It’s about time to start working on your taxes, and if you’re like many mind-body fitness trainers this might fill you with a sense of foreboding, panic, or impending doom. While some of us might be good with numbers and math, that’s probably not a skill that drew us to this profession. I know it’s not my strongest area.
Hopefully you have an organized, efficient system in place and you can easily access all of your pertinent info and either plug it into your tax program, or neatly present it to your accountant.
If that’s not the case I’d love to give you a quick solution to dig yourself out from under the pile of random receipts, but unfortunately I can’t. What I can do is give you some tips that have worked for me so that you can put them into place right now so that next year goes smooth and easy.
While everyone’s situation is different, this is how I manage my taxes. One caveat: my degree is in dance. My financial training has been purely trial and error. If you have specific financial questions please check with an accountant. Also, although I have run a studio in the past, this is more relevant to trainers who don’t run a studio with employees, although it might still give you some ideas for tracking your travel and educational expenses.
I currently have several sources of income that I have to track. I receive:
1. W2 for the clients I see as an employee of the studio where I work.
2. 1099 for payment to my business for teacher trainings I conduct at the studio.
3. 1099 for payments made to me for an equipment purchase.
4. Pay slips for some of the courses or classes I teach off site as a traveling Master Trainer.
5. Nothing for some courses or classes I teach off site as a traveling Master Trainer, so I have to keep my own documentation of these.
These documents I put into a big, clear plastic envelop when I receive them. I print out my own record of payments for which I received no documentation. This doesn’t need to be elaborate. You could do it in a spreadsheet, or you could just keep it in the notes app on your phone. Just make sure you note the date, amount, who paid it, and what was the service provided.
When I receive any other tax documents, from my credit union, investment accounts, health insurance, or anything that comes in the mail or online that says “TAX DOCUMENT”, it all goes into the envelope.
It would be helpful to have a list, or spreadsheet if you want to get fancy, of all the tax documents you expect to receive. You could prepare now by making a list of what you receive this year, and then just think through what might be different for next year. You could put that list in the front of your envelope and check things off as you get them.
I double check my list and see if there’s anything that I didn’t receive by mail that I need to go online and print out.
Now is a good time to double check that the info is correct on ALL of your documents. Last year there was a typo in my social security number on my W2. I didn’t notice and so my tax return was rejected. So far it’s cost me $340 in accountant fees (as the IRS wouldn’t speak to me, and the accountant pays for special phone access that we can’t get as regular citizens), and I still have not received my refund.
I used to save all of my receipts in an accordion folder and then dump them all out on the floor in January and sort through the pile and add up all the categories. Ugh. Horrible. That’s why they invented apps.
Now I use a budgeting app called Mint. It works on my phone or laptop. It’s great just for budgeting and tracking spending in general, but I’ve found it especially useful for tracking my business expenses.
What I do is for each business trip I take, for example, I create a “tag”, such as “Gyrotoner®/Germany/2018”. The Mint is linked to all of my bank accounts and credit cards. So any time I spend on a debit or credit card, or write the occasional paper check, it comes up in my transactions. Cash expenses I can enter manually (so do them right away so you don’t forget). I then tag each of the expenses to “Gyrotoner®/Germany/2018”, or whatever the appropriate category would be. Then, once I’ve finished spending on a particular trip, I can pull up the tag on my laptop, then export all the tagged transactions so I have them all in a spreadsheet.
Not only does it help me track expenses for taxes, it also helps me see the total cost of taking a course, or how much I spent to go teach a course, so I can see if I’m spending my money and time as efficiently as I think I am.
You can also set up categories in Mint for business expenses, with sub categories for meals, uniform, tuition, studio rentals, etc. Think about how it would make sense for you to use it, play around a bit with the app, and do what works for you.
I also keep a super simple spreadsheet in which I note any mileage if I drive to teach or take a course. I just note the date, purpose, to/from, and miles. At the end of the year I print it out and put it in my envelope.
I personally send my exported expenses from Mint to a friend who does bookkeeping for me. It’s such a small job I just give her a couple private sessions around tax season in exchange. I could probably do it myself now, but we’ve been doing it this way since I had my studio with more complex finances, and it’s just sort of carried over.
I also take all my compiled income and expense info to an accountant. This is also a carry-over from having a studio, with depreciation on equipment, and all sorts of other complexities. But this year I’m going to try Turbo Tax, since those financial loose ends from my studio are pretty much tied up now.
You can also take advantage of FREE assistance opportunities. If you make under $55,000 you can get free tax preparation by volunteers https://www.irs.gov/individuals/free-tax-return-preparation-for-you-by-volunteers
You might also check with your local library to see if they have information on free help.
There is conflicting information out there, but here are a few things relevant to our field worth taking note of to be completely legit on your tax return. Again, this is tax advice from a dance major, so verify all of this with a professional if you’re concerned.
Technically, as it was explained by my accountant, workout clothes are NOT tax deductible, unless they have the studio logo or branding. In that case they are considered “uniform”. So don’t go crazy at Athleta assuming you can write it all off.
Bartering is supposed to be reported on your taxes. So if you exchange private sessions for massage with a friend, you’re technically supposed to report the value of that exchange. Super confusing, I know.
Be really clear with your accountant about “per diem” expensing your trips. I know a lot of trainers do this, but it’s not necessarily as straight forward as you might think. So if this is something you plan to do you’d best get some professional advice.
And on that note, get professional advice on anything you’re not sure of. Even if you work with an accountant for one year and get all of your specific questions answered. You can use that year’s tax return as a sort of template for when you try it yourself the following year.
This is just how I handle my taxes, and it may or may not work for you. Do you have any tax prep hacks you’d like to share? Let me know!