Get your practice in shape Its Tax Time for Massage Therapists - - PowerPoint PPT Presentation

Get your practice in shape

It’s Tax Time for Massage Therapists

Associated Bodywork & Massage Professionals

Melanie Gourley ABMP School Liaison

Anne Williams, ABMP Director of Education

H&R Block Master Tax Advisor

Jan Catron

Session Objectives

• Identify basic methods to keep accurate records.
• Discuss guidelines for tax filing.
• Understand allowable business deductions.
• Review forms for different business structures.
• Provide resources for tax preparation.

Taxes Defined

• A tax is a compulsory payment for which no specific

benefit is received in return. ~ U.S. Treasury

Disclaimer: Tax laws are complex and constantly changing. Each person’s tax situation is unique. This webinar is designed to provide general information about tax related information pertinent to a massage therapist.

References

• Preparing for Tax Time by Lisa Bakewell
• Massage & Bodywork Magazine
• IRS Publication 334, Tax Guide for Small Businesses
• Small Time Operator by Bernard Kamoroff
• Bell Springs Publishing, CA. USA
• Business Mastery by Cherie Sohnen-Moe
• Sohnen-Moe Associates, AZ. USA

Preparation for Tax Time

• Keep accurate records
• Preparing records for tax filing
• Understand allowable deductions
• Know which forms to file
• Find help when you need it

IRS Publication 334 Tax Guide for Small Businesses

Tax Terms to Know

• As a small business you may be required to pay:
• Income tax
• Federal
• State
• Self-employment tax
• Employment tax
• Sales tax

IRS Publication 505, Tax Withholding and Estimated Tax IRS Publication 15, 15A, Employer’s Tax Guide, and Employer’s Supplemental Tax Guide

Keep Accurate Records Overview

• Business checking account
• Recording transactions

(money in / money out)

• Keep receipts
• Keep records

Business Checking Account

• Separate from personal

account

• Deposit all income from

massage

• Pay all expenses for massage

business

• Reconcile monthly with

business records

Record Transactions

• Record money coming in and money going out

Date Payment Name Description Amount 1/23/09 Check 2189 John Doe 1 hr. Sw. M / 1 GC $120.00 1/23/09 Visa 8766 Jane Doe 90 min Sw. M $80.00 1/23/09 Visa 5678 Sue Doe Bath salts, candle, lotion $37.00 Date Payment Name Description Amount 1/23/09 Check 3221 Comcast Internet $49.00 1/23/09 Check 3222 Office Max Office supplies $92.00 1/23/09 Check 3223

• M. Supply

Cream, oil, disinfectant $87.00

Keep Receipts

• Keep every receipt
• Purchases
• Expenses
• Store in the same order as ledger
• Note missing receipts
• Reconcile at the end of the month

Keep Records

• Six years
• Some forever
• Storage
• Safety deposit box
• Fireproof filing cabinet

Prepare Records for Taxes

• Gross Receipts
• Total amount paid for massage sessions (include tips)
• Total amount of products sold
• Total amount of fees for other services
• Business Expenses
• The costs to run your business for the year

Allowable Deductions

• Allowable deductions include:
• Common business deductions
• Retirement savings
• Writing off a home office
• Deducting the use of a car
• Business expenses must be ordinary and necessary

• Marketing expenses
• Books and magazines
• Continuing education
• Insurance and dues
• Home office
• Mileage
• Laundry services
• Cleaning expenses
• Bank fees
• Equipment rental fees
• Legal services
• Rent
• Loan interest
• Credit card interest
• Massage supplies
• Business related travel
• Utilities
• Postage
• Licenses / permits
• Accounting

Sorting Business Expenses

• Ordinary and necessary
• Personal, family, living not

deductible

• Exception – partly

business / partly personal

• IRS Publication 535,

Business Expenses

Retirement Savings are Tax Deductible

• Saving for retirement =

significant tax advantages

• Contributions tax deductable
• Not taxed until distributed
• Money grows tax-free
• SEP IRA
• 401k
• Defined Benefit

Plan

• Simple IRA

Writing Off a Home Office

• Deduct a portion of home expenses related to

business:

• Mortgage interest
• Insurance
• Utilities
• Repairs
• Depreciation
• Business part of home

must be used exclusively for business

• Must be principle part
• f business

Deducting Use of a Car

• Deduct car expenses:
• Depreciation
• Lease payments
• Gas and oil
• Ties
• Repairs
• Tune-ups
• Insurance
• Registration fees
• Standard mileage rate
• 50.5 cents per mile
• 1/1/08 – 6/30/08
• 58.5 cents per mile
• 7/1/08-12/31/08
• Divide business use from

personal use

IRS Publication 463 (Travel, Entertainment, Gift, and Car Expenses)

Non-Deductible Expenses

• Business expenses not

“ordinary and necessary”

• Federal income tax and tax

penalties

• Fines or penalties for

violation of the law

• Payments to yourself
• Loan repayments
• Clothing, unless it is a

uniform used exclusively for work and unsuitable for street wear

• Regular commuting

expenses

• Some start-up expenses
• Some types of club dues

Knowing Which Forms to File

• Sole Proprietors
• Partnerships and LLCs
• Corporations
• Employer’s Forms

Sole Proprietors

• Schedule SE: Self-Employment Tax
• Schedule C: Profit or Loss from Business (Sole Proprietorship)
• Form 1040: U.S. Individual Income Tax Return
• Form 1040 ES: Estimated Tax for Individuals
• Quarterly – if you will owe taxes

Self-Employment Tax

• Earnings $400 or more
• 15.3%
• 12.4% Social security
• 2.9% Medicare
• Deduct half SE tax in

figuring adjusted gross income.

Schedule C – Profit or Loss from Business (Sole Proprietorship)

• Income
• Expenses
• Costs of Goods Sold
• Information on use of Vehicle

Costs of Good Sold

• Methods
• Change in quantities,

costs, valuations

• Inventory beginning of

the year

• Purchases
• Labor
• Materials and supplies
• Other costs
• Inventory at the end of

the year

Partnerships and LLC’s

• Form 1065: U.S. Partnership Return of Income
• Form 1065 K-1: Partner’s Share of Income,

Credits, Deductions, etc.

• Form 1040: U.S. Individual Income Tax Return

Corporations

• Form 1120: U.S. Corporation Income Tax Return
• Or short version, 1120 A
• Form 8109: Federal Tax Deposit Coupon
• Quarterly estimated tax payment

Resources for Employers

• Form 941: Employer’s

Quarterly Federal Tax Return

• Form W-2: Wage and Tax

Statement

• Form W-3: Transmittal of

Wage and Tax Statement

• Form 940: Employer’s Annual

Federal Unemployment Tax Return (FUTA)

• Form 1099: Miscellaneous

Income

• Form 1096: Annual Summary

and Transmittal of U.S. Information Returns

Realities of Taxes

• Filing date
• April 15, 2009
• Penalties
• Failure to file
• Failure to pay
• Negligence
• Fraud

Resources: Tax Preparation

• Discounted tax

preparation fees to ABMP members

• www.hrblock.com/offer

s/abmp.

• www.irs.gov

Resources ABMP

• www.abmp.com
• Membership section
• BizFit Tool Kit for Tax Time
• Archived webinar

Summary

• Identified basic methods to keep accurate records.
• Discussed guidelines for tax filing.
• Reviewed allowable business deductions.
• Reviewed the forms for different business structures.
• Provided resources for tax preparation.

Questions for the H&R Block Master Tax Advisor

Jan Catron