How To File Your Taxes For Free As A Massage Therapist
First of all, if you qualify you can get your federal tax preparation for free. With the IRS Free File Program for self-employed persons, you can get your taxes prepared on the house! Whether you do your own taxes or hire a tax professional, you want to get the biggest refund or owe the least amount of tax allowed.
Most noteworthy, almost all online and retail location tax preparation companies utilize some form of the IRS Free File Program. Even if they entice you to use their service for little to no cost, they provide professional help and assistance. Likewise, it is always better to file electronically to get a refund direct-deposited into your bank account to avoid delays.
Functional Profit And Loss Statement For The Hair Salon
This illustration uses the same information from the traditional presentation above.
Bangs Profit and Loss Statement by Class For the Month Ending October 31, 2016 Hair Spa Retail Total Sales $71,280 $36,508 $10,619 $118,407 Adjustments: Discounts Coupons Net Sales 70,323 33,931 10,460 114,714 Cost of Sales: Commissions 42,398 14,004 806 57,208 Product 2,209 -0- 4,210 6,419 Backbar 6,827 1,183 -0- 8,010 Equipment 1,956 2,740 107 4,803 Supplies 266 391 85 742 Gross Profit $16,667 $15,613 $5,252 37,532 Expenses: Other 605 Net Profit $8,065
One of the first steps in evaluating a functional profit and loss statement is to review the respective class gross profit as a percentage of net sales . Do not use gross sales as the denominator net sales is the correct variable. Here are the results:
Hair Spa Retail Total Gross Profit % 23.7% 46.0% 50.1% 32.7%
Based on the results Retail generates the highest gross margin per dollar unit. But this class of sales is not the primary source of business for Bangs. It is merely an ancillary source of revenue. It would be nice to double the volume but it is unrealistic to believe this is possible. The sole source of customers are the clients visiting the shop for hair and spa services. Rarely if ever does a customer walk in to the salon to just purchase retail products.
Plan To Expand Your Profits
Seeing the numbers in action can help motivate you to market your business and get more clients. If youre paying yourself using a flat amount each time, your motivation comes from expanding that profit gap so you can reinvest in the business. If youre paying yourself on percentage, your motivation comes from increasing your take-home pay. Understanding what motivates you can also help you decide which method to use.
When you get good at figuring out the proportions that work for you, think a little bigger. Do you want to save a little from each pay period to build up a vacation and sick pay buffer? See where you can squeeze out another five percent, or consider how much more you would need to earn to make that happen.
Getting clear about your business finances, especially when the cash flow includes a regular income for you, is illuminating. Whichever method you choose, approach it with intention. You are running a business, providing a valuable service to your clients, and you deserve to be compensated fairly.
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Where Can I Get What I Need
Finally, if theres a gap between the resources you have and the resources youll need, you must fill it. The first place you should turn is your personal savings. You ought to have saved a minimum of three months and ideally a minimum of six months, Bowman says. Youve got to have that reserve or youll be dead in the water.
If you dont have the savings now, start accumulating immediately while you work for someone else. If you save 20 percent of your paycheck every month, it will be worth waiting for when you have saved enough so you can start your business without going into debt, says Los Angeles-based massage therapist Ruth Belcher, CMT, owner of Therapeutic Ruth.
If your ambitions exceed the capacity of your savings account, consider a bank loan. Specifically, a loan that is backed by the U.S. Small Business Administration , advises Susan Alexander, senior vice president and western territory sales manager for SBA lending at PNC bank, who says SBA loans are designed for business owners who might not qualify for a traditional bank loan. To qualify, she says, youll typically need a strong credit rating, 20 percent down , roughly the same amount in cash reserves and personal collateral with which to secure the loan.
Youll also need a business plan, which will help the bank determine whether youll be successful enough to repay your loan. Even if you dont need a loan, however, you should consider creating a business plan.
A business plan should include:
Https Www Panasonic Com Global Corporate Ir Pdf Quarterly Report Fy2019 1q Intact Insurance Financial Statements
Accounting consists of my debits and credits that would mean nothing with out the ability to translate them to financial statements and in turn decipher them. The first piece of data needed to construct these statements is account balances for all assets, liabilities and also owners equity. Owners equity is also made up of Revenue and Expense accounts that will be needed to construct most of the four financial statements. The three financial statements we are able to construct from general journal entries are a Trial Balance, an Income Statement, Statement of Retained Earnings, and also a Balance Sheet.A certified financial statement is one that has been reviewed by a certified public accountant to ensure that the numbers reported in the statement are accurate and are not subject to material errors or omissions. Because the accountant is writing a certification that he has reviewed the figures and found them to be accurate, he may incur liability if the figures in the financial statement turn out to be wrong. Because of the possible liability, many CPAs do not certify these statements anymore. Those that still prepare them charge a large fee. For this reason, mortgage brokers and mortgage lenders are looking for reasons not to need one. There are two grounds for needing one: the state in which you are licensed requires them for proving your net worth or you want to originate FHA loans.
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Preparing For Tax Deductions
While your massage certification certainly prepares you to help clients, it doesnt necessarily help you come tax time. That was certainly the case for Nadine Crest, a Baltimore-based Registered Massage Practitioner and owner of Palms to Souls. When I went to school, they didnt give much instruction on being an entrepreneur, says Crest. I expected it to be easier to find and claim tax write-offs.
