Are you a yoga teacher looking for some tax tips? As a seasoned accountant, a yoga teacher and a yoga studio owner, yoga teachers often ask for my advice on accounting and taxes. Here are my lucky seven tax tips for yoga teachers to make sure you are doing it the right way:
#1 Keep it simple
Keep it simple. When it comes to organizing your business, choose your entity wisely. I recommend sole proprietor or single member LLC (Limited Liability Company). This way you only have to file one tax return (your personal Form 1040 with some additional forms). Other entity choices like Corporations or S-Corporations cause complexity, more administrative work and you have to file more tax returns!
#2 Know your tax deductions
Most yoga instructors are independent contractors. This means they are business owners. Business owners get to write off expenses. Expenses are things like travel, supplies, mileage, training, licenses, cell phone, business meals etc. These expenses are netting against your income received from the studio you teach for. By tracking your expenses, you will pay less taxes because you will have lower net income (gross income less expenses).
#3 Set up an easy bookkeeping system
Make sure to set up an easy bookkeeping system (perhaps an excel spreadsheet) and schedule time to update your income statement at least once a month. The more organized you are, the easier it is to estimate your tax liability and it will also save you a ton of time if you pay someone to prepare your taxes. Instead of handing your tax preparer a shoebox of receipts, you just provide your income statement. Easy.
#4 Open a business banking account
Run your expenses through this account. Don’t commingle your personal expenses in this account. This will not only legitimatize your business, but it will be an easier way of tracking expenses and can serve as substantiation (receipts) if audited by the IRS.
#5 Pay your quarterly taxes
If you are an independent contractor, that means you have to pay your own taxes. This includes federal taxes and self employment taxes (which is essentially social security and medicare taxes). Unlike an employee where the employer withholds taxes, you must estimate and pay on a quarterly basis. Don’t get hit with a huge tax bill at the end of the year. Instead, pay during the year.
#6 Empower yourself
Take your business by the horns. Do not put off learning what you need to do to run your business. If you take the time to get organized and understand what you need to do as a business owner, fear diminishes and empowerment begins!
#7 Take a Business and Tax Planning workshop
This kind of workshop will go into further detail regarding the concepts above. If you are in Seattle, I invite you to attend one of the workshops I lead. The next one will be in October at shefayoga Roosevelt.
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