You’ve probably heard the saying, “There are two certainties in life: Death and Taxes.” Perhaps this is not the most inspirational quote but it is certainly true. While you’re setting out on your new year goals and intentions, this is also the time of year to begin getting organized to file your taxes. We know that this can be a stressful time of year and it’s much easier to procrastinate, but taking steps now will ease your filing experience. Here are some tips to help you get organized:
Are you an employee or an independent contractor? First things first, figure out if you are an employee or an independent contractor. For many yoga, meditation, and fitness instructors, they are likely a mix of both especially if they teach at a variety of locations including studios, fitness centers, and privately. If you’re an employee, then you would have already had taxes withheld which makes things a bit easier on you. If you are an independent contractor, then you’ll be responsible for reporting your income and paying taxes since nothing was withheld when you got paid. If you are an employee, the studio or fitness center you teach for should supply you with a Form W2 by the end of January and those that you provide services to as a contractor will send you a Form-1099.
Itemize vs. standard deductions: You may have heard about the new tax bill that went into effect in 2018. One of the biggest changes we’ll see with this bill is the increase in the standard deduction, which nearly doubled which means you may no longer need to itemize your business expenses and will be better off taking the standard deduction. However, if you’re interested in adding up expenses for items and services that helped you teach and grow your business, create a list of all of your relevant expenses including:
- Continuing education including workshops, seminars, conferences, books or magazine subscriptions relevant to your field
- Music streaming subscriptions where you create class playlists
- Yoga or fitness apparel (Within reason. Expensive leggings may not be considered necessary for conducting your business.)
- Home office or teaching space that you use exclusively for your business
- Professional association dues or membership fees
- Liability insurance
- CPR and First Aid Certification
- Mileage and other travel costs
- Business and administration costs such as website hosting, email marketing, and payment processing fees
Find your receipts: Even if you decide to take the standard deduction when you file your taxes, it’s a good idea to keep track of your receipts so you have a clear picture of what expenses you’re taking on to run your business. If you haven’t kept track of these expenses throughout the year, that’s OK! It will take some extra work but it is possible to track down your various receipts and figure out your expenses. Go back through your calendar and make a list of workshops you attended and classes that you taught, also taking note of the mileage for traveling to wherever you taught. Search through credit card statements for any business expenses you have incurred. If you need to find receipts for other expenses like books, music, and apparel, start by searching your email. If you purchased it online, there’s a good chance you’ll find it somewhere in your inbox. As you move forward, creating a filing system for notes and receipts so you don’t have to spend as much time playing detective. Simply keeping a manila folder for receipts or a page in a notebook to record expenses will help you greatly.
Hire a tax expert. To be clear, we are not tax lawyers so it is always best to seek out the advice of a trained professional if you have questions. This might feel like an additional expense you are unable to take on but it is well worth the investment, especially if you are new to the world of independent contracting and if you have a complicated situation with income from various sources.
We know tax season can be overwhelming but remember, you don’t have to do it alone and there are many resources to help you. We hope this article has provided some ideas on how to make tax season as headache-free as possible. If you’re looking for a new solution to help keep track of your schedule, students, and payments, we’d love to help! Visit offeringtree.com to learn more about our suite of tools for your professional practice.