While you can use this list to find potential tax write-offs, make sure youre backing up each expense with documentationin the form of receipts, statements or bills. Ideally, youll keep both a digital and hard copy of your documentation to ensure that all your deductions stand up to scrutiny, should the IRS ever require proof.
Tax Implications Of Barter
Many people appreciate a good massage, and you may find it helpful to trade massage therapy sessions for other services, whether related to your business or personal life . Its important to keep in mind that these kinds of trades are taxable and should be recorded as taxable income.
You may, however, be able to deduct some trades while others will simply be taxable income. For example, if you trade massage therapy sessions for painting your office, you must include the cost of the massage as income and take the painting expense as a deduction. But if you trade for painting your house, you would declare the price of the massage you provide as income, but you cannot deduct the painting as it is for personal use, not a business expense.
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How To Pull Up A P& l
Now that youve read our crash course on how to interpret your P& L, here are steps to pull it up for your business:
Profit And Loss Statement For Massage Therapist Internal
At a minimum, you should ask your accountant to provide you with the following financial statements every month: balance sheet, income statement and cash flow statement. The Balance Sheet shows the financial position or the value of the assets, liabilities and equity of your company at a specific time. It is like a status report that shows the liquidity and financial structure of your company.A certified financial statement is one that has been reviewed by a certified public accountant to ensure that the numbers reported in the statement are accurate and are not subject to material errors or omissions. Because the accountant is writing a certification that he has reviewed the figures and found them to be accurate, he may incur liability if the figures in the financial statement turn out to be wrong. Because of the possible liability, many CPAs do not certify these statements anymore. Those that still prepare them charge a large fee. For this reason, mortgage brokers and mortgage lenders are looking for reasons not to need one. There are two grounds for needing one: the state in which you are licensed requires them for proving your net worth or you want to originate FHA loans.
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Other Tax Deductions To Consider
Saving for retirement is especially important if youre self-employed, so the Internal Revenue Service gives you a generous break on contributions to your traditional Individual Retirement Account, or IRA.
You may also be able to claim your health insurance premiums as a deduction on your income taxes.
If you use your car for work, you can deduct certain expenses as transportation costs, including the cost of gas, as well as capital expenses like vehicle purchases and repairs. Alternatively, you can usually deduct your car expenses based on the standard mileage rate set by the IRS each year.
You may also be able to deduct certain meals and entertainment expenses, provided theyre essential for running your massage business. Be sure to keep documentation for every business expense you claim.
TurboTax Self-Employed will ask you simple questions about your life and help you fill out all the right forms. Perfect for independent contractors and small businesses. Well search over 500 tax deductions to get you every dollar you deserve and help you uncover industry-specific deductions.
How To Track Business Expenses As A Lmt
For tax preparation, it is vital to track your expenses correctly for deductions. Document everything and use written evidence, notes, receipts, and an appointment book. You should enter all the required information such as the time and amount of the transaction and the name of the session.
Use a cell phone application to capture transactions. As mentioned earlier, there are IOS/Android tax apps to help you organize and streamline your business.
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Breaking Down A Business Plans Profit And Loss Statement
Most business plan profit and loss statements are done annually. However, there are also some businesses that would like to have an updated monthly or quarterly profit and loss statement. With this, you have to keep in mind that developing the specified document must be based on the needs of your business and not solely when it is required by external organizations and entities. Unlike a business consulting business plan where content varies on the area/s of the business where consultation is necessary, the composition of profit and loss statements are mostly the same. Here are some of the common or basic items that you can see in a simple business plan profit and loss statement:
Cogs And Other Deductions
Costs of goods sold include the direct cost of producing a good or the wholesale price of goods resold. Other potentially deductible costs include labor, assuming the labor was directly involved in the good’s production process, supplies, shipping costs, freight in, and directly related overhead.
There are also some indirect costs that can be included in COGS. Indirect costs can include rent, taxes, storage, handling, repacking, and certain administrative costs.
Companies that can claim COGS do so on their Schedule C via line 42. This is only possible if the company accurately values its inventory at the beginning and end of each tax year. If an expense is included in COGS it cant be counted again as a business expense.
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Adding Cash Transactions To Your P& l
Don’t forget to add cash transactions, both income and expenses. Even if you have business accounting software, you may still have to enter cash transactions manually, including cash for petty cash and income. If you accept cash from customers, use a cash transaction form or a simple invoice.
For cash payments, save the receipt. These receipts are especially important for business driving and business meals expenses.
Ready To Start Your Planning
Now that you know how to write a business plan, it’s time to create one for you.
Remember that problem and market analysis are essential, but implementation is what counts. Go through the process explained in this guide to start planning for your business.
We have created Upmetrics business plan software to simplify the process of business planning.
Our business plan builder allows you to write and customize your business plan. Our sample business plans and inbuilt help tips will help you to get started with your writing even if you are no expert. Our business plan sections and charts will make your document visually attractive.
Our financial forecasting module will create all the essential reports automatically. You need to enter numbers, and the application will do all the math to generate all your financial statements. Later you can embed those reports into your business plan.
After completing your business plan, you can file with Upmetrics. You can also share it online with investors just by a quick link.
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