
- massage table sheets
- essential oils
- lamps, pillows, towels, or blankets
- scrubs or other clothes for work
- continuing education
- business conference fees
- business books or references
- association dues
- health insurance
- dental insurance
- long term care insurance
- wages or fees paid
- telephone charges
- property tax
- sales tax
- business tax
- license fees
- depreciation on fixed assets
- rent/mortgage payments
- graphic design costs
- utilities for office space
- linens and/or cleaning service
- gifts to clients
- business travel
- web hosting
- business mileage
- business meals
- domain name renewal
- cell phone
- homeowners insurance bills
- landline telephone bills
- pepper spray or other self-defense products
- laundry detergent, fabric softener, and bleach
- cleaning supplies
- paper towels and toilet paper
- tax preparation fees
- hand soap sanitizers
- light bulbs
- face rest covers
- fans, heaters, trash cans, tissues
- lotion, mints for clients
- vehicle repairs, insurance, payments, maintenance, registration, mileage
Home Office Tax Deductions-Working At Home
If you are using a part of your home as your business, then it can be eligible for home-office deductions. You can use a section or a room for your business. The deduction amount will depend on the area of your home that you are using specifically for your business.
If you are claiming the deduction, then make sure that you are using that area regularly for the management or administrative work of your business. Even if you are not using that space for massage, it will not cause a problem in the event that space is used to perform different types of business activities. Activities such as contacting your clients, preparing your records, paying bills, making appointments, updating your website, and entering your financial records.
When it comes to tax code and deductions for a home office, realize that the IRS makes changes almost yearly to all deductions including home offices. Best bet is to be prepared for an audit by providing pictures of your home office, a layout diagram, and square foot measurements. The simplest accountability for home office tax code for the massage therapists is to consult a professional.
The going figure for home office deduction is $5 per square foot and a maximum of 300 feet for home office write off. For more information review IRS Publication 587 and IRS Form 8829 on deducting home expenses.
Retirement And Savings Accounts For LMT’s
Why work countless hours as a LMT and have no retirement? You are working for yourself as a bonus, why not start tax deductible savings now. There are many ways to saving as a LMT. Self-employed retirement plans and contributions to SEP-IRAs, Simple IRA’s, and Sole 401K’s can make your year-end tax bill more enjoyable and less painful!
In Conclusion, Do Not Hesitate To Get Professional Advice
If you are not comfortable with tax preparation and find it hard to understand the details, it is better to use the help of a professional accountant. Moreover, if you are just getting started, it is highly recommended that consult a professional about running your own massage therapy business. They can help with the right solution and keep you on track for years to come. In the beginning of your career, you should not scrimp on tax preparation. A tax professional will provide you the confidence and money saving tax tips for your massage therapy practice and success.