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

Anne Williams, Melanie Gourley ABMP Director of Education ABMP School Liaison

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 IRS Publication 334  Understand allowable deductions Tax Guide for Small Businesses  Know which forms to file  Find help when you need it

Tax Terms to Know  As a small business you may be required to pay:  Income tax  Federal  State IRS Publication 505, Tax Withholding and Estimated Tax  Self-employment tax IRS Publication 15, 15A,  Employment tax Employer’s Tax Guide, and Employer’s Supplemental Tax Guide  Sales tax

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  Legal services  Books and magazines  Rent  Continuing education  Loan interest  Insurance and dues  Credit card interest  Home office  Massage supplies  Mileage  Business related travel  Laundry services  Utilities  Cleaning expenses  Postage  Bank fees  Licenses / permits  Equipment rental fees  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 =  SEP IRA significant tax advantages  401k  Contributions tax deductable  Defined Benefit  Not taxed until distributed Plan  Money grows tax-free  Simple IRA

Writing Off a Home Office  Deduct a portion of home expenses related to business:  Business part of home  Mortgage interest must be used  Insurance exclusively for business  Utilities  Must be principle part  Repairs of business  Depreciation

Deducting Use of a Car  Deduct car expenses:  Standard mileage rate  Depreciation  50.5 cents per mile  1/1/08 – 6/30/08  Lease payments  58.5 cents per mile  Gas and oil  7/1/08-12/31/08  Ties  Repairs  Divide business use from  Tune-ups personal use  Insurance  Registration fees IRS Publication 463 (Travel, Entertainment, Gift, and Car Expenses)

Non-Deductible Expenses  Business expenses not  Clothing, unless it is a “ordinary and necessary” uniform used exclusively for work and unsuitable for  Federal income tax and tax street wear penalties  Regular commuting  Fines or penalties for expenses violation of the law  Some start-up expenses  Payments to yourself  Loan repayments  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  Labor  Change in quantities,  Materials and supplies costs, valuations  Other costs  Inventory beginning of  Inventory at the end of the year the year  Purchases

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  Form 940: Employer’s Annual Quarterly Federal Tax Federal Unemployment Tax Return Return (FUTA)  Form W-2: Wage and Tax  Form 1099: Miscellaneous Statement Income  Form W-3: Transmittal of  Form 1096: Annual Summary Wage and Tax Statement 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