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In this Post: In this episode we discuss all things taxes for massage therapists. We share our tips and tools for have a more stress-free tax season.
“Align with The Massage Business Mama” a Podcast Brings You
Episode 012: Taxes for Massage Therapists
In this episode, we talk all things taxes! It’s a tough topic, one that most massage therapists tend to dread, procrastinate, and even avoid. But, the earlier we can get a game plan on the coming tax year, the better off we will be. Every year tax adjustments differ. If we are proactive and get organized now, we can be ready at tax time! Here are our tax tips to help ease the stress during tax time!
Now it is important to note that neither of us are accountants or tax experts. So, take what we say as a jumping-off point to do your own research and reach out to the tax expert in your life.
Find a Tax Expert
Don’t have a tax expert? Now might be a good time to start treating your business like a business and find someone who can give you educated, timely, and appropriate advice for the specifics of YOUR massage biz.
If you want to have a successful massage business, it is important that you treat it with the respect it deserves and treat it like a business, NOT a hobby.
Be Prepared and Don’t Procrastinate
Our biggest advice is to get prepared. Don’t wait until the last minute to gather all of the information needed to get them filed. Instead, have a system in place that allows you to capture all the required information as you go through the year.
As soon as January begins, start pulling together your records. Eat the frog and get it over with!
We recommend generously calculating 30% of your average monthly income to save for quarterly taxes. You may want to consider moving this money from a general fund to a less accessible spot, as it is very easy to spend this money otherwise.
Another thing that trips therapists up, in the beginning, is figuring out what type of a legal entity to set up. Whether to be a sole proprietor, partnership, corporation, LLC, C Corp, S Corp, it can be so overwhelming in the beginning!
One thing to note is if you take no action, the IRS automatically considers you a sole proprietorship. So, in the event you are struggling with paralysis analysis for how to structure your business. You have already inadvertently made a decision. By failing to make any official decisions or moves to create a business entity, you are operating as a sole proprietorship.
Legal Entities for Your Massage Biz
Sole Proprioter –
As a Sole Proprietor, you can withdraw money from your business, but it isn’t considered a wage and can’t be deducted as a business expense. While you won’t pay payroll taxes on your draw, you do pay self-employment and income taxes. The business does not file taxes or pay income tax. Instead, you file a Schedule C with your 1040 form and pay personal income taxes on the profit.
Partnership –
With a Partnership, you file a Schedule K-1 (Form 1065). The partnership itself doesn’t pay taxes. Instead, each partner reports their profits and losses on their individual tax return.
Corporation –
Corporations are the most complicated when it comes to filing taxes. This fact is a big reason why most massage therapists go with a sole proprietor entity. Not to say that you shouldn’t consider a corporation. We will dive more into the different entities in another episode.
Deductions
Deductions are one of the most confusing topics for massage therapists! We tend to overcomplicate and overthink them to the point that we just throw up our hands!
So what are some things we can deduct?
- rent
- advertising
- marketing
- professional fees
- dues
- accounting
- legal fees
- interest on a business loan
- office supplies
- treatment supplies
- mileage
- personal protective equipment
- business insurance
- property insurance
- liability insurance
- health insurance
- license renewal
- travel expenses associated with education
- utilities
- business meeting
- associated food expenses with travel/business meetings
- website
- postage
- phone
- appliance repair
- email provider
- booking software
- networking
- new equipment
- depreciated equipment
Depreciation
Depreciation or the loss in value of an asset over time can get pretty complicated! The rules change almost every year, and can get pretty complicated! This is where a good accountant can come in so handy!
2020 Tax Considerations
When filing your 2020 taxes, you are going to factor in any monies received from unemployment via Coronavirus Aid, Relief, and Economic Security or CARES, and the stimulus check.
All unemployment benefits, including the $600 Coronavirus unemployment benefits, are counted as taxable income. So any UI benefits received, we need to set aside approximately 30% of that income for taxes if you didn’t opt to have the taxes taken out of your benefits from the git-go. Don’t get hit in April, guys! Plan ahead and save that cash!
End Goal
One last thing to think about when filing is what your end goals are. Are you trying to get as many deductions as possible, or are you trying to get a home loan? If you are trying to get a home loan, you may want to think about taxes a little differently.
Think about trying to get a mortgage or loan and trying to prove your income with your tax returns, but you didn’t make enough money because you wrote it all off so you didn’t have to pay taxes on it.
We hope this episode helps! Bottom line, taxes shouldn’t debilitate you from moving forward in your massage practice! If you find yourselves feeling stressed and overwhelmed, it is much better to reach out to an expert than to halt your progress! Usually, the energy we expel dreading dealing with these types of issues is FAR worse than bucking up and getting it over with! We’ve known far too many therapists over the years who have failed to file taxes because of FEAR. This fear ultimately leads to far more time being dedicated to taxes, lost sleep, and increased anxiety. Therapist, you got this!
Resources:
Driversnote – App for recording mileage
Treasury.gov & IRS.gov/Coronavirus
Listen here: Taxes for Massage Therapists
Author Profile
-
Ali Boehm
- Boulder College of Massage Therapy Graduate
- Nationally Certified through NCBTMB
- Colorado Licensed Massage Therapist
- Certified CranialSacral Level 1 through Upledger
- Certified Herbal Therapist through Nutrition Therapy Institute
- Certified Fujian Massage through Barefoot Masters
- Fort Lewis College - Majored in Art, Minored in Business Administration
- 6 Year Winner of Best Massage Therapist for "Best of The Boat" Competition
- Massage Business Owner Since 2008
